Who lost: Retirement savings vanish as stock takes a nosedive

Bev Hess, a real-estate agent in Nebraska, scrimped for 42 years to save $120,000 for her retirement. It took less than a year for her nest egg to shrink to $5,000 after investing in Internet stocks such as InfoSpace.

Hess plunged into InfoSpace after reading glowing business-magazine profiles about Naveen Jain and his grand plans to build another Microsoft.

"I thought he was one smart dude, kind of like Bill Gates," she said.

She bought 350 shares at $114 a share for $39,900. Shares kept climbing to over $260.

When InfoSpace stock fell in March 2000, she didn't sell because she believed it was a "good, viable company" that would bounce back. It eventually crashed to less than $1 a share. Her InfoSpace holdings are now worth $1,450.

She now realizes that Jain's rosy press was all hype.

"They had all these analysts that were saying wonderful things about it," she said. "I feel like the American public was lied to."

At the age of 65, Hess says she can't afford to retire. "I'm working my butt off," she said. "That's what I foresee for the next five or 10 years."

Roger Hilbert, an architect in Bothell, calls InfoSpace "my personal Enron." Like Hess, he still holds shares that are worth pennies on the dollar. "It was devastating," says Hilbert, who lost $80,000. His family lost an additional $20,000.

Roger Hilbert lost $80,000 on his InfoSpace investment.

Hilbert became an InfoSpace shareholder through a Seattle company, Go2Net, which merged with InfoSpace in 2000. He bought his first shares of Go2Net in 1999, convinced that the company was going to be the cornerstone of billionaire Paul Allen's vision of a "wired world," where the Internet would connect televisions with computers.

After Allen invested heavily in the company, Hilbert pushed its stock on his 80-year-old parents, his sister, nephew and even his brother, who was living in his van on a Hawaiian island and was able to buy shares via his solar-powered laptop.

Hilbert became so exuberant about the stock that he and his wife sold a Mercer Island condo and poured the proceeds and the majority of their retirement savings into the company.

Hilbert's case shows that even informed investors can lose their shirts when company financial statements are built on accounting gimmicks or if CEOs are willing to use hyperbole to mislead the investing public.

Like millions of other investors during the Internet bubble, Hilbert watched CNBC, read Securities and Exchange Commission filings and took notes at shareholder meetings. One year, he said, he made more than $20,000 in day trading.

"I spent every day researching everything that came out," Hilbert, 59, said. "Apparently none of us really knew the truth that was going on behind the scenes."

After the InfoSpace merger with Go2Net in 2000, the stock plunged. Hilbert hung on until 2001 then started selling, but it was too late.

"It really devastated us," he said. "My grandma lived to 103 and I figure if I'm lucky that's when I'll be able to retire now."

"There's no question that I feel conned," Hilbert said. "But, even then, we should have been smart enough to put stop orders." (A stop order tells a broker to sell an investor's stock once it falls to a price the investor has set.)

He says he was especially suspicious of Jain. "I was hoping to turn CNBC on one morning and see Jain being led off in the infamous 'perp walk' in handcuffs."