Investor relations rule No. 1: If you're going to use the words "SEC" and "investigation" in the same sentence, speak slowly, enunciate and, above all, do try to be clear.

Following a presentation last Wednesday, short-sellers believed

AgriBioTech

(ABTX) - Get Report

had revealed that regulators were investigating the seed company. But by Friday, the company's securities lawyer said his comments had been misconstrued. He says the company actually is helping regulators nail the real bad guys.

This all started last Wednesday during a question-and-answer session following AgriBioTech's presentation at the

Goldman Sachs

agriculture investment conference in New York. An unidentified man claiming to be a shareholder questioned the credibility of Johnny Thomas, the company's chairman and chief executive. The shareholder, according to a bootleg transcript of the presentation made by a short-seller and confirmed by AgriBioTech's lawyer as accurate, complained that the company wasn't able to sell itself after Thomas talked up the prospect. AgriBioTech, whose sales skyrocketed to $205 million last year from $29,000 in 1994 thanks to a madcap spree of seed-company acquisitions, said Oct. 8 that it hired

Merrill Lynch

to "explore strategic alternatives," a.k.a. shop it around.

With the stock trading around 10 in October, Thomas told

The Wall Street Journal

that he could sell his company for 30 to 70 a share. Two weeks ago, AgriBioTech said it had "elected" to stay independent after, according to news reports, receiving no bids. Oops. Analysts downgraded the stock, which the following Monday dropped 2 1/8 to 8 15/16. On Feb. 1, two AgriBioTech founders walked the plank.

Back to the Goldman meeting. The investor, growing increasingly irate, said he received "documents that say you defaulted on two banks in Albuquerque." Speaking to Thomas, the man continued: "I mean, what I'm trying to get at here is your credibility right now is questionable at best for doing these things. That's the way the Street is. ... It might be better if you step down."

Thomas blamed short-sellers for sending around information and defends his track record. The shareholder replied, "So Johnny, those documents, they're made-up documents?"

Thomas answered, "They're absolutely false statements in many, many respects. Beyond that I don't have more to say. I have never not satisfied a financial obligation, not once, in my entire life."

More defense of his record. More frustration voiced by the shareholder.

Then, the shareholder asked, "How many bids did you have for the company?" Thomas said, "I have not got any more comments on the strategic alternative process."

And then, another man in the audience interjected: "I just wanted to add something to that."

Thomas introduced the man as AgriBioTech's lawyer, Elliot Lutzker of the New York firm

Snow Becker Krauss

. Lutzker, who was with the SEC from 1978 to 1981, said, according to the transcript, "John Stark of the task force of the SEC, the division of enforcement, and the NASD regulation has had the same documents that you have, and the entire Street has had since October." The lawyer continued, "The company has been supplying them with boxes and boxes of documents, and they're investigating the matter also. It's, uh ... all investigations are done in secret by the SEC and the NASD regulation and there is nothing else to comment on."

The shareholder -- described by one short-seller in attendance as "jumping out of his skin" by now -- replied, "You mean the SEC is investigating right now?"

Lutzker answered, "They're investigating the documents that you received." Noise on the tape makes a period inaudible. Then Thomas said, "We made two full SEC reviews."

As short-sellers faxed the transcript to one another and the media on Thursday and Friday, the sound of their joyous weeping was audible across the land. But Lutzker, in an interview, says it's all one big misinterpretation.

"To be more accurate, the correct word is, 'We

assume

that they are reviewing the information -- not investigating any person, place or thing," Lutzker says. "There are no inquiries, no investigations, no requests for information, no subpoenas."

The lawyer says that the company sent information to the NASD and the SEC voluntarily in an effort to alert regulators to what AgriBioTech called lies and misleading facts being spread about the company. In a letter to

TheStreet.com

, Lutzker wrote: "While I do not disagree with the portion of the transcript which you read to me, after Johnny Thomas stated that the company had no knowledge of any investigation, I personally added that the company had voluntarily provided NASD Regulation and John Stark, the head of the SEC's Division of Enforcement Internet Task Force, with boxes of documents concerning these falsehoods." This is not on the transcript, though Lutzker suggests that some of his comments may not have been picked up by the tape. The SEC declined to comment as a matter of policy, and the NASD didn't return a phone call.

The company's lawyer explains that AgriBioTech complained to the SEC in October about posters on Internet chat boards who were spreading false information. About the same time, the NASD contacted the company in a routine inquiry about price and volume fluctuations, says Lutzker.

He says, "We told Nasdaq that lies were being spread. We asked for help. When NASD regulation wasn't helpful," the company reached the SEC. "We had seen in the newspaper

accounts of John Stark's task force and we initiated contact. It was a cold contact to John Stark at the SEC," Lutzker says. The attorney furnished

TheStreet.com

with a letter dated Oct. 9 that he sent to Jay Perlman, an attorney in the enforcement division of the SEC.

It's a tad odd, several short-sellers suggested, that the company would be concerned about falsehoods on the Internet. Of the 21,000-plus postings on the

Yahoo!

AgriBioTech chat board, the vast majority support the company.