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A Message from Brian

August 6, 2014

Stovepipe

This is my family on Thanksgiving 2013, at the restaurant in Stovepipe Wells, Death Valley, California. A few hours earlier, we'd rescued three Chinese tourists who had spent the night in their car stuck in the snow, and we winched it out and got them back to safety.

Shortly thereafter, we ourselves suffered a single vehicle rollover, destroying the Jeep. Amazingly, none of us were seriously hurt. We were lucky to all make it back. These are the kinds of life events that matter most, and make other bumps in the road seem trivial by comparison.

My latest news is that I can now add to my resume the title "convicted felon." We make up about 2% of the population.

Before I became a science writer and podcaster in 2006, I had a small consulting business doing FileMaker Pro development. It provided a modest family income. In about 2003 my company partnered with another to form "Kessler's Flying Circus" (a reference to The Great Waldo Pepper, a favorite movie), to give affiliate marketing a try. Affiliate marketing is where you place ads on the web, and if anyone clicks those ads and subsequently makes a purchase, you would get a sales commission of some kind. There are a whole variety of models for this: pay per ad impression, pay per click, pay per sale, etc. These were trailblazing years for fast-growing companies like Amazon, Google, and eBay; and there was a lot of experimentation.

For our first few years we had very little success, making perhaps a few hundred dollars per month. But then, working in close association with eBay and with Commission Junction (the company that managed eBay's affiliate program) we developed a pair of useful widgets: ProfileMaps, that showed a map of visitors to your MySpace page; and WhoLinked, a WordPress plugin that showed who has linked to your blog. These both included an eBay advertisement. Amazingly these both went viral, and through 2006 and 2007 our ads drove enough new customers to eBay US to earn KFC about $5.3 million dollars. Keep in mind that was the company's gross revenue; we had overhead and employees and costs like every other company. I was the second highest paid employee, and I did earn over a million dollars personally over 2006 and 2007 before taxes. We put the money toward paying off our mortgage and opening college savings accounts for our kids. Then just as we were about to start saving, everything came to an abrupt end.

On June 18, 2007, our house was raided by armed FBI agents. They had a search warrant from the Treasury Department alleging racketeering, wire fraud, and a raft of other charges. The model we used, which is the same as that used by all other eBay affiliates I knew at the time, was to pass through eBay's URL along with each advertisement, allowing eBay to read/write whatever affiliate cookie they choose. eBay filed both civil and criminal charges against the affiliates, claiming that this pass-through model was a violation of their Terms & Conditions. This is true, it was a clear violation, and we knew this. But the models of all top affiliates were clear violations. Mainly, you weren't allowed to place ads on sites that you did not personally own. But we had worked carefully and openly with the eBay team assigned to us to form "interpretations" of the rules that permitted this. Obviously, this was a red flag (among many) and I should have gotten out of the business right away. I didn't. I was making some money for the first time in my life, and I let myself believe that bending the rules was OK if other people were bending them too. Let's be clear: what I did was wrong, and I knew it at the time. "Come on, everyone's doing it!"

On that same day in 2007, I ceased my association with KFC and have had no involvement with affiliate marketing, or anything remotely related to it, ever since.

Although many have argued this should have been strictly a civil contract dispute, the government determined that it constituted wire fraud, a violation of 18 USC § 1343, and that eBay had been victimized by paying KFC commissions on sales that should have been house sales. I fully accept this determination, and fully accept and admit responsibility for every action I was involved in. eBay claimed a loss amount of $200-400K, and I agreed to stipulate to that amount. I was the only person criminally charged from KFC, though we have never been able to determine why I was singled out; we can only guess it was because of my notoriety.

I stress that from the first day to the last day, I offered full cooperation to authorities, and I did make eBay whole through a confidential settlement.

On August 4, 2014, the judge sentenced me to 15 months incarceration, beginning September 2, 2014. In the federal system you must serve a minimum 85% of that time. According to determinations made during your stay, you may be able to transfer to a halfway house near your home at some point during the sentence, which allows you to resume work and see your family. Most of those present felt the sentence was unnecessarily harsh, and the judge stated in his pronouncement that it was based mainly on the deterrence criterion, particularly due to my "minor Internet celebrity" status.

There are a lot of untruths being circulated by bloggers and reporters:

  • That I "stole millions of dollars". Completely false. The vast majority of KFC's earnings, over 90%, were never in dispute. My share of the unearned commissions was about a third of the $200-400K, on which I paid taxes. That doesn't make it any less of a crime, but absurd exaggerations serve nobody.

  • That any individuals were affected. Completely false. The only victim was eBay, and the nature of their loss was a reduced profit (due to paying unearned sales commissions) on new paying customers who had viewed one of our ads. You can see the reason we fought this in court for so long here.

  • A conspiracy theory that my nonprofit Skeptoid Media, Inc. was set up as some kind of shield to hide stolen millions. First, I never had millions in my possession; second, you cannot shield money from the feds. The federal government can seize anything at any time; there is no protection like there is in state cases (e.g., moving to a state that allows you to keep your primary residence). Skeptoid Media exists only for its stated reasons: producing free educational materials and STEM-focused informational and entertainment content, made available to educators and individuals worldwide, concentrating on critical thinking and scientific skepticism.

  • That I'm a millionaire who has the gall to beg for donations. This is an absolutely false lie, and is explained in greater detail here.

In the meantime, the Skeptoid podcast is going to continue uninterrupted, using a combination of banked episodes and guest hosts, so you can continue to expect the same high quality show every week. The show will have higher costs this year, but also brings some fresh blood, and will need your tax-deductible support more than ever.

My plan is to start production on Principia Curiositas, the long-awaited sequel to Here Be Dragons, as soon as I'm able to return to work. And of course, I plan to continue Skeptoid and other projects.

I am proud of who I am and what I have accomplished to date, and very much regret this stain on my past. But as we all must do with all our regrets, I will incorporate it into who I am, own it, and continue on as best I can.

In short, I'll see you soon.

Brian Dunning
Brian Dunning

@BrianDunning
facebook.com/briandunning

 

 

Message from Brian | How eBay can fix their program | FAQ | Misinfo | YouTube interview