Setting the record straight(er)
Last updated October 18, 2015
Until this month, all blogs and articles about these cases (United States v Brian Dunning, eBay v Kessler's Flying Circus et. al.) have been based on press releases and document filings coming only from the prosecution. I was never able to tell my side of the story. I was compelled to plead guilty to violating 18 USC § 1343. That doesn't mean that much of the information published by attention-seeking bloggers or imaginative reporters was correct.
I'd like to start by addressing the most malicious lie being spread by bloggers in an effort to harm the reputation of Skeptoid Media, the nonprofit I founded. It is often claimed that I am a "millionaire" who "begs for donations" via my podcast, Skeptoid. This is silly. In Skeptoid's early days (2006-2008), I did still have decent middle-class money in the bank; and was committed to the promotion of scientific skepticism. I funded projects like the Skeptoid podcast, The Skeptologists, Truth Hurts, and Here Be Dragons largely (or entirely) out of my own pocket. In fact, during those years, I stated clearly in the Skeptoid podcast that I did not accept donations. (Listen to the last 45 seconds or so of episode 67 from 2007 as one example.) Over the next year or so, having settled one gigantic civil lawsuit and having been in an ongoing fight against eBay's law firm O'Melveny & Myers for several years, we were not only broke, but in significant debt. My wife and I had to make a decision. Either I was going to have to quit Skeptoid and go back to consulting full time, or I was going to have to try and make a living from the profession I truly enjoyed. That was the point at which I began asking for donations from listeners who wanted to support the program ("beggars", on the other hand, offer nothing in return). The claim that I was a ever, at any point, a "millionaire begging for money" is absolutely false and malicious, and should not be condoned by any reasonable person.
Regarding the bulk of the "details" that made it into the press, let's look at just one seemingly unimportant point. It has been reported that I first met another defendant while playing World of Warcraft together:
I have never owned, installed, or played World of Warcraft, nor did I ever play any sort of online game with this or any other defendant. Nothing remotely like this ever occurred. How this reporter came up with this is a complete mystery to me. I bring it up because it is exemplary of so many things about this case — misinformation (bizarre in some cases) is everywhere. Some of it can be explained by journalistic incompetence or laziness. In an earlier article, this same reporter also said that my brother had been indicted. Apparently he made this up out of whole cloth, as no such thing ever happened or was even reported anywhere else to have happened. Don't be so quick to trust hastily written news articles, no matter how much you may trust the publisher.
The basic premise of this Yahoo! Finance article was that eBay worked with the FBI for an entire year, collecting evidence and building a case. This is completely false; eBay's Powerpoint presentation, with which they initially contacted the FBI, is dated June 2007, just two weeks before the raids. In a private email, the reporter told me that he made this assumption based on a single typo in one of the public court filings giving the FBI interview date of one eBay employee as June 2006 instead of June 2007. There was no "year of investigation" — eBay spent that year writing cookies through as many ads as they could, and actively compelling the affiliates to facilitate it for them.
It's very important to understand what an FBI 302 document is. By written policy, the FBI never records (or allows to be recorded) any interviews. They take handwritten notes only, which are later interpreted and written into a narrative, called a 302. This narrative then becomes the official legal account of what you said. You cannot challenge what's in a 302; if you do, you're either lying now, or you lied to the FBI. For some well-deserved criticism of this process, check these articles — Boston Globe, Tech Dirt, Forbes. Or Google for your own. It's actually a bit scary.
When I was raided on June 18, 2007, I was interrogated by the FBI in a corner room of my house with armed guards. I was not mirandized. Several times I requested a lawyer; the requests were answered only with more questions — which I naively answered (1) because I was terrified, and (2) because I believed I was assisting the legal process of getting to the root of what I thought was some huge misunderstanding. This 3.5-hour interview resulted in a 302 document that, when I saw it, I could hardly believe how full of errors it was, and how it had twisted virtually everything I'd said into arrogant boasting of my Master Criminal skills.
A few of the basic errors:
These seem trivial, but reflect the general accuracy of the entire document throughout. Note how serious this became when the questions got down to the specifics of our affiliate marketing program.
One agent asked all the questions, and another took all the handwritten notes. She rarely wrote anything. They would ask the same question many times, many different ways, suggesting different answers, until I finally said something they could make use of; then they'd madly scribble. The most notable example of this was when they asked my overall opinion of what I thought of eBay's affiliate marketing program. I felt that it was unnecessary, on the principle that eBay is a household name, and everyone already knows about it. I felt their affiliate program was a waste of their money, as (in my opinion at the time) it probably brought in very few people who wouldn't have eventually gotten to eBay anyway. They asked this many, many times, and suggested many, many words to see which I might agree with. I gave them many, many answers, repeating what I just told you. What ended up in the 302 report (which was an exhibit in a publicly accessible pleading, so I can give it here legally) was:
Later in the interview, I told them how eBay had given us kudos on many occasions for coming up with our widget model, which spread itself virally, because the widgets were truly useful and people enjoyed putting them on their web pages. This was a real innovation in affiliate marketing at that time, and eBay was stoked with it. Unbelievably, the FBI, in its infinite wisdom, combined these last two points (discussed at least an hour apart from each other) into the following:
Epic facepalm. Bloggers, not surprisingly, translated this to mean "Brian told the FBI that eBay was stupid and deserved to be taken advantage of." On Scott Greenfield's Criminal Defense blog, he gives another similar example of 302 abuse:
It has also been argued that I "stole millions" or that the actual amount obtained fraudulently by our company was much larger than the $200-400K claimed by eBay. (There is an exact number that fell inside that range; and for some legal purpose not fully understood by me, only the range is what was in the court documents, so it's what I'm giving here.) It is true that our company's gross sales from 2005-2007 from eBay US were $5.3 million dollars, but the margins are not as fat as you might expect. We were paying for a lot of ad placement. There were about 15 total people in our organization. There was the same amount of overhead as any other business. One public document reported that I was personally paid $1.2 million over that time period, before taxes; so, in other words, I'd earned less than every lawyer I was ever seated at a table with.
Here is how you can be assured that the vast majority, the over 90% of our earnings that neither eBay nor the prosecution ever disputed, was legitimately earned. This is a chart from eBay's June 2007 Powerpoint presentation, showing the total payouts of their affiliate marketing program over our final year. They refused to produce the data from which this chart was generated, but you can still see one clear trend: While the earnings of the #1 affiliate who was displaying transparent pixels only, instead of the ads he was being paid to display (orange in the graph), had relatively flat earnings of about $1 million per month; our group ("Kessler", yellow in the graph) showed a curve of ups and downs that closely matched the affiliate program overall (blue). This is because (while we did indeed include eBay's pixel through which they wrote cookies) we were displaying good ads with good placement, as they were paying us to do, and were indeed generating clicks and serious profits for eBay.
Some have also claimed that our organization was a tangle of "shell companies" intended to disguise our identities. This is silly. Anyone could have gone online at any time and looked up any company name and found out who owned it (sos.ca.gov). For those who are interested, here is exactly what the Kessler's Flying Circus partnership consisted of:
Anyone who has been in business and sees these numbers, and understands what overhead and taxes and cost of living are, knows that it's absurd to expect any one person in this chart to end up with millions of dollars in his possession.
Perhaps the most ridiculous of the misinformation has been the conspiracy theory that my multiple-award-winning podcast Skeptoid, to which I've devoted the last 8 years of my life, secretly existed only to implant eBay cookies on listener's computers. This is both technically and temporally nonsensical (and is, of course, absolutely false). It's also been alleged that Skeptoid Media, Inc. (a 501c3 public charity) was set up as a nonprofit to shield my "stolen millions". Again, temporally impossible (by a span of 5 years) and provably false (also impossible because stolen money cannot be shielded from the feds; they can seize anything from anyone at any time, no exceptions). A word of warning to bloggers that both of these are actionable claims. You are free to consult with Skeptoid's board of directors if you have any doubts.
Regarding sensational headlines, just use your head to parse them. "Cookie stuffing affiliates steal 5 million dollars and face 20 years in prison" is wrong, and it's based on three unrelated true facts that were misintepreted exactly how the US Attorney's press office hoped you would.
Anyway, this is about all I have time to write for now. I welcome questions and comments. Just want to help you separate what's true from what's not.