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26 Jun 2003
Sex.con
Kieren McCarthy, The Guardian

It was always going to be an exciting battle. A software engineer made rich from the dotcom boom and a career conman with a silver tongue, fighting over the most valuable internet domain in the world - sex.com. Finally, after eight years of battling in and out of three courts, it reached the very pinnacle of the American legal system and came to a head.

Far from a climatic court battle, though - the case was eventually decided by a single sentence in a letter dated June 9 2003 from William K Suter, clerk of the supreme court of the United States, Washington DC. "The petition for a writ of certiorari is denied," it read. That nondescript sentence, which meant that the case could not go to appeal, could hardly be in greater contrast to what has happened since 1994, when a young computer engineer called Gary Kremen realised the potential of the then fledgling internet and applied for the domain sex.com.

At the time, the internet was only known to academia and computer students, all of whom had somehow failed to see why owning the word "sex" on an international computer network was of any value. Kremen couldn't believe it when he was awarded (for free, because there was no charge for domains in those days) what would become in five short years a piece of internet property worth $500,000 a month just in advertising space.

Unfortunately, he wasn't able to use it before it was stolen from under his nose by a career conman who had just got out of jail on fraud charges. Stephen Michael Cohen obtained the multi-million-pound domain with nothing more than a fake letter and a little social engineering. He forged a letter to the company that ran all dotcoms at that time, Network Solutions, purportedly from the president of Online Classifieds Inc, Kremen's trading name and the name the domain was registered under.

The letter, addressed to Cohen, explained that Kremen had been fired and the company had decided to relinquish the domain to Cohen. Since the company did not have an internet connection, the letter stated, would Cohen please contact Network Solutions direct and inform it of the change? And the scam: "This letter shall serve as our authorisation to the internet registration to transfer sex.com to your corporation."

Network Solutions was not entirely taken in at first. However, it did not dig out the original registration and contact Kremen to make sure. Believing the letter's assertion that the company had no internet connection, it didn't send an email either. Instead, after numerous phone calls, an NSI employee switched ownership of the domain to one of Cohen's many companies, Sporting Houses of America.

Kremen hadn't actually used the domain to put up a sex.com site, but he found out that its ownership details had changed relatively quickly. "I thought at first that it was just a computer problem," he said. "But I got a phone call a few months later from someone saying they were working on a complaint - I now know it was Cohen, claiming he was from the US Patent Office - about a trademark for sex.com."

Kremen contacted Network Solutions and demanded they change the details back. "They said they weren't going to do anything about it. So I had to go and get a cheap lawyer."

This was July 1996. It took nearly five years for Kremen to regain ownership of his domain, during which time Cohen had made an estimated $100m from selling advertising space to whatever porn sites would pay him the most money for a link to their own sites.

"In the sex.com case, there was one side with no case but who fought it to the bitter end and got what he deserved. There is no question that what Cohen did was fraud," says Michael Froomkin, a professor of law at the University of Miami and one of the world's leading experts on internet and the law.

Conviction for fraud would mean jail for a sixth time for Cohen. Or at least for the old Cohen. The new Cohen, however, who is now one of the richest men on the planet, is proving a little harder to track down. In fact, there has been an arrest warrant out on him for more than two years and he has officially been declared a "fugitive from justice" by the US district court.

Ironically, the turning point came when Network Solutions was absolved of any blame in May 2000. Kremen explains: "I had made some money from selling match.com so I got a real, real expensive lawyer and he told me I was making the wrong argument, that I should be arguing Cohen was a career criminal. When Network Solutions was there, it looked to the court like a respectable company caught up in an argument between a would-be pornographer and an actual pornographer." With Network Solutions out of the way, and with a lawyer that the judge trusted, Kremen's case suddenly became more persuasive.

The injunction ordered that Cohen deposit $25m with the court, that he not transfer any money out of the US and that he give full and complete accounts off all his businesses so the court could judge how much he had made through his illegal five-year ownership of the domain. Cohen ignored all the demands and fled to Mexico. In the meantime, he moved millions into offshore accounts. The injunction was swiftly made permanent, a demand of $65m was put against him and a warrant for his arrest approved.

More than two years later, Kremen is still owed $64.8m of the $65m awarded. Cohen is moving his ill-gotten gains around the world and whenever Kremen gets close, it moves again. "The money is probably about 100 miles from where you are sat in the UK," Kremen tells me. "The Isle of Man, Jersey, Guernsey." Cohen is well aware that Kremen is on his tail and keeps shifting it in an endless game of monetary cat and mouse.

But having millions has it advantages. Kremen posted a $50,000 award for Cohen soon after the court's permanent injunction, complete with a photograph of him and a map to his house in Mexico. But when US bounty hunters turned up to take Cohen back to the US, they were confronted by armed Mexican police. Cohen bizarrely then used this fact in his defence at the US court of appeals.

"This [reward] posting culminated with at least two gun battles between would-be bounty-hunters and Mexican police guarding Cohen," says the legal petition. "People were shot. Cohen filed a motion to vacate the arrest warrant, citing the threat to human life."

Cohen had no case and knew it. His arguments became more and more fantastic. Kremen and his lawyers had "duped" the court into believing he had lots of different bank accounts. Cohen may have owned and run the most valuable domain on the internet for six years but he was completely broke - he didn't even have enough money to buy toilet roll. He was being subjected to a "death sentence", some of the US's pre-eminent judges were told.

But most incredibly of all, the injunction should be lifted, Cohen claimed, because it broke the US Constitution. "This court by its injunction has placed this defendant in the status of slavery in violation of the 13th Amendment of the United States Constitution," the filing asserted, since any money he made would have to be handed over to Kremen.

But Cohen is no idiot. Kremen considers him a criminal genius - and having followed his every move for the past five years, he is in a good position to judge. It's possible that sending his lawyer into the top courts of the land with an unwinnable case appealed to Cohen's sense of humour.

However that sense of humour clearly fails when it comes to Kremen winning back sex.com. "I think he really believes he owns the domain," says Kremen. And if proof of his irritation were needed, it came when Kremen finally did manage to get some of Cohen's property. On September 24 2001 a fraudulent bankruptcy was noticed by a judge and subsequently examined. It was a company called Montano Properties and was a shell company run by Cohen consisting of nothing more than two properties close to the Mexican border.

Kremen was immediately awarded the properties and quickly drove down from San Francisco to secure them. But after having finally managed to get something off his adversary after six years fighting, he was denied the pleasure of victory. "Everything had been taken out the house - everything." That included not only all the furniture but also the carpets. And the kitchen sink. And the kitchen's sink's plumbing. And all the wiring. "They'd even taken the trees," he despaired.

This remarkable vindictiveness shows that Cohen has taken the battle for sex.com personally. Kremen, though, who now lives in the property and is slowly doing it up while sex.com and his other businesses gradually pay his way out of debt from lawyers' fees ("I'm about a third of the way there"), swears he doesn't feel the same way.

"I don't hold any ill will against him. He would have done the same to anyone who owned sex.com, it wasn't a personal grudge against me. I've let go of the anger now." Kremen met Cohen once and only once. "It was in San Diego," he recalls. "He was giving a testimony on the case, so I thought, 'I'll go and see what this man is like.' So I go to the court and we all had a pleasant dinner along with my lawyers. He talked a mile a minute and was so convincing that I nearly believed everything he told me."

 

 

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