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June 2004
Sex sells
Kieren McCarthy, Blink

A decade-long court battle, $65 million, a Mexican shoot-out, and a trashed mansion in one of the most exclusive neighbourhoods in the world - and at the centre of it all, an Internet domain name. Kieren McCarthy reports on the remarkable story of Sex.com

“I don’t hate the man. I have no hatred towards him. Everyone is always asking that: you hate him, right? He’s evil, right? Well, no, not really. Everyone thinks I’m kooky with that.”

Speaking while driving along the Californian coastline is Gary Kremen - computer whiz, Internet entrepreneur and self-confessed accidental pornographer. Gary should be one of the richest men on the planet. The person he says he doesn’t hate, believed to be 6,000 miles away on the Cote D’Azur, is the reason that he isn’t.

Three years earlier, Stephen Michael Cohen had been ordered by the US courts to pay Kremen $65 million for stealing his property and then for more than five years using it to create a personal fortune of mind-boggling proportions.

That property was the most valuable domain name that exists on the Internet, the Holy Grail of the World Wide Web - Sex.com.

It took years of legal action, over a dozen lawyers, and literally millions of dollars but Gary Kremen finally won back the rights to the name he’d first registered in May 1994. As for the $65 million, well, Stephen Cohen was unwilling to part with it. So, ignoring orders to attend court and hand over a $20 million deposit, he jumped across the Mexican border to Tijuana, outside US jurisdiction, and started filtering tens of millions of dollars from his various shell companies to offshore banks.

But Cohen’s no longer in Tijuana. After Gary Kremen put a reward on his re-acquired Sex.com site offering $50,000 to anyone that brought him back across the border, Cohen claims there was a shoot-out between bounty hunters and Mexican police at his house. In a letter to Kremen’s lawyers and later a statement in front of the Court of Appeal, he claimed two men had been shot and his life was at risk.

Kremen has the letter framed on his study wall. “Your client has gone ahead and published Mr Cohen’s physical location to assist third parties who may want to abduct Mr Cohen to take advantage of your client’s offer,” it reads. “What your client may have thought to be a prank has backfired. Seven people have been arrested in Mexico attempting to abduct Mr Cohen. Two have been shot. There is now blood on your client’s hands.”

Kremen pulled the reward but he swears to this day that no such thing ever happened - it was just another of Cohen’s lies designed to confuse the issue.

That Stephen Cohen is an extraordinary liar is not under doubt. Ever since he (or at least someone of his age, answering to his name and in the same place at the same time) was up in court as a teenager for ripping off stoned hippies during the summer of love in San Francisco, Cohen has spent an entire lifetime conning people.

The full tally of his exploits is extraordinary - and many of them will probably never be known. From making $10 each time by changing fuel tank sizes on a computer at a car hire place, to pretending to be a lawyer and running fake bankruptcies, to being possibly the world’s first software pirate, Cohen has never been without some scam or other. Now aged 56, he was exposed in the Washington Post earlier this year for being the mastermind behind a peer-to-peer file network con that claimed to be operating in Palestine.

When reporters actually visited the Middle East refuge camp that was supposed to contain Earth Station 5’s servers, they found nothing but a circular paper trail. The company’s spokesman, Steve Taylor, kept them at bay for weeks. But eventually his alter-ego - sat thousands of miles away on an untraceable Internet phone - was exposed as the brains behind it.

The scams are Cohen’s way of using his intellect to get back at a society he grew to hate during his deprived childhood in a poor Jewish family in Los Angeles. His limited education meant he was forced to work menial jobs to support the family when his father died. The man who would later convince and con everyone from bankers to district court judges - and was quite possibly hired at one point by the CIA because of his links with Panama’s corrupt dictator General Noriega - still can’t spell.

But the real big money has come from legitimate businesses. Well, semi-legal businesses anyway - and all of them centred on his prodigious sexual appetite. A disciple of the Californian free-love movement, Cohen became part of the 70s swinging scene and from there began running a sex club in an exclusive neighbourhood of Los Angeles. “The Club” as it was known charged $50 membership and $40 per person per visit. Members were vetted by Cohen himself, but a male and female vice officer acting as a couple managed to get inside for a look.

The house’s bedrooms had been converted into cubbyholes that were carpeted and mirrored for couples. The garage had been turned into a bar where women danced topless but guests were told to bring their own alcohol. There was a room with wall-to-wall mattresses for group sessions and a video room showing non-stop porno movies. The vice officers later recited all this court as Cohen sat confidently in the dock accused of running an illegal adult business.

Despite all the evidence and having over 3,000 members from whom he made a small fortune, Cohen convinced the court he was running a non-profit business and walked free. The Club was swiftly moved to another side of town

Around the same time, Cohen used his technical know-how and sex industry connections to sell pornographic pictures over a private computer network, called a Bulletin Board System, years before the Internet had even been invented. People used their telephone line to connect their computer directly to the server he had stashed at his workplace without the knowledge of his boss. He took a cut on the premium-rate calls and soon branched out in videos, buying a house in Las Vegas to film home porn shoots. He later installed his mum in the house where she lived the last years of her life.

But most profitably of all, Cohen got his hands on Sex.com through a combination of charm, daring and forgery, and he ran it through the era of the dotcom boom, charging hundreds of thousands of customers $9.95 a month for access to pornographic images. He made as much again by selling advertising on what quickly became one of the most visited websites in the world.

Cohen’s grandest scheme of all - to create a vast fantasy island where hundreds of high-class prostitutes would service thousands of clients amid absolute luxury - was abandoned after the stock market authorities took too keen an interest in it, and may well have been just another scam, but it was undoubtedly his style. The resort was called Wanaleiya. It was pronounced “Wanna lay her?”

That same sense of humour cropped up years later when Cohen told Kremen’s lawyers what Ynata Corporation - the offshore British Virgin Islands company that he used to illegally filter tens of millions of dollars out of the US actually stood for. “You’ll never amount to anything,” Cohen had been told throughout his childhood. He saw to it that he did.

But that was all in the past. Despite fighting Gary Kremen all the way up the highest court in America - the Supreme Court - Cohen lost. He nearly broke Kremen though, who had to put the personal fortune he had made from the dotcom boom on the line. And he had a lot of fun at the same time - sending documents claiming that he couldn’t afford toilet roll because he was broke, and that his fine was illegal because he was effectively put in position of being Kremen’s slave - which was against the Constitution. The US legal system kept rejecting him and Cohen kept appealing, using Kremen’s money to fund a masterclass in legal stalling.

But even now, Kremen has still to get a cent out of Cohen. He has had one victory though. Cohen was apoplectic with rage when Kremen managed to get his hands on Cohen’s $5 million mansion in the exclusive Santa Fe district of San Diego. Cohen ordered everything be taken out the house and loaded up in trucks. And it duly was - including all the electrics, doors, handles, plumbing, carpet, even trees in the garden. There literally was no kitchen sink when Kremen arrived. There was no kitchen either.

Kremen has spent years doing the house up however and lives there now; while Cohen lives in the South of France. Cohen answers his mobile and explains that he is entirely legit these days, the owner of hotels and casinos, a frequent global flyer and international jet-setter. Kremen’s detectives still haven’t pinpointed him, although they have traced his funds to Jersey - from where they will no doubt disappear as soon as Kremen gets authorisation, as they done many times before in the past three years.

But in April this year, Kremen finally did get his hands on some of his lost millions. He won between $10 million and $20 million from the company that wrongly handed the domain to Cohen in the first place and which runs all dotcom and dotnet Internet domains, VeriSign.

VeriSign had been duped by Cohen in 1995 but arrogantly refused to admit its mistake. So Kremen sued and eight years later finally settled out of court, having been back up to the Supreme Court a second time and having changed Internet law forever in the process.

After his lawyers’ fees, that settlement will leave Gary Kremen with around $5 million. He is now trying to build up Sex.com into the multi-million-dollar business it used to be. But he claims not to hate Cohen. The fact that he beat one the world’s greatest living con-men helps with that.

 

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