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25 May 2004
Web site founder adjusts to life in Rancho Santa Fe
Roger M. Showley, San Diego Union-Tribune

Web site operator Gary Kremen lives in a Rancho Santa Fe mansion with only the bare necessities. He won the house in a long legal fight over ownership of the Web site.

Web entrepreneur Gary Kremen found out early how difficult it is to make sex click on the Internet.

It took nine years, and $4.5 million spent on legal fees, for Kremen to emerge victorious in a long-running battle to re-establish his right to own one of the Web's most easily remembered names – sex.com.

Now, Kremen is finding new difficulties trying to ease into the good life amid the cloistered estates of Rancho Santa Fe, where he has had run-ins with the pricey area's homeowners' association.

From a nearly empty 7,650-square-foot mansion in the heart of The Ranch, Kremen says he's beaten a dependency on speed and is hoping to put his life in order, with a wish to get married and have three children.

That shouldn't be tough for a 40-year-old bachelor who founded Match.com, one of the Web's most popular dating sites, and who has been on the winning side of $80 million in court judgments and settlements.

Still, having a neighbor who owns an Internet site that is a gateway to explicit sexual content must raise some eyebrows in Rancho Santa Fe, where a legally binding document called "The Covenant" casts a near-Biblical edict on what is allowed and what is not, at least on matters of real estate.

Although he defends his sex-driven business, Kremen said he wants to change his focus.

"I don't even like porn," he said. "I find it dull."

Instead, he has dreams of playing dealmaker between San Diego biotechs and Northern California venture capitalists – as he tries to shed 50 extra pounds and furnish his austere home, which he won in one of his court fights.

"I want to move it in a new direction," he said of his San Francisco-based company, "and get involved in the venture (capital) community in San Diego."

Kremen arrived in San Diego through a circuitous set of circumstances that started in the formative days of the Internet.

After graduating from Northwestern University with degrees in electrical engineering and computer science, the Chicago-area native earned an MBA at Stanford in 1989 and moved to San Francisco when the dot-com boom was building.

"I began downloading software," he said, and earned his first $100,000.

He saw the windfall that would be possible by transforming the idea behind pay-per-call 900 telephone dating services into an Internet service using e-mail.

The result was Match.com, the well-known Internet dating-service he founded in 1993 with $2 million in venture capital. His board overruled him and sold the site before its full potential was realized, Kremen said.

About the same time, he hit on the idea of registering Web site domain names drawn from newspaper classified-ad headings and acquired the rights, at no charge, to about 20 generically named sites, including sex.com.

Sex.com is a bulletin board of paid advertising that links Internet users to a slew of explicit adult-entertainment sites offering products and services. Advertisers pay only a few pennies to Kremen every time someone clicks on one of their ads. At one time, the site was generating as much as $1 million per month, Kremen said.

Not surprisingly, others saw the lucrative possibilities of sex.com.

In late-1995, Kremen discovered that his site had been hijacked by another entrepreneur, Stephen Michael Cohen of San Diego, who earlier had been convicted of bankruptcy fraud and was sentenced to 46 months in jail.

In court proceedings, Cohen was shown to have persuaded San Diego-based SAIC's Network Solutions Inc., which was a registry for Web-site domain names, into switching ownership of the site from Kremen to Cohen.

"They said pound the sand," Kremen said Network Solutions attorneys told him when he complained of the switch.

It took six years and $4.5 million in legal costs before a court order returned ownership of the site to Kremen.

Through the courts, Kremen won a $65 million judgment against Cohen and, just last month, a settlement reported to be $15 million from Network Solutions' successor company, VeriSign, no longer owned by SAIC.

All this has been grist for lawyers, including San Diego's Gray Cary Ware & Freidenrich, which represented VeriSign, and for the Internet community, since the case produced a major ruling on Internet domain ownership. Somewhat of an Internet star, Kremen addressed an American Bar Association session earlier this year on his legal battle.

And, Kremen said, the BBC is planning a documentary on his story, with a working title of "The Accidental Pornographer."

It is Cohen who indirectly brought Kremen to Rancho Santa Fe.

While the case against Cohen wound its way through the courts, he bought a year-old home in Rancho Santa Fe in 1998 for $3 million. The mansion later was awarded to Kremen in 2001 as part of the judgment against Cohen, along with a small house near the border.

Cohen, 56, fled across the border to Tijuana and never paid Kremen what the court had ordered. Today, U.S. marshals say, Cohen remains a fugitive with a warrant outstanding for his arrest.

Meanwhile, Kremen said he had become dependent on speed and was running with the wrong crowd in the Bay Area.

"I wanted to get away from the bad people I knew," he said.

He moved to the Rancho Santa Fe mansion and weaned himself off drugs, began an exercise regimen (he still has 50 pounds to lose on his 5-9, 225-pound frame) and found a steady girlfriend.

When he first moved to The Ranch in 2002, Kremen said he ran up against the strict membership rules of the Rancho Santa Fe Association, the homeowners group empowered with land-use regulations for the 1,905-lot subdivision through the 1928 document known as "The Covenant."

When Kremen inquired about his membership in the association, he said officials told him they couldn't find any record that he owned land within the area regulated by the group.

"I sued and convinced their lawyer that they'd lose the battle," Kremen recalled. "They eventually let me in, eight months later."

Peter B. Smith, manager of the association, said Kremen's business as a sex-site operator had nothing to do with the delay.

"It was unusual because of the nature of how he acquired the property," Smith said.

Though he relishes living in the home of his nemesis, Kremen now says he would prefer a "cool" loft in downtown San Diego. Projected capital gains taxes deter him from moving.

"I don't do big houses," he said on a tour of the one-story, red-tiled home, surrounded by an expansive lawn and a lemon grove. There's a private tennis court, disappearing-edge pool and a guest house where his sister, Julie, a professional photographer, lives.

Paved with Saltillo tiles, the white-painted rooms are huge, from the catering-size kitchen to the master-bedroom suite where Kremen's king-size (and unmade) bed barely makes a dent in the floor space. A few innocuous paintings hang on the walls.

In the pantry are a few cans of vegetables, bottles of olive oil, Trader Joe's coffee and other sundry items – including a copy of a Dr. Atkins diet book.

The only space with a lived-in look is the wood-paneled den to the right of the entrance.

From here, Kremen manages his San Francisco-based company, Grant Media, via two computer screens hooked up to a high-speed modem. He spends about 25 percent of his time in the corporate office, where he employs a staff of 15.

Kremen's tastes run to thriller movies and novels, Steely Dan and gangsta rap music. His idea of a getaway is a camping trip in his Grand Cherokee to the Anza-Borrego desert, where he likes to curl with up a good book.

And he's developed an interest in collecting old maps of California.

Admitting that he should upgrade his styleless wardrobe, Kremen jokes that he could use some advice from the cast of "Queer Eye for the Straight Guy."

"Please – call me and save me!" Kremen pleads.

 

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