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 he moved to Mexican border town Tijuana, outside US jurisdiction, and ignored court orders while he cleverly and illegally filtered tens of millions of dollars from his various shell companies to offshore banks.
Cohen then appealed the decision all the way to the highest authority in America, the Supreme Court with increasingly flippant legal arguments before finally losing on 9 June 2003. And after a shoot-out at his Tijuana home between bounty hunters hired by Kremen and the Mexican police, he moved to France with his millions in tow.
But the money, the $65 million, incredibly, is not what has driven these two men to follow each other’s every step for nearly a decade, or to regular speak on the phone about the very case that was consuming their lives. The money is only the prize. The real battle has always been beating one other.
According to a printed coloured card of “Gary Kremen trivia” - a dozen of which lie in a cardboard box on the shelf of the computer room in Kremen’s $5 million San Diego mansion - Gary’s first word was not a) Mommy b) Light or c) Daddy, but rather d) Porn.
It was a strangely prescient utterance, especially since Gary had been born to a happy, middle-class family in Chicago, and the sex industry - based mostly in Los Angeles and San Francisco - could not have been further from the precocious infant.
Kremen had become fascinated very early on in life with computers, building one from scratch aged just 12, and nearly getting expelled from high school after hacking into the school network. In adulthood, he got a degree in electrical engineering and then sought his fortune in Silicon Valley, going to Stanford business school before taking various financial controller roles in various hi-tech companies.
It was in 1994 that he became aware of the organised effort to licence out specific words as “domains” on a computer network called the Internet. The Internet was a conglomeration of several earlier computer networks, and it may only have been 10 years ago, but when Kremen realised the potential of owning a word on such a network, the number of people actually using that network could be counted in the thousands. Now there are over one billion.
Domains were simply handed out to those that applied. US company Network Solutions had been given a monopoly over domains by the US government and for the first few years didn’t even charge. Kremen saw his chance and registered on 9 May 1994, among others, jobs.com, autos.com, houses.com, notices.com and, of course, sex.com.
He also bought, started and ran Match.com - now the world’s biggest online dating agency. Sex.com remained untouched while Kremen concentrated exclusively on Match.com. The plan, he said, was to make Sex.com “a sluttier version of Match.com” further down the line.
But while Kremen worked away, Sex.com - the most desirable and undeveloped piece of prime Internet real estate in existence - drew the attention of a lifelong con-man fresh from jail for fraud. Stephen Michael Cohen had just served three years for bankruptcy fraud, making false statements, obstructing justice and impersonating a lawyer. It wasn’t the first time he had done any of them, nor the first time he had been in court defending himself against them, but it was the first time he had gone to jail in his remarkable 18-year criminal career.
Cohen had significant experience of both the sex industry and computer networks. He had run a hugely successful private computer network when the Internet was no more than a pipe dream, distributing pornographic pictures and copyrighted software to paid-up members. And he had been in charge of an inner-city sex club - called “The Club” - where members would pay $50 to spend as long as they liked in a house full of like-minded, semi-naked people (years later, he would quip: “It was great, men would pay me to fuck their wives”). Both endeavours would bring him up in court and in both cases he talked his way out of a jail sentence.
In October 1995, therefore, Cohen had the nous and the wherewithal to immediately recognise Sex.com for what it was - an untapped goldmine. Within a week, he had stolen it from right under Gary Kremen’s nose.
The first Gary Kremen knew about it, a friend called to say that his name was no longer listed as the owner of Sex.com. He brushed it off: “I saw some other guy’s name was there but my information [address, contact details] was still there, so I thought: so what?” Kremen wrote it off as a glitch. But over a period of weeks, Stephen Cohen - now listed as the owner - gradually over-rode more of his details.
“Eventually it hit me that something was really wrong when everything changed,” Kremen reflects eight years later. “So I called Network Solutions up and they said they’d investigate it. I said fine. Nothing happened, so I called again. That was when Stephen Cohen called.”
Stephen Cohen, contacted by Network Solutions and asked to explain why the earlier owner of Sex.com was complaining, did something that would only ever occur to a con-man - he called up Kremen pretending to be from the United States Patent and Trademark Office and informed Kremen that he was investigating trademarks owned by one Stephen Cohen, including the trademark “Sex.com”.
Over the course of the conversation, he persuaded Kremen that he, Cohen, had legitimate rights over the domain. “It was a believable story, I believed it,” Kremen admits. He had no idea he was talking to the man that had stolen the domain off him. And Cohen would have got away with it had it not been for Network Solutions’ peculiar behaviour. The company that owned and ran all dotcom domains had decided that if it ignored Kremen he would eventually give up and go away. It only increased Kremen’s suspicion that something wasn’t right.
The more Network Solutions failed to provide the authorisation it had received to hand the domain over to Cohen, the more determined Kremen became. When, on 19 June 1996 - eight months later - it eventually provided a faxed copy of a letter, Kremen realised he had been had.
The letter was palpably a fake. It purported to come from Kremen’s company, Online Classifieds, yet had the wrong address and no contact number. It was addressed to Stephen Cohen and explained - in very un-business-like terms - that Gary Kremen had been fired and that the company had decided to hand over Sex.com to him, for no charge, in recognition of his rights over the domain. The real crunch though was at the end. “Because we do not have a direct connection to the Internet, we request that you notify the internet registration on our behalf, to delete our domain name sex.com. This letter shall serve as our authorisation.”
A letter written by a con-man addressed to himself and giving him authorisation over someone else’s property. You can’t deny that such audacity is rare.
And so began the legal fight that would nearly bankrupt Kremen - twice - reach the ears of the Supreme Court - twice - form a series of bizarre relationships and events, and change the law with regard to the Internet forever.
“Welcome to the house of Stephen Cohen,” exclaims Gary Kremen walking out onto the veranda. “This is where he used to sit in the early hours of the morning, figuring out new scams, working out how to screw people.” The afternoon sun is still warm, the silence golden and the deckchairs are arranged over-looking the swimming pool, hot tub, tennis court and volleyball sand-pit - which themselves look over some of the most exclusive property in the world: Rancho Santa Fe, San Diego, California, USA.
The house - mansion - is one of two things that Gary Kremen has managed to extract from Stephen Cohen. The other was a rotten, uninhabitable shack slap-bang, now burnt down, on the US side of the Mexican border that Cohen had managed to con from its owners and used for yet another scam.
Cohen hadn’t made it easy though. When the court judgement came down that Cohen had to pay $65 million, Kremen immediately sought to get control of Cohen’s assets, knowing he wouldn’t pay. But Cohen had tied it up months before. Money flowed from bank account to bank account, it jumped across the Mexican border and before anyone could grab hold of it, it was in the British Virgin Islands, a tax haven. (It subsequently moved and jumped across the world as Kremen’s investigators tracked it down. It is currently thought to be resting in Jersey and Liechtenstein.)
However, when Cohen attempted one of his trademark fraudulent bankruptcies with two properties under the name of his third wife, Rosa Montano, an alert judge realised what was going on and looked into it further. Kremen had someone watching the San Diego mansion within days. Not long after, they reported back that a large number of trucks were loading up with stuff from the house.
By the time Kremen arrived at the house - now his property in lieu of debts owed - it was torn to pieces. Everything: drawers, cupboards, carpets, toilets, wood panelling, lightbulbs, even trees had been pulled out at great haste and loaded on the back of trucks. The plumbing was gone and water poured out all over the house, all the handles and locks had been wrenched free, the light fittings and electrics had been pulled out. The doors had been left open and for days wild animals had been living inside. A green spray-paint mark on a palm tree by the swimming pool had marked it out for removal but never been uprooted.
Gary Kremen moved in, added an alarm system, hired guards and started doing it up. He now lives there, and on his study wall, amid various press cuttings and awards, is a framed letter from Stephen Cohen’s lawyer accusing Kremen of risking his client’s life by sending bounty hunters to his house in Tijuana where they fought a gun battle with the Mexican police.
Kremen had posted a $50,000 reward on the Internet on 31 May 2001 for Cohen after he had refused to return to the US and court proceedings, but swears that no shoot-out ever happened. Cohen for his part has pointed to his lawyers whenever the matter is raised. And his lawyers answer the question in the way that only lawyers can - by asking more, unconnected questions.
What did or didn’t happen, what may not or could feasibly be true is the area of uncertainty in which Stephen Cohen has made his living - extremely successfully - for over 20 years. And anyone who has spoken to him will understand how he has got away with it. It is a rare gift indeed, but Stephen Cohen has the genuine ability to persuade you of something you know not to be true. Each of Kremen’s lawyers has confessed that Cohen’s incredible charm made their job several orders harder.
What is undeniable however is camera footage. Despite a criminal record as long as your arm, despite extremely suspicious circumstances, despite Gary Kremen’s clear rights over the domain Sex.com, everyone involved in the case agrees that Stephen Cohen was going to win it - until that is, he made a major blunder.
Being top of your game for more than a decade is bound to lend a certain arrogance and it is difficult to see any other reason as to why Stephen Cohen took the gamble of his life when he decided to walk into a Kinko’s photocopying store, pretend to be Gary Kremen’s lawyer and walk away with his own bank documents that had been released under the American subpoena system. “I didn’t think he was entitled to the evidence. So I took it,” Cohen reasoned three years later. But the fact was that he didn’t think he would be caught.
Cohen had somehow found out where the bank documents detailing how much money he had made from Sex.com were to be copied and delivered to Kremen’s lawyer, and he stepped in, persuading staff to hand them over to him. What he didn’t count on was CCTV footage and the police confirming that the same man that had taken the documents was the one that had been filmed for an earlier deposition in the case. With Cohen finally exposed as a crook, the judge refused to listen to any more of his tales and suddenly the case fell into Kremen’s lap.
Cohen’s incredible control of details had worked though and the judge awarded $65 million based on what he could be sure Cohen had made from selling pornographic material and advertising on Sex.com. In reality, that figure should have been $100 million, and very likely much more.
But that is all pretty much irrelevant. Kremen, the law-abider, won through the law. Cohen, the con-man, had narrowly failed to bring off the biggest con of his life. A separate court case with Network Solutions decided that the company should never have given the domain away, and made a domain name legal property for the first time. That case - which found its way up to the Supreme Court before heading back down again - was finally settled at the end of March and Gary Kremen at last received some of the money he was owed.
Kremen now runs Sex.com as a search engine for other sex sites, refusing to host any material himself. He is also a founder of various organisations seeking to clean up the online sex industry and he is hoping to use the unique technology he has developed at Sex.com to expand into other, more conventional, markets.
Sex.com makes money and without the astronomical costs that hiring the best lawyers in America entails, the end of the legal crusade means Gary Kremen can get on with running a business. After all, he has won the argument, won the domain, won the battle. The only problem was Cohen got to keep the money.