Mr. Spam Man
FWD: SCOTT, DON'T SUFFER BETWEEN PAYCHECKS! THINK BIG!
In Scott Richter's world, size matters.
Richter knows that Americans like things big. Bigger penis, bigger breasts. Big savings. Big chance to win big. Think big about the bigness people crave, and big profits could be yours.
Richter is a big fellow himself, 240 pounds or so packed on a 6' 1" frame. He used to be bigger, before he got into big-time weight loss. But these days, it's his business that's really big. His e-mail marketing company, OptInRealBig, controls a host of like-minded domain names, including SaveRealBig, RealBigCash, RealGreatGifts, RealBigHosting and LesbiansSizzle.com (lesbians, God knows, are big). At 32, Richter's already spent nearly two decades chasing the Next Big Thing -- and finding it, the past few years, in cyberspace.
Denver Outlaws / Major League Lacrosse All Star Game
TicketsSat., Dec. 29, 6:00pm
Last April, as American forces marched into Baghdad, Brigadier General Vincent Brooks showed a group of reporters a mock-up of playing cards featuring the faces of Iraqi leaders sought for questioning. Right away, Richter knew this was going to be big, big, big.
The Pentagon had developed the cards as an intelligence tool, to be distributed to the troops. Richter saw them as the war souvenir the public had been waiting for. Within hours, his company was shooting out e-mails advertising the cards for sale -- more than 15 million e-mails, in fact. Richter moved 40,000 decks of the cards in a week, buying them for 89 cents each and selling them for $5.95. Yet at the time he started the blitz, he didn't have a single deck in stock. Nobody did.
"We sold them before we ever owned them," he recalls. "Wal-Mart would've taken three weeks to get them in. We knew we could find them, so we went to work."
Richter tells the story while bottle-feeding one of his five-month-old twin sons in the kitchen of his Westminster home. It's a clean, spacious, well-lit place, with a portrait of Marilyn Monroe in the foyer, three Rhodesian Ridgebacks cavorting on the back deck, and hockey trophies and a pair of giant flat-screen monitors towering over the desk in the den. It's the kind of house you'd expect a young, sober, hard-driving entrepreneur to inhabit with his young, budding family. It's also totally at odds with Richter's reputation among his enemies on the Internet, who regard him as one of the most notorious and "morally challenged" spammers in the world.
If you have an e-mail account and have ever been careless about the kind of information you scatter about while surfing the Web, chances are good that you've received mail from Richter. OptInRealBig boasts of having a list of 45 million e-mail addresses at its disposal, many with additional demographic or consumer-preference information. The company also e-mails to millions of other addresses provided by clients, who use Richter's services to hawk everything from diet pills and porn sites to vacation packages and Christmas toys. OptInRealBig sends out between 50 million and 250 million e-mails a day, generating close to $2 million a month in revenues.
According to the Spamhaus Project, a British-based organization dedicated to combating the expanding swamp of unsolicited e-mail, Richter's operation ranks as the third-largest source of spam on the Internet. "OptInRealBig.com and Richter's many aliases are 'block-on-sight' domains for most of the Internet's mail systems," states the group's profile of Richter. "Due to his massive spamming history, Richter finds it hard to get service from responsible Internet Service Providers."
Richter calls Spamhaus founder Steve Linford "the third-biggest moron in the world." He prefers to describe himself as a bulk e-mail marketer, not a spammer, insisting that his mailings are perfectly legal. They're also not unsolicited, he says, because the people on his lists "opted in" to receive commercial offers, whether they realized it or not.
"I'm not going to argue that there isn't one person in forty million who didn't subscribe," Richter says. "But we document where the addresses come from, and when people complain, we remove them from our list. What people don't understand is that the Internet isn't free. I make my money by signing you up at my Web site, getting your information, and using that information to figure out what you like."
Unlike many spammers, who hide behind layers of phony e-mail addresses and forged domain names, Richter has been a highly visible advocate for his industry. He's defended his methods in the New York Times, seen his stippled portrait grace the front page of the Wall Street Journal, made the Details list of the ten most powerful and influential men under the age of 38. "If I didn't make myself available to the press, they'd never hear the other side of the story," he says.
But last month, Richter's bid for legitimacy hit a brick wall -- make that two brick walls -- in the form of New York Attorney General Eliot Spitzer and the friendly spam investigators at Microsoft. A week before Christmas, Spitzer announced that he was filing suit against Richter, OptInRealBig and the principals of two other companies for allegedly sending millions of fraudulent e-mails over hijacked servers around the globe. Claiming to have evidence of "more than 40,000 instances of deceptive conduct" in nearly 9,000 e-mails captured on Microsoft's Hotmail service, Spitzer's suit seeks $20 million in damages; another suit filed by Microsoft seeks an additional $18.8 million.
"We believe Scott Richter is clearing several million dollars a month in profits from his illegal activities," Spitzer said. "We will drive [him] into bankruptcy."
Richter fired back on his Web site and in interviews, denouncing Spitzer's suit as a "smear campaign" and blaming the deceptive e-mails on a subcontractor. He says he plans to countersue Eliot Spitzer -- a man who's made mutual-fund moguls and Wall Street investment firms tremble.
"All you have to do is say the word 'spam,' and people jump," Richter grumbles. "But Spitzer overstepped his boundaries. You can't say you're going to bankrupt a business. I say bring it on."
Bravado aside, the lawsuit couldn't have come at a worse time for Richter and his company. A week before Spitzer vowed to ruin him, Richter's lawyers filed suit in Denver against seven former employees, claiming the group had stolen precious mailing lists, destroyed data and set up a competing company in an effort to bury OptInRealBig. And Richter now finds himself in a media spotlight at a time when he's coming off probation from a felony conviction arising from a fencing investigation two years ago -- a subject he's not at all eager to talk about.
But none of these distractions have slowed him down. If Microsoft and headline-grabbing state officials are after him, he argues, it's only because he's so good at what he does, so effective, so...big. Last month, he says, despite Spitzer's attack, or maybe because of it, OptInRealBig generated 337,000 leads for its clients -- that is, the company steered that many prospective customers to client Web sites, where they could sign up for a service or order a product. That's up from 280,000 the month before.
"Bad press, good press -- all I usually get is bad, but it doesn't really matter," Richter says. "It helps build my business."
HEY CUTIE! CAN WE MEET?
The first reported instance of spam dates back to 1978, when Gary Thurek, a marketing manager for the Digital Equipment Corporation, sent a mass invitation to a company open house over ARPAnet, a network of military and university computers that was the forerunner of the Internet. Thurek wrote the message in all capital letters, the e-mail equivalent of shouting in someone's ear.
The strategy sold a lot of DEC computers. It also earned Thurek a reprimand from system administrators, who told him never to pull such a stunt again.
In 1994, two immigration lawyers posted an ad pushing their services to thousands of electronic bulletin boards. The tide of outrage that greeted their solicitation seems almost quaint now; many citizens of the emerging cyberspace community believed that the Internet could not and should not be prostituted to such crass commercial ends.
Ten years further down the road, the use of junk e-mail has exploded. According to statistics gathered by Brightmail, spam accounted for roughly 40 percent of all e-mail traffic at the start of 2003; by the end of the year, it had increased to almost 60 percent. At America Online, the world's largest service provider, the figure is already at 80 percent. AOL filters 2.5 billion pieces of spam a day, but a substantial backwash of the stuff still gets through. Yahoo reports dealing with five times the amount of spam that it received a year ago.
In one experiment, a fresh e-mail address was posted in an online chat room to see how long it would take spammers to locate it. The first piece of spam arrived at the address eight minutes later.
According to Jupiter Research, the average e-mail account received 2,200 pieces of spam in 2002. For those without the savvy or resources to filter, weed, firewall, use temporary addresses and otherwise protect their in-boxes, the message is drowning the medium. And what a message it is:
SEE HOW BARELY LEGAL BABYSITTERS MAKE SOME EXTRA CASH!
IS UR SMALL PEA NESS MAKING YOU SAD?
GIRL FROM CHURCH IS LOOKING FOR YOU!
VI@GRA FOR LESS!
Just how much havoc the plague of virility pills and get-rich-quick schemes is inflicting on the Internet is hard to say. It's estimated that dealing with spam adds two dollars to the monthly bill of Internet users, and some analysts calculate the cost to businesses -- lost productivity, anti-spam software and the like -- in billions of dollars.
But the true extent of the damage is difficult to measure, from mistakenly deleted personal e-mails (what if a girl from church really is looking for you?) to spam-weary ex-surfers to bilked consumers (a recent Federal Trade Commission survey of 1,000 random, unsolicited e-mails found that two-thirds of them involved phony investment schemes or misleading claims).
As legislators, service providers and others have stepped up efforts to expel spam, the spammers have grown increasingly sophisticated. Some use gibberish or alternate spellings ("vi@gra") to defeat filters, misleading subject lines ("Re: Tuesday's meeting") to lure users into opening their mail, and fake return addresses and "spoofed" headers to fool the ISPs trying to block them. Some operate offshore and are virtually unassailable.
But the Spamhaus Project claims that 90 percent of the spam circulating throughout North America and Europe can be traced back to 200 spammers. And the vast majority of them are in the United States.
RE: SCOTT, EARN MILLIONS WITHOUT LEAVING YOUR PC!
Although he can talk upstreams and IPs with the best of them, Scott Richter is not your classic computer geek. He never got near a computer until a few years ago, and it took him some time to grasp the machine's true potential.
"I didn't know anything about computers," he says now. "All I knew was how to log into AOL. That's still about all I can do."
But long before he staked his claim in cyberspace, Richter was an opportunity geek. His parents split when he was eleven. His father left town, his mother was busy, and that left him with plenty of time on his own. (His father, attorney Steven Richter, is now general counsel and one of the owners of OptInRealBig.) Young Scott found out he enjoyed making money. Lots of money.
Opportunities were everywhere. School didn't interest him much, but he knew that kids spent a lot of money on candy. He could buy candy cheaper at a discount outlet than they sold it at the school store, so he did. He sold candy out of his locker and out of his backpack until the people who ran the official concession began to raise hell.
"I got suspended a few times for selling candy," he recalls. "I was making thirty or forty bucks a day. Then I was doing a hundred bucks. Then I was hiring other kids to do it. Finally, the agreement we reached was that the school store would buy their candy from me, and I wouldn't sell candy at school."
For his fifteenth birthday, Richter asked his mother for two gumball machines. He put them in an office-supply store. Not a great location, he discovered. He was soon plowing his paycheck from Taco Bell into more vending machines and putting them in bars and restaurants. The machines didn't pull in much, maybe a dollar a day per machine, but he had an eager supplier and a growing sense of what locations would work. "By the time I graduated from high school," he says, "I had a few thousand machines and two full-time employees."
Richter had been an indifferent student at Cherry Creek High School. Despite his head for numbers, he'd even flunked math. But it scarcely mattered. He went straight from high school to a cousin's restaurant in Park City, Utah, to learn about that business, taking a few days now and then to return to Denver and check on his vending-machine operation. He'd already branched into video games, landing the Super Saver Cinemas and other national accounts. The revenue was good, but the machines were expensive; he had to bring in around two grand a week just to make his payments to the supplier. Who had time for college?
Video games took him into more bars and restaurants. His first effort to open his own restaurant, a family-style joint on Pecos that was essentially turned over to him by an operator who owed him money, ended in frustration. The popular chain that controlled the lease on the place considered Richter a poor risk. He was, after all, only twenty years old.
But within a few months, he'd found another location -- an empty building in Thornton -- and transformed it into Great Scott's Eatery. That was followed by his first bar; in 1992, at the age of 21, he became the youngest liquor-license holder in the state. He began buying up cheap properties left over from the Front Range bust of the late 1980s -- warehouses, shopping strips, a big college bar in Greeley. His timing couldn't have been better; within a few years, as the economy took off again, virtually all of his real estate would appreciate handsomely. He opened three more Great Scott's restaurants in the metro area, as well as the Colorado Sports Cafe.
"Scott is very motivated, and one of the most intelligent people you'll ever meet," says Bob Nelson, Richter's longtime partner in the bar business. "He's got a gift. He can take whatever someone has and make it better. He's had some failures, but he's destined to be rich. The guy just works, works, works."
At one point, Richter dreamed of building a nationwide chain of restaurants. But the high turnover and tight profit margins of the business soon dissuaded him. Instead, he began fooling around with computers. Everywhere he looked, it seemed, someone was making a fortune on the Internet, and many of the sheiks of cyberspace were twenty-somethings like him. Surely it couldn't be that hard.
Five years ago, he hired some technical help and started putting together Web sites: SaveRealBig. RealCheapGifts. RealBigDeals. The idea was to put up a bunch of banners on a site and get paid by affiliates every time somebody clicked on a link and registered with an affiliate for a contest or a subscription or something. But there was nothing about Richter's sites that would lure traffic there in the first place.
"We made nothing," Richter recalls. "I thought all you had to do was put up a Web site and you'd be a millionaire. I didn't understand the Internet."
What he needed, he realized, was a product to sell, an ongoing service of some kind. Something you sold once, then kept tapping a credit card for annual renewal. He decided on low-cost pagers, the kind of pagers people in his bars used for a few years and then threw away. Some quick math: a hundred thousand pagers...forty bucks a year for service...Richter figured he could clear $2 million a year easily.
But the pager business turned out to be as fickle as Fred Durst. Some of the people who ordered were outside his coverage area; in other cases, the pagers didn't work, even when the recipient lived in the right place. And every week there was a new style or color of pager hitting the market, and all the lemmings would flock to the latest thing.
"We put out 10,000 pagers in a few months," Richter says, "but it was more customer service than I wanted it to be."
Okay, forget pagers. How about diet pills? Everybody wants to lose weight, Richter mused. He'd been heavy for most of his life, topping out at 310 pounds. So he came up with a name for a diet pill and a slogan: Inferno, Melt the Fat Away. Then he hired an e-mail marketer to help get the message out. In those distant days -- circa 1999 -- bulk e-mail was expensive, around $5,000 to send out a million e-mails. (Thanks to cheaper bandwidth and other developments, Richter's company charges a tenth of that amount today.) But the initial results were gratifying.
Working out of his basement, Richter was soon shipping several thousand dollars' worth of pills a day. Still, he discovered that he had to keep coughing up bucks for barrages of e-mail to keep the orders coming in.
"Lots of people would order diet products once, but maybe 10 percent or less would come back and reorder," he says. "I'd send out ŒLose 10 pounds in a month,' and someone else would come out with ŒLose 11 pounds' -- and people would switch to an identical product. So I'd take the same pill and change the name. Instead of Inferno, it's Thermalife. I'd spend $10,000 a week marketing, get $15,000 in sales, and hope for reorders."
Richter soon realized the error of his ways. Instead of trying to lock people into one product, one service, for month after month, why not roll with the consumer's endless hunger for innovation, for something New, Improved, Bigger, Better? Instead of handing hard-earned profits to an outside marketer, why not develop your own list of potential diet-pill customers? And why not send those customers a regular e-mail newsletter, touting other health-related offers?
"It was incredible," Richter recalls. "We started building our own lists, getting people to sign up for our newsletter. I'd give tips of the week on how to lose weight, a special recipe -- and, oh, here's a new pill."
Soon Richter partnered with other cyber-hucksters, paying for "co-registration" on their Web sites -- which allowed him to send offers to their customer lists -- and sending their offers to his list ("Inferno has partnered with Telecom X to provide all of its members a free cell phone!"). Within a few months, he'd expanded his diet-pill customer list to a general list encompassing tens of millions of e-mail addresses, prospects for everything from letters from Santa to female arousal cream, from American flags to hard-core porn.
"Before you knew it, I was sending out a million e-mails and making $20,000 a day," Richter says. "It was the easiest thing I ever did in my life. Just send out e-mails and make money."
He pauses. "Of course," he adds, "you get a few spam complaints."
URGENT!!! SCOTT@OPTINBIG.COM CONFIRMATION REQUIRED!!!
There are many reasons to hate spam, starting with its sheer volume. Add to that the widespread (and illegal) use of phony return addresses and hacked servers; the crude, obscene or subliterate sales pitches; and, of course, the often elaborate or non-functional process for getting "unsubscribed" from a given list.
For many people, though, the most loathsome aspect of the whole business has to do with its unsolicited nature. In newsgroups devoted to the subject, some of the most passionate denunciations of spam treat it as a kind of cyber-rape, a heinous violation of one's personal space. In the new millennium, is there any more intimate refuge than a private e-mail account? Can there be any more degrading experience than visiting your in-box and finding that you -- yes, you -- have been selected for a special advance copy of a video involving a goat, a midget and an unspecified number of lactating teens?
Scott Richter had become a major target for anti-spammers even before last month's lawsuit. He's visible, he's vocal and, over the past two years, his company has become a major player in a largely anonymous industry. He routinely gets large volumes of spam from his critics -- along with death threats, lawsuits and an endless torrent of online flaming and taunting. To the regulars of the newsgroup news.admin.net-abuse.email, or "nanae," he's known as Snotty Richter, supposedly because of his confrontational attitude toward the anti-spammers.
Richter maintains that much of the anger directed at him is misplaced. "These anti-spammers, most of them are unemployed people," he sighs. "No life, miserable. They thrive on attention. They have their little newsgroups, and they argue with each other. They're their own worst enemies. I used to care what they think, but not anymore."
He is still smarting from the online bashing he endured after the September 11 attacks, when his flag sales shot through the roof. Like many distributors, he pledged to donate a portion of the proceeds to relief efforts. He scrambled to fill orders, paying premiums to suppliers and watching his profit margin drop. The Spamhaus crowd accused him of "exploiting" the American public. Richter wound up selling 10,000 flags, donating $20,000 to the Red Cross -- and vowing never to do another online fundraiser. "You try to do something nice, and these people do nothing but sit around and bitch," he says.
He insists that he engages in none of the practices groups such as nanae find so objectionable. His mailing list is all "opt in," he says; in other words, the recipients of his mail gave their consent to receive commercial offers when they visited one of his Web sites, or one hosted by his partners or partners' partners, and entered their e-mail addresses. Maybe they didn't read the fine print or check the right box to "opt out," but that's not his problem.
"If someone harvests your name off a message board or a Web site, that's an invasion of privacy," he says. "That's a hundred percent wrong. But if you go to a Web site that's advertising 'Win a million dollars,' and you sign up, and they have fifty check boxes there, and you're too ignorant -- because you really think you're going to win a million dollars -- to read what those boxes say, that's your responsibility."
The anti-spammers dismiss Richter's reasoning as so much spamspeak. They say it's unlikely that 45 million e-mail users could sign up for his offers and have no recollection of having done so. Some accuse him of harvesting addresses and hijacking vulnerable servers to carry his mail.
Last spring, Spamhaus reports, an e-mail firm in the United Kingdom collected 175,000 pieces of mail from Richter's company, "addressed to harvested and in thousands of cases nonexistent addresses (proving the address could never have 'opted in' to anything), and provided them...to the BBC together with testimony from sample address holders that no opt-in had ever taken place." And nanae members have posted examples of what they claim are OptInRealBig's efforts to "probe" proxy servers in search of ways to hack into them.
Richter denies that his company has done anything illegal. He notes that he pays $100,000 a month for ISP service to acquire the necessary bandwidth for the volume of mail he sends out. And his business has expanded so rapidly, from marketing his own products to sending out e-mail for other companies and hosting their Web sites, that he says he doesn't need to engage in the underhanded tactics some spammers use to obtain addresses, such as "dictionary attacks" (random generation of words until you hit an actual address) or trolling Web sites and newsgroups for e-mail information.
"We've never harvested," he insists. "We run our own co-registration Web sites now. With our traffic, we can generate 20,000 leads a day, with full profiles -- people coming to our sites for contests, prizes or free e-mail service. From our partners, we can get another hundred or hundred fifty thousand names a day. Their sites have to have the date, time, IP address -- everything. We check them."
OptInRealBig's techniques may seem too scattershot to be effective; fewer than 5 percent of spam recipients bother to open the message, and fewer than 1 percent order anything. But if you're sending out 50 million messages, even those response rates can pay off. And Richter says the firm does engage in a kind of target marketing, even when penis pills or breast enhancements show up in the opposite gender's mailbox.
"We send breast-enlargement pills for a company here in town," he says. "Fifty percent of their customers are males. Bodybuilders love it. We have a product called Viagel, which is a female arousal cream. You'd be surprised how many times a guy buys it as a gift, or because his wife would never buy it."
Richter says he averages one spam complaint for every 10 million e-mails -- an astonishingly low number -- and that all of his mail clearly identifies the sender and has a working "unsubscribe" link. Some spammers use the link to confirm good addresses and redouble their efforts, but Richter swears that's not his way.
"The media has done a good job of telling people not to trust unsubscribe links," he says. "But if somebody wants off our list, we'll never send to them again. We want to fly under the radar. The last thing I want is to have 10,000 spam complaints coming into my ISP."
A new federal law requires bulk e-mailers to use genuine return addresses and working unsubscribe links. It also prohibits deceptive subject lines and the harvesting of addresses. But many anti-spammers say the CANSPAM (Controlling the Assault of Non-Solicited Pornography and Marketing) Act is, in fact, a license to spam, since it supersedes more restrictive state laws and fails to ban unsolicited bulk mail outright.
Richter says CANSPAM puts new burdens on legitimate companies while encouraging rogue spammers to become more devious in order to evade prosecution and fines. It's a fundamental axiom of the business: New laws and filters only seem to bring out more spam and more fraudulent tactics to deliver it.
"We wanted one law we could meet, but this new law is a disaster," Richter says. "Nobody really understands it, and the hard-core underground spammers haven't slowed down at all."
PSSST! SCOTT.RICHTER, LOWEST PRICE CIGS RIGHT HERE!
May 9, 2000. What is Scott Richter, soon-to-be president of OptInRealBig, doing in Denver's gritty Lincoln Park neighborhood? Why is he loading 120 cartons of Marlboros, purchased for $1,200 from an undercover cop, into his Lexus SUV? What kind of low-rent, think-small deal is this?
In 2002, following a lengthy investigation by the Denver Police Department's anti-fencing unit, Richter and Bob Nelson, his partner in the Colorado Sports Cafe, were charged with multiple counts of theft by receiving. According to court records, an informant's tip stemming from a stolen Bobcat loader had led undercover officers to the defendants' bar. Over the course of thirteen months, they proceeded to strike deals with Nelson and Richter for a Honda generator, several cases of cigarettes, three laptop computers and other items, all offered to the two men at suspiciously low, low prices.
The indictment implies that all of the goods were represented as stolen and that Richter and Nelson were engaged in a fencing operation, but both men deny this. Nelson says the problem started after he befriended a bar patron, Dave Kechter, who turned out to be a Denver detective.
"The guy comes in and becomes friends with me," Nelson says. "He asks me if I know anybody who wants to buy a generator, and I'm like, 'We need one for the bar here.' He said it wasn't stolen. Everything I purchased was for personal use, not to sell it. It wasn't like we were doing this to become rich."
Richter calls the episode "the most screwed-up story you ever heard in your life" and a clear case of entrapment. He wasn't that involved in the bar's day-to-day operations at the time, he says: "The only thing I was part of was $3,000 worth of cigarettes, bought for our vending machines. I wasn't around a lot of the time, but because I had knowledge of it, I got tied to it."
Richard Mumford, a detective with Denver's anti-fencing unit, conducted three separate cigarette sales with Richter. He says it was "very clear" to Richter that the merchandise he was buying was supposed to be hot.
"I did two really good deals with him, where he showed up in the projects with his Lexus," Mumford recalls. "He was one of the best crooks I know."
Richter and Nelson each pleaded guilty to a single count of conspiracy to commit theft by receiving and ended up on probation. They have since sold the bar. Richter, who was assessed more than $35,000 in costs and restitution and had to perform community service, says the bust was a "unique situation" that came at a time of great reversals in his life.
"This was three, four years ago," he says. "At the time, I lost a ton in the stock market. I owed almost $600,000. I worked hard with the Internet to come back and pay everything off. I'm not ashamed of what I did. I'm ashamed because I wanted to fight it, and I wish I had."
SCOTT, HOT DOMINATING NY AG WANTS TO SPANK YOU!
Things were looking up for Richter last spring. Business was booming, and he'd been invited to be a featured speaker at a Federal Trade Commission "summit" on spam issues in Washington. He was feeling jaunty enough to fire off an e-mail to the nanae newsgroup regulars, addressed to "all my fans."
"I have had many e-mailing me about wanting to take pictures with me while in DC," he wrote. "To answer those who have asked and those who are wondering, I'm actually a normal human being. I will be more than happy to meet any of you for a picture with me as well as listen to your viewpoints on e-mail.
"I'm actually against unethical marketing and can admit mistakes in the past and look forward to a correct and prosperous future.... For those who do not know how to be civil to another human, for whatever personal or emotional problems you suffer from, please talk to the other panelists."
He signed the note, "Yours truly, Snotty."
Around the same time, Richter was also embarking on a potentially lucrative deal with Synergy6, a New York-based e-mail marketer. Synergy6 lured consumers to its Web sites with offers of "free" products -- including doughnuts, earrings and sunglasses -- in order to get them to register for more commercial offers. The company hired OptInRealBig to send out "free stuff" e-mails, paying a bounty for each registration that resulted from the campaign. But Richter's company was also serving as a broker in the deal, hiring yet another company, Texas-based Delta Seven, to send out some of the e-mails.
Over the next few months, Synergy6 and its partners bombarded the Internet with hundreds of millions of e-mails. The registration rates were not as high as everyone involved had hoped -- at one point, they were running at 20,000 a month, while Synergy6 president Justin Champion had his sights set on 20,000 a day -- but they improved dramatically as the campaign heated up. Synergy6 documents indicate that OptInRealBig was paid in excess of $700,000 for its part in the promotions. But the barrage also ran afoul of Microsoft and Attorney General Spitzer; Richter's program for a "correct and prosperous future" had developed some major bugs.
Exhibits attached to Spitzer's lawsuit include more than a hundred pages of e-mails between Richter and various Synergy6 employees, providing an unusual glimpse into the inner workings of an e-mail mega-blitz. Amid the snarling over commissions, technical glitches, "shitty data" and not enough "freshies" (fresh lists of addresses), a tone of exhilaration and conquest prevailed.
"Let's blow this up," Champion urged. To his own CEO, he fired off a memo urging him to contact Richter about how to "syndicate" their business: "He knows exactly how we could instantly mint cash by building e-mail processes for Scott and all of his mailers. He sends 200 mill per day."
Champion demanded more volume. As Richter delivered, his commission was raised. But when the free offers Synergy6 sent them bombed, such as an offer for a free screen saver, Snotty Richter made no attempt to mask his disappointment. In an e-mail headed "new screen conversion sucks ass," he moaned: "No getting opens no clicks and conversions not like was, no one wants same old shit and everyone has mailed screen savers forever. I'm loosing [sic] my ass on this crap."
Synergy6 had other concerns about the mailings. Early on, the company's chief operating officer, Robert Aitken, notified Richter that he'd been getting "scathing complaints from consumers that they are receiving our offers with their own e-mail addresses in the Œfrom' line. Most have threatened to contact the FTC, BBB, etc."
Richter denied that the cited e-mails had come from Synergy6's offers. But Aitken insisted that "the complaints are killing us" and asked Richter to use a "legit from line."
"We won't mail any more to be safe," Richter replied. A few minutes later, he wrote: "We send out 10 million plus e-mails a day, and you on average send me two complaints or less in a day. Today three complaints. I think one complaint per 3 million is real good...If you're having issues with your ISP, maybe something else is the reason."
But Spitzer's lawsuit claims that there were ample reasons for consumer complaints. Microsoft had set up spam traps on its Hotmail service, e-mail accounts created for the sole purpose of collecting bulk mailings. How these accounts "opted in" for Synergy6's offers isn't clear, but in a one-month period, the traps snagged 8,779 messages from the campaign. Most of the messages contained false sender identities -- claiming, in many cases, that the sender was the recipient's user name or a major online company such as AOL, Yahoo or Hotmail.
The captured e-mails also contained false headers, the code that documents the message's transmission path and server of origin. To make the messages even more untraceable, every one had also been routed through unsecured servers around the world. In all, the spammers had used 514 servers in 35 countries on six continents, including servers at a hospital in South Korea, the Ministry of Finance in Kuwait and ISPs in Slovenia and South Africa.
Richter says that all of the fraudulent e-mails at issue in the lawsuit were sent out by Delta Seven and that he was unaware of the company's alleged tactics. He received only a handful of complaints, he says, and he passed those on to Delta Seven.
"If there was a problem, it was up to Synergy6 to shut the guy off," he says. "Instead, after I say it's simple, we'll stop mailing, they send an e-mail saying they need to pay Richter more money to keep him happy."
Synergy6 executives have denied any culpability as well, insisting that they were "unaware that OptInRealBig had even engaged Delta Seven" to promote the offers and that the company requires its affiliates to sign contracts that prohibit illegal conduct.
As for Delta Seven, one of its principals has since filed for bankruptcy and moved on to other ventures. When interviewed by an investigator for Spitzer's office, the other chief partner in the company denied that he'd received any complaints from Richter about illegal activities. "If anything," Denny Cole said, "the complaints from Scott Richter were that not enough money was being generated."
The finger-pointing among the defendants has been a source of amusement among anti-spammers, who've been posting online excerpts from Spitzer's complaint and the companies' responses. ("Why Scott Richter is doomed," reads the header of one such discussion.) Richter, though, insists he will be vindicated.
"We were brought into this because of our name," he says. "We're positive that we're not going to pay a penny and we're going to be out of it fast. Our intention is to countersue for damage and to hold Eliot Spitzer personally liable for the remarks he's made. The guy was on National Public Radio saying we're already out of business."
Richter says that Spitzer has yet to produce one piece of fraudulent mail sent out by OptInRealBig. Technically, he hasn't even produced an aggrieved mail recipient -- a live one, anyway. Although the lawsuit estimates that 5 percent of the recipients of the Synergy6 campaign were New York residents, the $20 million figure sought in the suit is based on the spam-trap examples of fraud. "Those aren't New York residents," Richter notes. "They're going to have to produce 8,000 New Yorkers."
According to Richter, New York Assistant Attorney General Stephen Kline offered to let his company "opt out" of the lawsuit and pay a settlement of $100,000; he declined. (Kline didn't respond to a request for comment.) Spitzer may be emerging as the scourge of CEOs, a modern-day Dewey, but Richter isn't easily intimidated. Consider his response to a recent assault on OptInRealBig from its own former employees.
Last fall, as Spitzer was preparing to file his lawsuit, half a dozen men abruptly left Richter's operation. One of them was Jeff Perreault, a 10 percent owner of the company who was moving into a consulting relationship. Others included key information-technology people and sales reps. Shortly after their departure, Richter says, he discovered that the ex-employees had destroyed hard drives and made copies of confidential data and client files for their own use. One IT whiz, he alleges, even tapped into his private e-mail correspondence with legal counsel and arranged for callers to a company "tech support" number to be forwarded to an adult chat line.
OptInRealBig's lawyers went to court, claiming that the defectors were setting up a rival company -- and using stolen property to do it. Last month, Denver District Judge Herbert Stern ordered the property at issue to be returned and cautioned the defendants against disparaging Richter's company.
Perreault didn't respond to Westword's requests for comment. Richter says he expects a settlement in the case to be reached soon.
In Richter's world, the only way to avoid getting crushed is to keep getting bigger. He points out that AOL, Microsoft and other big service providers blitz their own users with "special offers" all the time, but nobody's calling that spam. A case could be made, he argues, that Microsoft is going after him because it wants to eliminate the competition. The best way to protect himself, he figures, is to build his own free e-mail service into something very big.
"My goal is to have 40 million free e-mail accounts given out by the end of the year," he says. "I'm building my own user base. What's Hotmail going to say when I won't take mail from them?"
SICK OF ANNOYING ADS? AMAZING PRODUCT STOPS SPAM NOW!
The sign on the window next to the entrance of OptInRealBig's offices in Westminster leaves no room for misunderstanding. Or irony.
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