Profile of a "Spam King"

Unlike his father, Scott didn't go to college and get a business degree. Instead, he spent his time after high school in Denver running RAM Amusement Investments Inc., a vending-machine business he incorporated in 1991 with his mother as corporate secretary.

That business frequently took him into bars and restaurants, and he eventually opened his own chain of '50s-style restaurants around Denver known as Great Scott's Eatery, as well as a nightspot called the Colorado Sports Cafe.

Spending so much time around good food did a number on Richter's weight. At one point the 6-foot-1 Richter pushed the scales at nearly 300 pounds. So when the Internet beckoned Richter to try his hand at online entrepreneurship in late 2000, spamming diet pills seemed a natural choice. He even featured himself in a before-and-after photo at a website for Inferno, the ephedra-based supplement he was selling.

Deep in debt at the time as the result of stock market losses, Richter initially could afford to hire only small-time spammers to deliver his Inferno ads, which listed the Colorado Sports Cafe's street address as SaveRealBig's corporate headquarters. But as the cash flow picked up, Richter turned to MindShare's Postmaster General system for most of his mailing.

Shiksaa had noticed complaints on Nanae (a newsgroup on spamming) about SaveRealBig spams emanating from MindShare's service. In August 2001, she posted a note on the newsgroup observing that Richter apparently was using "dirty" mailing lists - containing addresses of people who hadn't opted in to receive them - and that Postmaster General didn't seem to be aware.

In early November 2001, more glaring proof appeared that Richter's lists weren't of the highest quality. Using the Postmaster General system, SaveRealBig had e-mailed ads for $6 cellphone booster antennas to an Internet discussion list dedicated to the Debian computer operating system. The ads carried the subject line "Vital Emergency Strategy" and played on fears that new terrorist attacks would bring the sorts of communications breakdowns that plagued World Trade Center rescue efforts: "Worried that you or your loved ones won't be able to summon help in a crisis? The Amazing ezBooster is the solution!"

By the end of the month, Richter's ads had caught the attention of America Online. The big online service warned MindShare that, due to member complaints, it intended to remove SaveRealBig from the "white list" of bulk e-mailers allowed to send messages to AOL members. In response, MindShare's abuse manager, Kelly Molloy Thompson, contacted Richter by e-mail with an ultimatum: "You, as a list owner, will need to submit documentation that the AOL addresses on your list were in fact collected through an opt-in process."

According to Thompson, Richter's documentation minimally needed to include the date and time the user opted in, as well as his or her Internet protocol address. Failure to produce such evidence within three days, she said, would result in SaveRealBig's messages "being silently discarded" by AOL's spam filters.

Richter was unable to produce the proof by AOL's deadline. Like many e-mail marketers, he had built his mailing lists - which had grown to over 10 million addresses at the time - largely through what are known as co-registration deals.

Under such arrangements, operators of Web services sell or trade their customer lists to other marketers. In some cases, customers haven't actually given permission for their information to be shared, yet unscrupulous marketers nonetheless pass off their lists as "opt in." In other instances, sites hungry for sales leads essentially trick visitors into granting permission through confusing fine print and numerous checkboxes. Then there are the lists sold as "co-reg" leads, which actually contain a blend of data, some of it harvested from the Internet. Not surprisingly, spam complaints from co-registration lists can be common.

Cut off from mailing to AOL through Postmaster General, Richter began focusing his ads on general Internet addresses. But even then, his mailing lists continued to get him - and MindShare - into trouble. In early December, spam from Richter arrived in the e-mail in-box of anti-spammer Morely Dotes. The message was sent through the Postmaster General service and carried the subject line, "Why should men have all the fun?" It promoted a product called Vigel, which it claimed was "a topical gel that increases feminine sexual pleasure and excitement." According to the SaveRealBig Web page advertised in the spam, Vigel contained menthol and the amino acid L-arganine and was "guaranteed to improve your sex-life or your money back!"

Morely Dotes forwarded a copy of the spam to MindShare's Internet service provider with a recommendation that it block all traffic from the company, which he called "a spam-for-hire outfit, with no legitimate users."

Spitzer and Microsoft take aim at Richter

At the time, Richter publicly relished the bad-boy image he was gaining among anti-spammers. When several of Richter's SaveRealBig sites were kicked off San Francisco ISP Hurricane Electric in December 2001, Richter posted a note to Nanae that celebrated the action.

"The more attention we get the more money we make. We are going to be big. REALBIG, the name we use says it all ... we are legit and getting stronger by the day.

"The more people talk about us the more companies find us. COMPLAINERS=$$$$$$," wrote Richter.

A few days later, as spam fighters were discussing Richter's listing on the Spews.org blacklist, he jumped into the fray: "I love the public's eye and the attention. Keep chatting; I LOVE EVERY MINUTE OF IT. MAKE ME FAMOUS."

But contrary to his public posturing, Richter was privately seething over the attention his spams had generated. In early January 2002, he phoned management at Peer 1 Network, an Internet service provider based in British Columbia. Rob Mitzel, the ISP's abuse coordinator, had posted what Richter considered defamatory comments on Nanae about SaveRealBig. When Richter threatened to sue the company, Mitzel published a public apology on Nanae.

At the beginning of December 2003, Richter suddenly found himself on the receiving end of a lawsuit. Officials from the New York attorney general's office wanted to talk with him about several batches of spam that had been sent out from May through July of 2003 using proxies and fake headers. New York state prosecutors said they had traced the sites advertised in the spams to a New York company called Synergy6, which said it had subcontracted the e-mailing to Richter.

Richter knew New York Attorney General Eliot Spitzer was on the warpath against spammers. In February 2003, Spitzer had pulled off a successful lawsuit against another self-proclaimed "opt-in" e-mail-marketing company. A federal court judge ruled that Monsterhut, a Niagara Falls, N.Y.-based firm, was deceptively representing its service as "permission based" or "opt-in," when in fact Monsterhut's mailing lists contained millions of e-mail addresses of consumers who had never asked to receive ads. The court permanently banned Monsterhut from engaging in such acts in the future.

In a conference call with Spitzer's office, with Richter's dad on the line in San Diego, Richter explained that OptInRealBig had never directly sent any messages for Synergy6 during the period in question. All the e-mail was the work of one of his affiliates, a Texas company named Delta Seven. Richter explained that OptInRealBig had forwarded to Delta Seven the few complaints his company had received about the messages. He provided investigators with contact information for Delta Seven's owners, Paul Boes and Denny Cole, and hoped that would be the end of his involvement in the matter.

But a week later, a certified letter arrived from New York. It announced that state regulators had commenced litigation against Richter, "among others." The letter accused him of a variety of deceptive business practices, including e-mail header forgery, as well as false advertising. A few days later, Richter got word that Microsoft was teaming up with New York on a parallel lawsuit, on the grounds that its Hotmail service had received potentially millions of the illegal spams.

As Richter predicted, Spitzer and Microsoft general counsel Brad Smith held a joint press conference the next day in New York to announce their lawsuits. Spitzer began by describing the three respondents, referring to Richter as the third-largest spammer in the world. Then Spitzer zeroed in on the subject of header forgery. He noted that Microsoft's spam traps had attracted over 8,000 spams from Scott Richter in a one-month period. All of the messages, according to Spitzer, contained bogus headers designed to evade the spam filters used by ISPs and computer end users.

All told, there were 40,000 "fraudulent statements" in the messages, said Spitzer. Then he announced his office's intent to sue the spammers $500 for each fraudulent statement, or a total of $20 million. The goal, he said, was to make other spammers realize their business was unviable.

"We will drive them into bankruptcy, and therefore others will not come into the marketplace to take their place," he promised.

When Microsoft's top lawyer Brad Smith took his turn at the podium, he announced the company's intent to separately seek damages of $18 million from the spammers.

"If these people have any money left after the New York attorney general's lawsuit in New York comes to a close, we will be happy to pursue the remainder," said Smith to laughter from the press corps.

During the question-and-answer period that followed, Spitzer was asked whether investigators had determined the profitability of the spammers' businesses. He responded that Richter was "clearing several million dollars a month in profit," and that the damages sought by Microsoft and New York would be "sufficient to wipe out whatever profit he has made."

Richter fights back, alleges "smear campaign"

But one reporter wanted to know how a strong case could be built against Richter, since OptInRealBig apparently had farmed out the spamming to Delta Seven. Spitzer assured the media that prosecutors would be able to establish liability "up the chain of command ... and prove without a doubt that those, including Richter ... are liable for the misbehavior of those that actually stand there and push the buttons."

New York prosecutors also released 619 pages of exhibits gathered in support of the complaint filed in New York Supreme Court. The evidence included dozens of e-mail messages between employees of Synergy6 and OptInRealBig. The e-mails showed Richter deeply involved in the day-to-day operations of the Synergy6 spam campaign.

In one exchange, Richter shrugged off Synergy6's chief operating officer's concerns that Delta Seven's messages contained forged header information.

"We send out 10-million-plus e-mails a day, and you on average send me two complaints per day. I think one complaint per 3 million is real good," said Richter, apparently unconcerned that the bogus headers in the messages made it extremely difficult for average Internet users to determine to whom they should complain.

New York's exhibits also included hundreds of spam samples. The scores of sample spams from Delta Seven included the characters "wsb," a special tracking code OptInRealBig had assigned to Delta Seven. But none of the message headers contained Internet Protocol addresses assigned to networks directly operated by OptInRealBig.

After news outlets published an array of articles quoting Spitzer and Smith, Richter belatedly responded with a press release about the lawsuits. The argumentative statement bore little of the polish customarily found in corporate press releases on legal matters.

It described the lawsuit as "one of the worst-orchestrated smear campaigns against legitimate Internet business interests of recent times," and said prosecutors hadn't produced any evidence linking OptInRealBig to the illegal spams.

"If there were 10,000 false and fraudulent e-mails sent by OptIn, it would be good legal practice if the attorney general would see fit to attach at least one," read the statement. It also criticized Spitzer's "reliance on Spamhaus" as "a fatal error, because Spamhaus is an offshore, anonymous organization which has no legitimate connection with Internet businesses in the United States."

Richter's press release concluded by saying OptInRealBig would vigorously defend itself in court and "prevail as one of the most legitimate Internet marketing institutions in the United States."

Spam fighters reveled in the moment. The man they considered one of the most frustrating spammers in the world had finally met his comeuppance. But nearly everyone, including Shiksaa, was secretly worried about whether the charges against Richter would stick.

In July 2004, the office of the New York attorney general announced a settlement with Richter. Under the deal, Richter agreed to pay the state $50,000 in fines and legal expenses and to allow state officials to regularly audit aspects of his business. Richter's suit from Microsoft is still pending. In April 2004, Richter sued the SpamCop spam-reporting service for $1 million, alleging trade libel and tortious interference. In September, SpamCop announced it had settled the lawsuit, with neither party making any changes to its practices.

In June, Richter announced he was abandoning plans to market a line of "Spam King" apparel after receiving warnings from Hormel, owners of the "Spam" trademark.

This material has been adapted from "Spam Kings" by Brian McWilliams. Copyright O'Reilly Media Inc., 2004. All rights reserved.

Source: Denver Post