Yesterday, I broke the news that Skeptoid’s Brian Dunning was sentenced to 15 months in prison for wire fraud after previously pleading guilty. Since then, I’ve received a number of complaints from people in the skeptic community who believe that it was wrong for me to report on this, that Dunning was set up, that he is guilty but not that guilty, and/or that it’s wrong for me to be glad that he’s going to prison.
This morning, I read Dunning’s own defense, which I see being passed around amongst skeptics, many of whom seem to accept it as a valid explanation and a confirmation that this is all a big mistake.
One of the reasons why I enjoy skepticism as a tool is because it does not (or should not) discriminate. I tend to be equally skeptical of things I like or agree with – sometimes more skeptical, because the things we want to believe are the easiest things to believe, regardless of whether they are true.
That’s one reason why I am very skeptical of other skeptics. The other reason is because I believe that if the skeptical movement wants to be taken seriously as a force that genuinely cares about helping people, about protecting them from scam artists, we need to make sure that the people who speak for us are honest and forthright and above all else ethical. If a person lacks those traits, I cannot in good conscience recommend their work to others. This doesn’t mean that leaders need to be perfect, or that I always need to agree with them: it only means that they cannot demonstrate to me a willful interest in manipulating the truth for their own benefit. It’s the reason why I can no longer recommend any of Ben Radford’s work after finding he purposely misrepresented scientific studies to suit his interests, and it’s the reason why I stopped promoting Brian Dunning’s work once I realized he admitted to stealing hundreds of thousands of dollars.
Dunning’s defense of himself is so riddled with half-truths and logical fallacies that I’m shocked and a little embarrassed that skeptics are accepting it on its face. I would be more shocked, were there not already many skeptics who never even considered the US government’s case against Dunning, and many who refuse to even talk about the case publicly, as though the idea of a skeptic leader pleading guilty to defrauding people isn’t newsworthy.
Let’s start with the photo that accompanies the post, along with the caption:
This is my family on Thanksgiving 2013, at the restaurant in Stovepipe Wells, Death Valley, California. A few hours earlier, we’d rescued three Chinese tourists who had spent the night in their car stuck in the snow, and we winched it out and got them back to safety.
Shortly thereafter, we ourselves suffered a single vehicle rollover, destroying the Jeep. Amazingly, none of us were seriously hurt. We were lucky to all make it back. These are the kinds of life events that matter most, and make other bumps in the road seem trivial by comparison.
A good skeptic should recognize that this is an ad hominem, and a kind of poisoning the well. Rescuing stranded tourists is a noble thing, but it has nothing to do with whether or not one has stolen money from others.
Here’s Dunning’s post:
My latest news is that I can now add to my resume the title “convicted felon.” We make up about 2% of the population.
Before I became a science writer and podcaster in 2006, I had a small consulting business doing FileMaker Pro development. It provided a modest family income. In about 2003 my company partnered with another to form “Kessler’s Flying Circus” (a reference to The Great Waldo Pepper, a favorite movie), to give affiliate marketing a try.
Already there is a bit of context missing. The other company Dunning partnered with was his brother, Todd Dunning. Kessler’s Flying Circus (KFC) was run out of Brian Dunning’s home. eBay’s complaint and all other court documents make it clear that Todd and Brian Dunning were the two sole owners of the KFC partnership.
Dunning wants his audience to think that KFC is a large company, and that he is just one of many hapless employees. This is not true.
Affiliate marketing is where you place ads on the web, and if anyone clicks those ads and subsequently makes a purchase, you would get a sales commission of some kind. There are a whole variety of models for this: pay per ad impression, pay per click, pay per sale, etc. These were trailblazing years for fast-growing companies like Amazon, Google, and eBay. A perspective of what those days were like is offered here, from another defendant who was also convicted.
For our first few years we had very little success, making perhaps a few hundred dollars per month. But then, working in close association with eBay and with Commission Junction (the company that managed eBay’s affiliate program) we developed a pair of useful widgets: ProfileMaps, that showed a map of visitors to your MySpace page; and WhoLinked, a WordPress plugin that showed who has linked to your blog.
Dunning also worked closely with Shawn Hogan, who was also convicted of fraud for the same cookie-stuffing scheme. According to the FBI’s interview with Hogan, Dunning found out about Hogan’s scheme, which involved loading a 1×1 pixel onto a user’s computer that altered their browsing history to make it look as though they had visited eBay through Hogan’s affiliate link, even though the end user would never see the eBay homepage load and had no idea what was happening. If that user happened to visit eBay at some later date and sign up as a new user or make a purchase, it would look as though they had come from Hogan’s link, and so Hogan would be paid a percentage of the sale from eBay.
According to Hogan, Dunning tried to reverse engineer the 1×1 pixel but he needed help. So, he allegedly blackmailed Hogan into helping him out, telling Hogan that if Dunning screwed up and got caught by eBay, he’d tell them about Hogan’s activities, too.
Dunning then used the pixel trick on his widgets and websites, and started raking in the millions.
These both included an eBay advertisement. Amazingly these both went viral, and through 2006 and 2007 our ads drove enough new customers to eBay US to earn KFC about $5.3 million dollars.
I assume Dunning ran this statement past his lawyer, which is why I’m stunned to see what appears to be an outright lie. The entire point of the pixel trick was that customers were visiting eBay without clicking on Dunning’s ad. Many of them viewed the ad, unknowingly downloaded the cookie, and then at a later date happened to sign up or make a purchase on eBay. The $5.3 million in commission that Dunning got from eBay was not due to his ads driving new customers to eBay, which is the entire reason the government is calling this “fraud.”
In his interview with the FBI, Dunning admitted “that eBay does not need an Affiliate Program in that the average person visits eBay and engages in transactions on a fairly regular basis and would do so with or without a program.”
Keep in mind that was the company’s gross revenue; we had overhead and employees and costs like every other company.
According to his interview with the FBI, Dunning’s employees included his wife (who earned $10,000/month), his mother ($2,500/month), and his mother-in-law ($2,500/month). And again, the company was run out of his home, making one wonder how much “overhead” there could possibly be.
We’re not even through three paragraphs and I’m already exhausted by this. This statement is the Gish Gallop of wire fraud.
I was the second highest paid employee, and I did earn over a million dollars personally over 2006 and 2007 before taxes.
The first highest paid employee would presumably be his brother, Todd Dunning, but according to Brian’s statement to the FBI, he and Todd split all the affiliate income equally down the middle. Also, the million dollars Brian earned is presumably separate from the $10,000/month his wife earned.
We put the money toward paying off our mortgage and opening college savings accounts for our kids. Then just as we were about to start saving, everything came to an abrupt end.
On June 18, 2007, our house was raided by armed FBI agents. They had a search warrant from the Treasury Department alleging racketeering, wire fraud, and a raft of other charges. The model we used, which is the same as that used by all other eBay affiliates I knew at the time, was to pass through eBay’s URL along with each advertisement, allowing eBay to read/write whatever affiliate cookie they choose.
It may be true that all affiliates Dunning knew at the time used the same fraudulent cookie-stuffing method, if the only other affiliates Dunning knew were his brother and Shawn Hogan. Again, Hogan came up with this method and then says that Dunning forced him to help him do it, as well.
About the time of the raid, eBay transferred our affiliate program manager overseas to their London office, and filed both civil and criminal charges against the affiliates, claiming that this pass-through model was a violation of their Terms & Conditions. This is true, it was a clear violation, and we knew this. But the models of all top affiliates were clear violations. Mainly, you weren’t allowed to place ads on sites that you did not personally own.
This is absolutely not what this case is about. The US government did not sentence Dunning to prison because he put ads on a sites he did not personally own – they sentenced him to prison because he planted a file on unsuspecting people’s computers that tricked eBay’s systems into thinking he was doing something that he was not, and he got paid for it.
But we had worked carefully and openly with the eBay team assigned to us to form “interpretations” of the rules that permitted this.
Dunning even told the FBI that he met with Hogan to discuss ways to better mask what they were doing. (Dunning describes this as him trying to help out Hogan and himself. Hogan describes this as Todd Dunning telling eBay what Hogan was up to and then Brian Dunning using that to blackmail Hogan into helping him cover up their activity.)
I suppose that’s one way of working “carefully” with the eBay team, but I’d hardly call it “open.”
Obviously, this was a red flag (among many) and I should have gotten out of the business right away. I didn’t. I was making some money for the first time in my life, and I let myself believe that bending the rules was OK if other people were bending them too. Let’s be clear: what I did was wrong, and I knew it at the time. “Come on, everyone’s doing it!”
On that same day in 2007, I ceased my association with KFC and have had no involvement with affiliate marketing, or anything remotely related to it, ever since.
It’s hardly a mark of good morals that he closed his own business on the day he was raided by the FBI.
Although all the lawyers involved felt this should have been strictly a civil contract dispute, the government determined that it constituted wire fraud, a violation of 18 USC § 1343, and that eBay had been victimized by paying KFC commissions on sales that should have been house sales.
“All the lawyers involved” on the defense. Important distinction.
I fully accept this determination, and fully accept and admit responsibility for every action I was involved in. eBay claimed a loss amount of $200-400K, and I agreed to stipulate to that amount. I was the only person criminally charged from KFC, though we have never been able to determine why I was singled out; we can only guess it was because of my notoriety.
It’s strange that I’ve been able to read all of these documents but Dunning apparently has not. If I were to guess, I would say he was “singled out” because he owned the company responsible for the fraud, and because others pointed to him as the person actively trying to make as much money as possible while covering up his activity from eBay and Commission Junction.
I stress that from the first day to the last day, I offered full cooperation to authorities, and I did make eBay whole through a confidential settlement.
On August 4, 2014, the judge sentenced me to 15 months incarceration, beginning September 2, 2014. In the federal system you must serve a minimum 85% of that time. According to determinations made during your stay, you may be able to transfer to a halfway house near your home at some point during the sentence, which allows you to resume work and see your family. Most attorneys involved felt the sentence was unnecessarily harsh, and the judge stated in his pronouncement that it was based mainly on the deterrence criterion, particularly due to my “minor Internet celebrity” status.
That’s true (if you change it to “Most attorneys involved with the defense” – the sentence was less than what the prosecution recommended and of course much less than the maximum)! I mentioned it in my previous post.
There are a lot of untruths being circulated by bloggers and reporters:
That I “stole millions of dollars”. Completely false. The vast majority of KFC’s earnings, over 90%, were never in dispute. My share of the unearned commissions was about a third of the $200-400K, on which I paid taxes. That doesn’t make it any less of a crime, but absurd exaggerations serve nobody.
This is tough to say. KFC did take about $5.2 million from eBay over the course of two years, and by Dunning’s own admission he was only making a few hundred dollars a month prior to beginning his fraudulent cookie-stuffing operation. But it does appear as though the US Government settled for assuming that a few hundred thousand was definitely due to the fraudulent activity.
That any individuals were affected. Completely false. The only victim was eBay, and the nature of their loss was a reduced profit (due to paying an unearned sales commission) on new paying customers who had viewed one of our ads.
I can think of individuals who were affected: honest affiliates. Dunning didn’t “just” steal money from eBay (note: not liking the victim doesn’t make the crime better). He took money that was meant for others. Cookie-stuffing overwrites any previous cookies from affiliates who may have succeeded in getting users to visit eBay, meaning that Dunning would collect commissions that were rightfully owed to honest individuals.
A conspiracy theory that my nonprofit Skeptoid Media, Inc., was set up as some kind of shield to hide stolen millions. First, I never had millions in my possession; second, you cannot shield money from the feds. The federal government can seize anything at any time; there is no protection like there is in state cases (e.g., moving to a state that allows you to keep your primary residence). Skeptoid Media exists only for its stated reasons: producing free educational materials and STEM-focused informational and entertainment content, made available to educators and individuals worldwide, concentrating on critical thinking and scientific skepticism.
I’m not a lawyer, so I can’t comment on this at all except to say that if you’ve read this far and you still trust Dunning with your money, there’s nothing more I can do for you.
That I’m a millionaire who has the gall to beg for donations. Please do not conflate the two. Donations that support the Skeptoid podcast go only to support Skeptoid Media, a good cause. See Skeptoid.org for all available disclosures. Separately, I am not a millionaire and my family is under a huge amount of debt, but working that out is our problem, not yours, and not Skeptoid Media’s.
By his own admission, Dunning did top a million dollars in income. Unless we’re splitting hairs here, that would make him a millionaire at that time, and he did have the gall to beg for donations, repeatedly, on his podcast, on his website, and in his multiple successful Kickstarter campaigns.
In the meantime, the Skeptoid podcast is going to continue uninterrupted, using a combination of banked episodes and guest hosts, so you can continue to expect the same high quality show every week.
My plan is to start production on Principia Curiositas, the long-awaited sequel to Here Be Dragons, as soon as I’m able to return to work. And of course, I plan to continue Skeptoid and other projects.
I am proud of who I am and what I have accomplished to date, and very much regret this stain on my past. But as we all must do with all our regrets, I will incorporate it into who I am, own it, and continue on as best I can.
I’m not surprised he’s planning to continue squeezing skeptics for money even from prison. In my opinion, someone who actually cared about the skeptical movement would accept that he’s a huge liability and step out of the spotlight to find more productive ways to contribute to skepticism. But Dunning’s behavior to date makes it clear to me that he only cares about himself, and so he’ll continue trying to make money and be famous in whatever subculture will have him. Unfortunately, I have little doubt that many skeptics will be all too happy to continue giving him what he wants.
In short, I’ll see you soon.
Goodness, I hope not.