01/07/13

Shawn Hogan Pleads Guilty To Cookie Stuffing Charges

It's been over two years since Shawn Hogan, of Digital Point Solutions, and Brian Dunning were indicated on federal charges for cookie stuffing through the Ebay affiliate program.

Court documents filed under seal on December 17, 2012 indicate in a plea bargain agreement Hogan has pled guilty to one count of wire fraud.  Maximum penalties can be 20 years in prison, $250k fine (or twice gross gain or loss, whichever is greater), 3 years TSR and $100 SAF.  Sentencing and Evidentiary Hearing on Restitution is scheduled for February 11, 2013.

Wake Up Call

Despite Hogan's claims that he did indeed cookie stuff but at the request of his account rep so he was not culpable, ultimately he admits in a court of law to committing wire fraud.  Online rhetoric and rants don't carry any meaningful weight once an issue lands in the legal system. Nor do any personal justifications.

Affiliate marketing is a simple concept. You refer consumers to a merchant and you receive financial compensation if they subsequently make a purchase from the merchant. While some within the industry continue to try and muddy the simple concept in order to justify questionable practices, it really is simple. You must actually send the consumer to the merchant's site not just have a "click" track for the affiliate link. Those outside of affiliate marketing, such as law enforcement and judges, are grasping the concept.

If you are cookie stuffing, legally it is wire fraud. End of story. There is no "good" cookie stuffing as I saw some people claim when news of the indictments first hit web ink. If traffic to a merchant's site is tagged through an affiliate link, then the consumer better have actually had the merchant's web site displayed to them. If they haven't seen the merchant's site, then you are committing fraud with all the possible legal consequences.

If you are managing an affiliate program and are aware of affiliates who are cookie stuffing in your program, then you should think about the potential legal ramifications of taking no action towards known criminal activity.

Legal Updates To Related Cases

Several legal cases resulted surrounding the incidents of three affiliates cookie stuffing in the Ebay program. Here is an update of those cases:

Brian Dunning Criminal Charges

Dunning's case was set for trial in October 2012. The case was continued as the defendant and government had entered talks regarding a plea agreement. Court transcripts also indicate they were awaiting a final resolution in the Hogan matter, which has now occurred. Trial is not set to begin April 23, 2013. The likelihood of some type of plea agreement prior to this date seems probable.

Ebay Civil Suit Against Shawn Hogan, Brian Dunning and Todd Dunning

This suit was closed until the criminal cases were resolved.  We'll have to wait and see if Ebay will be satisfied with the results of the criminal cases.

Todd Dunning Bankruptcy

Although criminal charges were not filed against Todd Dunning,  earlier in 2012 he filed Chapter 7 bankruptcy stemming from the possible $30 million debt related to the Ebay civil suit. This is a common legal move when you are facing a large civil suit judgment. Just the attorney fees to file the bankruptcy amounted to $12k.

Christopher Kennedy (SauceKit)

In February 2010, Christopher Kennedy was indicted on charges of conspiracy to commit wire fraud for his cookie stuffing script, SauceKit. The script targeted cookie stuffing against Ebay and was promoted on some blackhat forums. He pled guilty to the charges. In June 2012, he was sentenced to six months prison, 3 years supervised release following prison (a large part of which involves the prior approval and monitoring of any kind of computer use) and  restitution of Ebay of $407,934.39.

And this is how the legal cookie crumbles. Cookie stuffing is a felony. Activity related to cookie stuffing can be a felony.