Shawn Hogan Speaks Out: Marketer Charged by Feds Claims Conspiracy
I had thought of cutting this article to a smaller size, but realized that it contained a lot of good information for everyone to think about beyond just this specific issue. I apologize for its size, but hopefully you will agree there is something to be learned here and more importantly, something for us to think about.
Shawn Hogan is a guy who has been around this industry for a long time, and the founder of DigitalPoint a forum where some of the smartest folks in Search Engine Optimization and Online Marketing go to. He’s also a rich guy who has made a good amount of money from this industry. He’s also one of those guys who admits to get close to the “edge” of online marketing, entering the grey areas that some of us tend to steer clear of. His techniques garnered the attention of EBay two years ago who launched a very large lawsuit against him and brought both criticism and support from the industry. Unfortunately for him, these accusations have now resulted now in a criminal prosecution of him by the Federal Government that if true, could cost him many years of freedom. As expected, Mr. Hogan thinks the charges are complete junk.. but not as expected he has been publicly defending himself, claiming a conspiracy involving EBay employees, an unknown member of the district attorney’s office and even Carmen Electra.
Before I comment further, it seems appropriate to make this clear: I am a firm believer in the justice system in this country and the principle that one is innocent until proven otherwise. At the moment, the indictment against him is no more than an accusation of the government claiming that they have evidence of crimes that he and a co-conspirators committed and are asking a jury (or judge) to issue a finding against Mr. Hogan. Anyone looking at this case needs to first remember that he has not been found guilty of anything yet.
Still, I feel it is important to address what is going on and shed light on both Mr. Hogan’s recent claims and frankly the issue at large. Hogan responded in his own blog to accusations, making his own claims against EBay and providing a timeline of what he seems to believe if an appropriate defense against the claims. The accusations against him, while to an outside, might seem very little, they are part of a growing threat to our industry of fraud by knowledgeable experts who game everything from display advertising networks to affiliate programs to make money. I talk about this often because I honestly believe that fraudsters are the biggest threat to our industry and have the ability to destroy companies and lives if not checked. I continue to write about this weekly and examine this because it seems that much of the industry, many of the publications and almost all of the blogger refuse to examine these issues in a systemic manner, partially because they are scared like little girls before their first sleepover, about pissing off their advertisers if they question industry practices.
Rebecca Madigan, the Executive Director of the Performance Marketing Association seems to agree, and told me, “This is a game-changer in the industry. This should give pause to affiliates out there who think getting kicked out of a program or network is the only negative consequence to black hat behavior. This is hopefully going to encourage networks and advertisers to pursue working with law enforcement.” I’m delighted that they are taking this stance.
Moving along, let’s get one incorrect statement that Mr. Hogan makes out of the way before we really spank him. Hogan in his defense, in his own words on his blog, claims that at the end that this is some local “district attorney” out to get him because of an implied association with one of the companies involved. His lack of knowledge of his own case worries me greatly, but may only be a sign of the enormous stress that he is probably going through. I can’t imagine what he is feeling right now, and how his life seems turned upside down. However, Hogan wants us to believe that this is somehow the actions of some local prosecutor who he seems to claim has no idea what is going on. The is a complete falsehood. This is a charge brought on by the US Attorney’s Office, a part of the United States Department of Justice. An indictment of this kind reads “United States of America vs. Defendant” in this case, Shawn Hogan. This is not some local “district attorney” or any district attorney in California as Hogan claims but instead one of the largest US Attorney’s Offices in the nation. I don’t know the people in that office well, but I can assure you that they are not part of some EBay originated conspiracy to shut down Shawn Hogan and any claims that they are is about as ridiculous as believing that Myspace will come back En Vogue.
Next, the case was investigated by Special Agents at Cyber Crimes Unit of the FBI in the Bay Area. These highly trained expert agents are part of the indictment and have made sworn statements to their independent findings. While the indictment presents a very basic summary of the case, there will most likely be pages and pages of findings from these agents including forensic evidence. The evidence collected will have been collected and found similar to any forensic evidence – computers seized, data stored in a way that it can’t be tampered with. I am personally very familiar with the methods used as I helped write and create one of the first manuals on seizing computer evidence in 1999 for the US Secret Service. This is not some Mayberry sheriff curious about “what that internet thang is” filing charges because he couldn’t get GeekSquad to teach him how to download photos of hot chicks with guns. Having known more than a few FBI agents, I am not going to claim that every single one is a genius, but most of them are extremely well educated, hard working crime fighters.
As for Hogan’s actual defense in his blog, I’m have to admit it really perplexes me. The first thing that bothers me is that instead of letting his attorney defend him in court and issuing a professional statement, he has taken to writing one of the weirdest defenses I’ve ever heard. Part of me almost believes that he has completely lost his mind or has been abducted by aliens. I frankly think the alien abduction idea is actually more plausible than some of his claims.
Let me give you the best advice you’ll ever get: If you are ever charged in a crime, STFU. SHUT UP There is never a reason to make statements whatsoever to anyone, including the police. I am a huge supporter of law enforcement and the work they do, but if you are charged with a crime, they are not your friend, they are not trying to help you out or provide you with tips on how to pick up police chicks. If you didn’t know, statements made by you to police cannot be used as evidence to prove your innocence, but can be used by the prosecution to prove admission of guilt. There lies one of Hogan’s biggest mistakes in this case so far: he has already written a statement on his blog where he not only doesn’t deny the crimes, but admits to them point blank. Most likely, like many members of our industry, he believes that he can outsmart everyone around him, that his wordplay will somehow benefit and defend him. He thinks that somehow what he says on his blog will somehow change the outcome of a trial. Unfortunately, he may be right: it can provide additional evidence of mens rea, that he had knowledge of the crime by telling “his side” of the story.
On top of this, his entire public defense is based on the claim that he was goaded, persuaded by people at EBay into defrauding the company and somehow “forced” into taking money based on fraudulent actions. He claims that he questioned EBay about his own practices, but they were “good at avoiding” his questions. He claims that they at sometime admitted that their own terms and conditions were junk and they didn’t expect him to follow them. His entire claim is that he did millions of dollars of business, expected to be paid, based on a façade of a contract, promises of private jets with people who couldn’t answer his questions directly though means that he himself thought were questionable? Who does millions of dollars of business that way? In itself, that makes him seem more than a little shady, or at least lacking some street smarts.
Still he lays out claims that EBay knew about these things and they met over and over again but he never provides any evidence providing this. Despite this post in his blog, Hogan is a very smart guy who knows quite a bit about the industry, runs a successful company and definitely knows about contracts. Let’s not forget, he is already being sued by EBay for the last two years for the same exact things, but has never once presented evidence, as far as I know, that his claims of EBay of having complicity in his actions were true. If this was indeed true Hogan would have presented this sometime in the last two years. Hogan has known for a long time that he was being investigated by the FBI – he or his attorney would have provided this evidence to them. Where is that evidence? Again, who does this type of business for millions of dollars without actual contracts that solemnize the changes he claims were authorized? I am pretty sure that everyone in this business or any business learns on day one to use contracts. Did he miss that day of kindergarten marketing school? I don’t think so actually, as he admits that in one case he actually worked with the Ebay legal team to get special permission for a promotional project.
On top of this, EBay is a public company and all financial transactions, records; emails correspondence is archived for public record… by law. Hogan claims that he was told by affiliate managers of the company about some sort of covert“Black Budget” that was funding his schemes. However, this is nothing more than a very weird red herring – as he was paid through Commission Junction for all his commissions, as EBay didn’t leave CJ until 2008. We all love conspiracy theories and the idea of EBay CEO Meg Whitman dressed in a black leather cat-suit, jumping out of helicopters as part of a covert “black budget” operation of Ebay might actually be a masturbatory fantasy of some SEO geek friends of mine. However, in the real world, the only fantasy that occurs with Ebay is all the mentally challenged folks who really believe they can buy a genuine Louis Vuitton bag for $49.95.
Commission Junction is also part of a public company, ValueClick and it’s unlikely they were somehow conspiring with EBay. The claim that EBay or someone at EBay was hiding income, not reporting it, and thus committing securities fraud would interest the federal prosecutors a bit more than Hogan’s cookie antics. You’d think by now he would have already provided this evidence to federal investigators, correct? I actually know the guys at the US Attorney’s Office who prosecute these crimes and they would have made a deal in a second if these claims were true. Honestly, does anyone believe that if EBay actually had a secret “black budget” that was used to defraud investors that the lowly affiliate managers would know about it? Hogan claims that all these folks were fired, so you think by now someone would have gone public, if only to collect the millions of dollars that they are entitled to by law as a corporate whistle blower. Heck, why didn’t Hogan go public already and collect that money, it could be used for his defense.
Even if Hogan’s claims were true, that someone at EBay worked with him on cookie stuffing in order to get “quarterly bonuses”, it really doesn’t excuse him for his actions or any possible criminal liability. He admits that he knew that these practices were against Ebay’s policies and his contract with EBay – he never denies this whatsoever. He just claims that someone over there conspired with him to violate that agreement and assist him. It’s not like he is claiming that he and Meg Whitman were meeting during late night rendezvous in some seedy strip club, talking about how to defraud investors while downing tequila shots. His claim is that an unnamed affiliate manager or a team of managers, convinced him to “experiment” using questionable techniques that would grant him money not due him through cookie stuffing in order that this mysterious affiliate manager might gain commissions (and in theory a better parking space in the Ebay corporate lot)… ask him to engage in “cyber terrorism” against Google and then force him via persuasion, against his own better judgment, and promises of free private airplane miles to take the money… month after month after month for almost four years. Eh? Really?
Again, I want to point out that Hogan is not a stupid, ignorant guy who doesn’t know anything about technology, business or contracts. He is a multi-millionaire genius, self admitted expert, who knows this industry inside and out, has successfully fought the RIAA in a lawsuit against him and has written numerous articles about this industry before the crimes he is being indicted for occurred. He is not being charged for looking at really nasty porn involving peanut butter on his parents computer when he was 14. If indeed there was someone in the company that was conspiring with him to defraud EBay because of quarterly bonuses, then both of them are liable for crimes committed. There are tons of cases where people conspired with inside sources to commit crimes and it is always considered a poor defense, especially when the people involved are educated, knowledgeable and experienced about the industry they are involved in. Hogan, despite posting some silly things, did not ride a short bus to school. It’s not like he is trying to defend himself against believing that the blonde stripper “really does like me” or that she is only “stripping in order to go to college, but eventual wants to settle down with a SEO geek who loves Affliction Shirts.” Is he really asking the marketing community to believe that he took millions of dollars based on possible fraud… by accident? What is he going to claim next, that he was happy when Ebay stopped working with him, sending him millions of dollars? Crap.. he does claim that.
For those who have defended Mr. Hogan, I can appreciate your concern. We should always hold a government’s case to the highest degree of examination. In Hogan’s defense, the actual facts of the case have yet to be provided completely as they will in trial. Despite all the checks and balances, the government is not actually always right in its prosecution of criminals and does get things wrong. I think that what Hogan has written so far is complete and utter crap and makes little or no sense, and if any attorney advised him that this was a smart idea, he needs to get another attorney really damn fast. However that doesn’t matter when it comes to the case against him. It is the responsibility of the Government to prove beyond a preponderance of the evidence that he committed a crime. It is not Hogan’s responsibility to have to prove his own innocence.
Similarly, my comments and criticism of Hogan are nothing more than an analysis of what seems to be a very poorly thought out blog post. Shawn Hogan puts himself out there as a leader in our industry and teaches others on a frequent basis on how to do business and thus it should be expected that his actions are more heavily examined and criticized. Still, there is something important here that needs to be brought up. Despite being an expert in this, I’m not even quite sure that what Hogan did is actually criminal in nature. Fraud is a serious issue in the industry and if Hogan did what he is charged with, it’s still damn scummy and I’d never reccomend doing business with him again. Still the accusation is basically that he violated the terms and conditions of the contract with EBay’s affiliate program.
According to the government, EBay doesn’t allow in that agreement to “cookie stuff” or to trigger a cookie based on a view. Yet there are tons of programs that actual do view based cookies especially for banner networks. It has actually become a very standard practice of many display networks to require that cookies be triggered on the viewing of the advertisement. I’m pretty sure his defense will bring this up—that they believe this is nothing more than a contractual violation and a disagreement between two parties into the interpretation of the agreement. This specific type of allegation as being criminal may be taking it too far; what is the next step, that we go after banner networks that incorrectly count advertising and charging it? There is more than enough proof that many serving platforms are off when it comes to counting, and we call that a discrepancy not fraud. Unfortunately for Hogan, he’s already admitted that he knew this was a violation of the contract so in there lies the problem of using this defense. There is a difference between planning to violate an agreement and thus defraud the other party and accidently violating it.
I guess that is what this case is going to be about then anyway. What exactly is criminal fraud and the liability of the people engaged in interactive advertising to ensure that what they provide is what is contractually provided? With the industry constantly changing and its definitions being rewritten yearly, we are finding ourselves facing new legal issues daily. Unfortunately for Hogan, he is going to be a poster-boy and a test case, a position in which no one wants to be in. For those interested, Shawn’s rant can be found here.
Thoughts?
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