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.
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.
So, I’d like to take some time to go through Dunning’s defense and add a bit of context and commentary. Dunning has used Javascript to stop people from copying and pasting his words, but just for the record I’ll be copying and pasting from the source code to be sure I’m not mistyping anything he wrote
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.