The Sex.Com Chronicles, by Charles Carreon

Identified as a trouble maker by the authorities since childhood, and resolved to live up to the description, Charles Carreon soon discovered that mischief is most effectively fomented through speech. Having mastered the art of flinging verbal pipe-bombs and molotov cocktails at an early age, he refined his skills by writing legal briefs and journalistic exposes, while developing a poetic style that meandered from the lyrical to the political. Journey with him into the dark caves of the human experience, illuminated by the torch of an outraged sense of injustice.

Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:40 am


We’re all familiar with the saying, “When life gives you lemons, make lemonade.” When my fax machine sprang to life, and started spewing out a lawsuit against Gary Kremen, alleging multiple tortuous acts, and seeking $9 million in damages, this was clearly an incoming shipment of lemons. This lawsuit was procedurally presented as a “counterclaim” by “counter-plaintiffs” Cohen, YNATA and Sandman Internacional. A counterclaim is no different in its effect upon the “counter-defendant” than a regular lawsuit, and gives the “counter-plaintiff” full rights of discovery and other procedural devices for wreaking havoc. As it was still spewing out of the fax machine, I called Gary and told him that Cohen was cross-claiming against him for $9 million for Defamation, Unfair Competition, and Cybersquatting. Then I had a question: “Gary, do you have insurance for your business activities?” Yes, he thought he did. I told him to fax me his policy immediately.

Gary may have had trouble finding some documents, but he had his State Farm insurance policies to me within hours. It looked very good. He had one policy for $1 million in coverage, and another for $300,000. They both covered slander, that is, defamation. I called Gary back with the happy news. We would be making lemonade, and State Farm was buying the sugar!

Of course, as the old adage goes, “there’s many a slip twixt the cup and the lip,” and State Farm might have very different ideas about springing for our lemonade party, but I knew once Gary understood the principles of insurance bad faith law, his burning sense of urgency would get us either a defense or a hell of a lawsuit against State Farm. Because insurance companies don’t always like to defend you when a guy like Cohen, worth maybe hundreds of millions, sues you because you called him a thief. Or they might not defend you very aggressively. The key to getting a good, vigorous defense, worth hundreds of thousands of dollars, is knowing the law of insurance bad faith.

I learned about insurance bad faith first from Steve Schiffrin, a much-published author on freedom of speech and the First Amendment who now teaches at Cornell Law School. Steve was brilliant, way too brilliant in fact to be fully appreciated by a classroom of 75 new law students lucky enough to learn basic tort law from a bona fide fucking genius. Steve was what you’d call pudgy, with thinning, sandy hair, and the complexion of a guy who rarely–if ever–goes to the beach. He was sweetly sarcastic, and enjoyed dealing legal propositions with a broad outward sweeping movement of his right arm, hand extended, palm upward, with a satisfied pursing of his lips, and eyebrows contracting to make the point.

Steve introduced us to insurance bad faith law as the place where the law of torts -- which deals with legal wrongs between strangers -- collides with the law of contracts, which deals with legal disputes between contracting parties. You often get more in damages for tort cases, where you recover the entire loss, including things like pain, suffering, and emotional distress, than in contract lawsuits, where damages are usually limited to the face amount of the contract.

Steve introduced us to the case of Crisci v. Security Insurance. In that case, an elderly Italian widow named Rosina Crisci owned a rental with a second floor walkup, which was insured by Security Insurance for $10,000. She also had a very hefty female tenant. One day the stairs broke and the hefty lady fell straight through, leaving her hanging in midair, which caused physical injury and a “severe psychosis.” She had no prior history of mental problems. The hefty lady’s lawyers sued the landlady, and Security Insurance appointed lawyers to defend Mrs. Crisci. The lawyers who Security hired scoffed at all of the plaintiff’s settlement demands, which started at $400,000, but dropped to $10,000, and even lower, to $9,000. Even though Security’s expert physicians predicted a verdict in excess of $100,000, the company offered only $3,000 for the physical injuries, refusing to pay “one cent” for the psychological injuries. Mrs. Crisci offered to kick in $2,500 if Security would pay the $6,500 difference between that and the final $9,000 demand, but Security rebuffed this opportunity as well.

The hefty lady went to trial and got the $100,000 trial verdict Security’s doctors had warned about. Her lawyers collected $10,000 from Security, the full amount of the insurance coverage, and then reached a settlement with poor Mrs. Crisci, who lost everything. As the California Supreme Court put it, Mrs. Crisci, “an immigrant widow of 70, became indigent. She worked as a babysitter, and her grandchildren paid her rent. The change in her physical condition was accompanied by a decline in physical health, hysteria and suicide attempts. She then brought this action.”

Mrs. Crisci sued Security for “breach of the covenant of good faith and fair dealing.” This “covenant” imposes a duty on the contracting parties to “do everything necessary to achieve the purposes of the contract, and nothing to defeat those contractual purposes.” The California Supreme Court held that the covenant of good faith and fair dealing was especially important when it comes to an insurance contract, because it is a contract for personal security and peace of mind. Thus, the court found that by rejecting a settlement demand within policy limits ($10,000 or less) when it was reasonably clear Mrs. Crisci would lose far more at trial, Security violated the covenant of good faith and fair dealing. Therefore, Security was subject to “extra-contractual damages,” that is, (gasp) the full $100,000 Mrs. Crisci got hit for at trial, plus Mrs. Crisci’s emotional distress, plus some punitive damages. This is now called “opening the policy,” and is justified on the grounds that it is the only way to teach insurance companies to not take risks with their insured’s interests, thinking “well, worst comes to worst, we just pay the policy limits.” Instead, they must settle every case as if they were going to have to pay the whole adverse verdict, for only then are they acting fairly.

During my first year at UCLA Law School, I completely missed the significance of Steve Schiffrin’s lecture on the Crisci case. But it became my daily bread at Mazursky, Schwartz & Angelo, where I worked on large claims, like Gary Lehto’s, who was rendered paraplegic when his car was rear ended by a car driven by a career drunk and owned by his drunken dad. Allstate screwed that case up when it refused to settle for the $25,000 policy unless Lehto gave a release to both father and son. Mr. Lehto’s final verdict was for $3.5 Million. An insurance company must treat these “over-limits” cases with the greatest solicitude, because if an insurance adjuster refuses to settle a multi-million dollar case for $25,000, Mrs. Crisci’s descendants may well have their way with the insurer’s assets.

At MS&A, we wanted them to refuse to settle. Sometimes we’d get a case on referral from other, no-name plaintiff lawyers who had been rebuffed by the insurers. When the adjusters saw MS&A on the case, their whole attitude would change. They would become eager to pay what had been out of the question before. My standard tough-guy response to these last-minute converts was, “In the future, always settle with a schmuck if you can. You missed your chance this time.”

Gary’s insurance policies for $300,000 and $1 Million were utterly dwarfed by the liability risk presented by Cohen’s $9 Million claim. Thus, even if Cohen only nicked Gary for a sixth of his total $9 million damages demand, it would exceed the value of both policies combined. You can see how that excess potential makes the risk of refusing to defend Gary one that State Farm would consider carefully. If Cohen got a $9 million verdict against Gary, because State Farm refused to defend him, Gary could sue State Farm for the loss, or even sell Cohen his right to sue State Farm. With this kind of leverage, the insurer must step up to the plate and defend.

The insurer then has one more decision to make -- whether or not to “reserve its rights.” By “reserving its rights” the insurance company says to its insured, “Okay, I’ll pay for your lawyer to defend this claim, but it may not really be covered under your policy, so I’m not promising to pay the verdict if you get hit, although I’ll defend you until then.” If an insurance carrier “reserves its rights,” their insured is actually benefited in two ways. First, the carrier must then pay for a lawyer, chosen by the insured, to advise the insured how to deal with the insurance carrier. Second, the insured also gets to pick their own lawyer for the main defense, rather than having the insurance carrier pick one of their “panel counsel.” So reserving rights can get expensive for an insurer.

State Farm at first denied coverage altogether under the $1 Million policy, and agreed to defend under the $300,000 policy, while reserving its rights. Thus, I tried to arrange to have State Farm retain the best First Amendment and speech law firm I knew of, Irell & Manella in Century City, Los Angeles. Irell & Manella thinks of itself as a firm that combines stellar intellectual firepower with a take-no-prisoners litigation ethic, basically promising to take your adversary on a rocket ride to hell. Actually, they are famous for delivering on this boast, and billing in a manner commensurate with their achievements. I clerked there when I was at UCLA, so I put a call through to partner Morgan Chu, who I figured was probably still representing ABC on speech issues. He put me in touch with his associate, David Codell, a 1999 magna cum laude Harvard graduate and a gem. David was interested in the case, so I started trying to get them onboard as Gary’s attorneys to defend against Cohen’s cross-complaint.

The plan to hire Irell & Manella was looking good until Jose Guillermo, the State Farm adjuster who had been assigned to the case, realized who they were and how much they charged. Their billing rates were way out of line with State Farm’s usual rates for insurance defense counsel. So State Farm withdrew its reservation of rights under the $300,000 policy. This decision was a no-brainer. Simple arithmetic. Better to be on the hook for $300,000 indemnity than pay for separate counsel, plus the cost of Irell & Manella’s rocket fuel. State Farm was then able to select one of its own panel attorneys, rather than have me make the choice for them.

State Farm hired Richard Diestel for the job. Initially, Rich was not taken with the case. I don’t think he had any intention of becoming involved in what he thought of as pornography law, and his involvement with defamation cases seemed neither deep nor extensive. However, it was my job to get him to spend abundantly from the great big bag of State Farm money, and Rich had an obligation to provide Gary with the best defense against Cohen’s counter-claims that could be mustered. It would not be long before he felt the sting of Gary’s emails, cell phone calls, and abrasive letters. He was in no way ready to start representing Gary Kremen in Cohen v. Kremen, but that had nothing to do with it. He was in the ring, Bob Dorband was in the other corner, and the bell had just rung. “Rich,” I told him, “you are going to make a lot of money on this case.”
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Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:41 am


Cohen bought himself a load of trouble when he alleged defamation against Kremen, claiming that Kremen had falsely called Cohen a thief by accusing him of “stealing Sex.Com” in an interview with Magazine writer Craig Bicknell. The wonderful thing about having to defend a defamation claim, and having an insurance lawyer to help you do it, is that truth is a defense to defamation. Gary could win the defamation claim by proving that Cohen really had stolen Sex.Com. That’s how it became Rich Diestel’s job to prove that Gary Kremen was speaking the truth when he said Cohen had stolen the domain name. Cohen had created a two-front war. We now had two guns instead of one. Best of all, Diestel had an unlimited supply of ammunition and a directive to keep expending it until the threat of Cohen’s counter-claim was extinguished.

Still, Rich was a little slow on the trigger. While he wouldn’t ever really say it out-and-out, he must have been extremely uncomfortable with the case. His discomfort is perhaps best explained by a remark Rich made about how State Farm adjusters were reacting to the wave of Internet cases they were having to defend based on a simple homeowner’s insurance policy. Lots of tech businesses having been launched from bedrooms and garages, these cases generated a type of case load for the insurance adjusters that they hadn’t previously seen. According to Rich, when confronted with a case like Sex.Com, the adjusters were wont to ask, “Where’s the dogbite?” Rich was describing his own reaction, as well.

Rich likes simple stories. Simple stories like, “my client’s dog bit the neighbor’s kid.” The nice thing about a story like that is, it’s easy to investigate. You can find out that the kid was always torturing the dog, that he isn’t doing well in school, and that he stuttered even before he was bitten. You can get the kid’s medical records, his school records, and the dog’s veterinarian records. There is a limited universe of facts, a limited number of witnesses, and you can tell when your job is done.

By contrast, the Sex.Com story, being primarily the creation of Stephen M. Cohen, was replete with switchbacks and confusion, with more corporations than you could shake a stick at, with forged documents and prison records, and imaginary witnesses scattered over the globe. Cohen’s skein of lies frustrated Rich, even as it obsessed Gary. Rich thought it would be difficult to win using a trial story that was difficult to comprehend, let alone explain.

Before you sell your case to the judge or jury, you have to at least be able to sell people like Rich, who have been paid to agree with you. To sell Rich, I had to master all of the available facts, and render them in a simple, convincing story: “Cohen is a crook, he stole Sex.Com, and he’s hiding the money in a bunch of phony corporations.” Once I was able to articulate that story, and support it with documents and testimony, Rich bought it. What he bought even more was the fact that Bob Dorband, Cohen’s lawyer, was one of the trickiest rascals to ever walk up the courthouse steps. Bob tied Rich’s tail in a knot so many times that it made Rich furious toward the end of the case. That was when the lemonade really started flowing. Once Diestel was pissed.

Rich got along well with witnesses. I won’t say he got as much information out of a witness as I did, when we did depositions together, but I think witnesses generally tended to feel more comfortable with him. That was a good thing, because they would open up, and I could get more stuff. Rich was the kind of guy that you could stolidly share some hotel food with, while swapping the occasional war story, and cursing Dorband and Cohen. “That’s fucking bullshit.” That’s the sort of thing that Rich Diestel would say. He said it more often and with increasing conviction as the case wore on.

Diestel’s investigator, Phil Stuto, did some good work, too. He interviewed several of Cohen’s ex wives, and found a dying witness by the name of Arnaldo Peralta, whose name Cohen had forged in order to obtain Mr. Peralta’s “permission” to incorporate a California company with the name of Omnitec, since Mr. Peralta already operated a company with a confusingly similar name -- Omni-Tech. Stuto was also the only person to get a trip to the Islands out of this case. He seized his opportunity, early in the case, and promptly got his ass to the British Virgin Islands to check out Cohen’s phony corporations. He didn’t learn anything, but then again, it was never clear why he was going in the first place.

Once discovery reopened, Diestel gave us additional moral high ground with Judge Trumbull. Many judges are more sympathetic to a plea for more discovery from a defendant who is being pressed with the threat of damages. Somehow it seems unfair to allow someone to be sued for damages and prevented from getting evidence to prove or disprove those claims. So Diestel, in his position as Gary’s defender against a claim for $9 Million, had a strong interest in finding out just how Cohen had incurred those damages. As lost profits, presumably. To verify those, we needed to see financials. Since Cohen had no intention of producing any accurate financial documents, our strategy was first, to file motions to compel production of documents and attendance of witnesses, second, to attempt to enforce those orders, and third, to file new motions to compel compliance when Cohen inevitably failed to comply. A judge can only tolerate so much disrespect of her orders. With both Diestel and myself filing motion after motion, it wasn’t long before we were regularly able to recount an increasingly familiar tale of woe to an increasingly sympathetic Judge Trumbull. We gained momentum as the judge resolved one discovery battle after another in our favor. As we banked each victory, we had the piles of paperwork, the airline tickets and deposition expenses, the sixteen hour days to show we’d paid for each order dearly. In litigation, there is no substitute for pushing ahead aggressively in discovery. Diestel shared that burden with me like no one else.

Throughout the case, it was good to have a dignified guy like Rich Diestel standing there, employed by the most legitimate entity in the world, an insurance company, denying everything, admitting nothing, and insisting that he’s going to get a complete dismissal of all claims. That stuff really cuts some ice with judges and juries, even when it’s a bad case. And when a guy like that is plainly in the right, he is unbeatable.

In this case, Diestel was blessed with luck. He didn’t have to compromise one damned thing. He participated in the total defeat of Cohen’s position in a case that will impart a flavor of the exotic to his entire career. You wonder what could ever make him want to go back to doing dogbites.
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Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:41 am


Henry Ford once made a comment about experts. It happened when he sued a man for slander who had said he was ignorant. Trying to prove that Ford was in fact stupid, the lawyer pressed Ford about some obscure point of history or science. Ford shot back that he saw no reason to clutter his mind with that type of information when he had “a row of push buttons” on his desk, pushing any one of which would put innumerable experts in all areas of human knowledge at his fingertips. If that was ignorance, then, well, he was stupid. You can imagine he got the better of the argument with the jury. To possess experts at your command, apparently, is better than to know something yourself.

We needed an expert. Gary found one. Affectionately, I call her a nerd. Ellen Rony is never so comfortable as when she has her Apple notebook computer on her lap, sitting in her solarium, culling through a few hundred emails from the friends in her vast global community. She corresponds with the luminaries of the Internet universe. Even the fearsome Phil Sbarbaro, longtime lawyer for NSI, called her a friend. Well, of course that was before he’d threatened to cut off her toes, but what’s a few digits between friends? No, Ellen might look like any other single mom with a dog in a suburb north of the Golden Gate Bridge, but the sleek profile of her pampered BMW suggested she had potential as a litigation weapon.

Ellen was the author of the Domain Name Handbook. Gary got a copy of the book for me, which comes with a CD-rom. Ellen was an Internet buff who had gotten so into chronicling the history of NSI that she actually had stuff saved off their old web pages that couldn’t be found anywhere else. This made me aware of something I had been worrying about -- the evanescence of the Internet record. The thought immediately casts an Orwellian shadow across the mind. Ellen Rony brought me face to face with the fact that the Internet had completely eliminated the need for the cutting and pasting department that was a necessary part of the Newthink/Newspeak system in the novel 1984. In Orwell’s novel the future was routinely rewritten, but the paperwork was immense. Entire newspapers had to be rewritten and reprinted, archived for history’s sake, then revised again. I remember in reading the novel that the very cumbersomeness of the process comforted me, as I thought that it would be impossible to accomplish that kind of historical revisionism. The paper record was a bulwark against it. And here, the Internet had destroyed one more barrier to deception, dissimulation, and alteration of the historical record. Truly, if corporations control the Internet, history is in unsafe hands.

Ellen’s book is not the sort of thing you would ordinarily find piling up next to my bed. Even if I want to study cyberspace, I’d rather read cyberpunk science fiction and see what rubs off that way. Ellen’s book had some good facts in it. Mind you, none about Sex.Com. The only mention of Sex.Com in Ellen’s book mistakenly states that it was originally registered by Cohen’s company, Sporting Houses Management Corporation. However, Ellen could not be faulted. She took the information directly from NSI’s website. According to Ellen, NSI should have listed Kremen as the original first-time registrant, with Sporting Houses Management coming later. For some reason, NSI deleted Kremen’s registration so completely that all records of the original registration were obliterated. Orwellian, again.

After reading a few chapters of Ellen’s book, I found some useful stuff. Particularly I liked her clear and simple statement that the term dot-com had been invented by John Postel in 1984. This was useful in debunking a defensive claim that Cohen had engineered using the trademark laws to validate his theft of Sex.Com. Cohen claimed he acquired a trademark in Sex.Com by “using it in commerce” since 1979 as part of a computer bulletin board operation. So citing Ellen’s book enabled me to argue early and often that Cohen’s claim was absurd, since “dot-coms hadn’t even been invented in 1979.”

Gary and I first met Ellen at a little restaurant on the water in Sausalito. Gary comes from the don’t drink at lunchtime ethic, but with the bright afternoon sun shining off the water, the three of us enjoyed our drinks. I forget what Ellen had, but it was something fruity and festive. I presume I had a Bloody Mary, your standard alcohol breakfast. My modus operandi with Gary was to back him up in all his flamboyant assertions about having lots and lots of money, to look well fed and well tended, and ask a few good questions. We wanted to recruit Ellen for our team because, as I repeatedly told her, she was the only person who could lay claim to being a published authority about the history and operation of NSI.

As with many a person, we were able to forge an alliance with a legitimate mainstream authority because we had taken the moral high ground. We circulated the third amended complaint widely to journalists and industry people like Ellen. Right there in the document Gary declared he was not a pornographer, and his site would not have been what Sex.Com had become. Gary enjoyed pitching this concept to Ellen, and his charisma caught fire as he did so, making him genuinely charming. His site would have been a far more wholesome, high-minded affair. This had an important effect on Ellen, who has a young son, Alexander, and hadn’t given much thought to pornography prior to our meeting. Gary’s presentation put her mind at rest, allowing her to concentrate on her field of expertise -- explaining exactly how Cohen had managed to get NSI to transfer the name, and why that was every bit as much NSI’s fault as it was Cohen’s. At first, Gary paid Ellen, but eventually, State Farm started picking up the tab, because after all, we couldn’t prove the case without her.
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Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:41 am


The practice of the trial arts can be analogized to sorcery, which allows us to see the marks left on the modern lawyer’s psyche by the medieval mold in which it was forged. The witch trials were, first and foremost, trials. The prosecutors who conducted them were priests. All the participants in those charged events were involved in a web of supernatural projections, but the influence of rationality was also felt. Much of the same dynamic inspires modern courtroom action, hidden beneath a veneer of modernity.

The courts use special language to inspire solemnity and add weight to the process. Papers are not merely mailed or delivered, they are “served” on the opposing party. One doesn’t simply start a lawsuit, one “commences the action.” Once started, the proceedings continue until “judgment.” Judges often refer to themselves in the third person, delivering rulings in the capacity of “the Court.” In many courts, lawyers are expected to show an exaggerated politeness, a courtly style if you will. There is still room for the use of an apt Latin phrase in argument before a judge.

Seen as sorcery, the trial lawyer’s filings with the court operate as spells to destroy the foe. For the lawyer as sorcerer, the defendant is a demon who must be “summoned” and thus brought within the “jurisdiction of the court” that can pass judgment upon him. Until the lawyer places a person under the court’s jurisdiction, he relates to him just like anyone else. Once a lawyer establishes jurisdiction over someone, he may deal with that person using the power of the court. Using that power, a lawyer can dispossess a person of their property, detain and imprison them, end the bonds of matrimony, sentence to death and otherwise modify the earthly relations of the members of our society. The business has very little to do with kindness and much to do with compulsion.

In criminal prosecutions, the prosecutor establishes jurisdiction over the defendant by arresting him. The act of arrest establishes the court’s authority. In civil cases, the formal service of the summons and complaint on the defendant establishes the court’s jurisdiction. After jurisdiction is established, the defendant is held in a magic circle, and ignores the court’s directives at his or her peril. When thinking as a sorcerer, all cases are magical contests, and all procedural devices are viewed as spells. A motion to dismiss, for example, is a “terminating spell,” as is a motion for summary judgment.

If you go about summoning demons and putting them under the court’s jurisdiction, you quickly learn they don’t like it. They try to break out of the magic circle in which you’ve confined them. They curse at you. The complaint is the first spell where you allege that the demon committed certain wrongs that the court is bound to redress. This spell must be constructed to meet formal requirements. The lawyers for the demons (defendants) often first move to dismiss the complaint on pedantic grounds, using legal erudition to argue that the complaint does not recite the “elements of the claim” in the proper fashion, or that it has been filed too late, or that this demon is immune to that spell. The beginning of adequate plaintiff-side sorcery is building an excellent complaint that will hold even a nasty demon. A good complaint anticipates some defenses that will be raised and heads off objections. Thus, when the inevitable motions to dismiss arrive, the plaintiff sorcerer can defend the complaint with arguments thought out before the complaint was even filed.

NSI didn’t bother with motions to dismiss like the ones that Cohen hurled at Gary’s first four complaints. NSI did what classy defendants do–it filed an answer to the complaint, saving its thunder for the Big Kahuna, the Motion for Summary Judgment. When I first went to work in the trenches of sorcery as a young apprentice, it was commonly said that motions for summary judgment were rarely granted. This no longer seems to be true. Years of tort reform rhetoric has made judges more willing to terminate cases and free civil demons who in the past would have been required to stand trial. Particularly in the Federal courts, a Supreme Court case called Cellotex gave federal judges a shot of testosterone that made them more willing to dismiss lawsuits at summary judgment. NSI is a big winner under this policy change. As of 1999 NSI had won virtually every lawsuit against it via summary judgment, which made about eighty wins in a row. So I was not looking forward to receiving NSI’s motion for summary judgment.

NSI filed its motion for summary judgment in mid-December, 1999. NSI’s take on the case was simple. NSI admitted that Gary had been the first to register the domain name. NSI admitted it had transferred the domain name to Cohen, in response to the October 15, 1995 forged letter that appeared to be from Online Classifieds, Inc. However, NSI claimed it “did not know anything about Ms. Dimmick’s relation with plaintiff,” and thus had no idea that the letter was forged. NSI also argued that Gary didn’t have a contract with NSI, because Gary had paid nothing for Sex.Com, and “the domain name registration application is... devoid of any language indicating any expectation of a quid pro quo.” NSI also argued that since domain names were “not property,” Gary had no rights to the name arising separately from contract. Thus, argued NSI, Gary’s problem was with Cohen, and NSI should just be dismissed from the case. As spells go, NSI’s motion for summary judgment had very good prospects for getting the nod from the judge, the arbiter of our magical contest.

When the dark cloud of summary judgment looms, however, and things look bleak, the plaintiff sorcerer initiates a two-fold course of action: (1) Buy time, and (2) Build the record. Thus, the first and most important spell after filing complaints is the “time spell.” One must deprive an opponent of the pleasure of making things happen on his or her schedule. And one must free oneself of the pressure of working on a deadline imposed by the other guy. If bad things are about to happen, your first battle cry is, “Not now!” Later you will have time to build the record, write your arguments, and organize your evidence.

As soon as I got the motion from NSI, I looked it over to learn what new, additional facts I didn’t have that would enable me to defeat the motion. I then wrote Dave Dolkas, NSI’s counsel of record, a letter asking him for an extension of time to oppose the motion while I gathered those facts through discovery. Naturally, he wouldn’t give me the extra time, so I filed a motion under Rule 56(f), asking the judge to give me more time. I wrote a skeleton of what my bigger opposition would be, mainly emphasizing how much I needed to get these additional facts that I didn’t yet have, and thus my need for more time. Under 56(f), the judge is basically always supposed to give you that time.

Usually, when you file a 56(f) motion, the judge will just reschedule the hearing on the motion for summary judgment so you can complete the discovery you claim will enable you to prepare the opposition. That had been my uniform experience up until this case. However, this time, something new happened. Judge Ware kept the hearing on NSI’s motion scheduled for January 24, 2000, and scheduled my motion for more time to be heard at the same time. This meant that on January 24th, the judge could either give me more time or grant NSI’s motion for summary judgment.

On January 24th, I stood in front of Judge Ware. He was very pleasant, but got right to the point -- he didn’t see how he could hold NSI liable if its people were duped by Cohen’s forgery. Judge Ware likes to question the advocates. He asked me whether the letter was a forgery, and whether NSI was taken in by Cohen’s deception. I answered that the letter was a forgery, and that NSI may have been taken in by it, but there was some evidence to indicate that NSI conspired with Cohen to aid in the theft of Sex.Com. Judge Ware asked what evidence that was. I felt like I was standing in front of locomotive that was just pausing briefly before running me over. Well, I told Judge Ware, there was a man named Lee Fuller in Riverside, California, who told me Cohen had told him “he had a girlfriend at NSI, and he could get any domain name he wanted.” Judge Ware questioned further. Had I spoken to this Lee Fuller myself, directly? Yes, I confirmed, I had. I felt as if the locomotive shifted into neutral, although its engines were still throbbing, while I held it at bay with a slender reed. Because of that slender reed, Judge Ware said he would give me more time to conduct discovery into whether “the domain name Sex.Com was not transferred by Network Solutions in the normal course of business.” Part one of the twofold strategy was complete -- I had more time. Now for part two -- building the record through discovery. Judge Ware could help there, too.

Remembering Judge Ware’s willingness to order Gary to resume his hastily adjourned deposition, I asked Judge Ware to allow me to take the depositions of appropriate persons at NSI. Judge Ware questioned further. Who would I depose, and what would I ask? I would want to question the human resources manager of NSI, at least, I said. No, said the Judge, he wouldn’t allow me to pry into the sex lives of people at NSI; however, if I wanted Cohen’s deposition, Judge Ware volunteered, he would order that to take place. I could hardly believe this was happening. Dorband had been stonewalling on producing Cohen, but I hadn’t filed a motion to compel him to appear at deposition, and here the judge was just offering it. Yes, I responded, I wanted to do that, and an order would be a big help. No problem, said the Judge. Where do you want to take the deposition? San Diego, I responded. Fine, said the Judge, and he ordered Cohen to appear for deposition “at the Edward J. Schwartz United States Courthouse on February 3, 2000 at 9:00 a.m. for a deposition” covering “any matters pertaining to this litigation.”

Judge Ware gave us until February 14, 2000 to file an opposition to NSI’s motion for summary judgment. That gave me just shy of three weeks to prepare for and depose Cohen, prepare an expert declaration from Ellen Rony, and build my record in opposition. When I left the courtroom, I could still feel that locomotive idling on the track, waiting to resume its advance.
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Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:41 am


I’ve made a few speeches on courthouse steps, and always been dissatisfied with the results. Reporters never seem to agree with me about what is important about the case. The best policy in dealing with the press is to formulate a sound bite that is witty enough to be quotable, and coherent enough that they can’t cut out a part and distort it. In Southern Oregon, I tried to sound folksy, as well. When a reporter for a Medford television station asked for a quote about a victim’s rights initiative, I said: “It’s kind of like a TV dinner. Some parts of it look pretty good, and other parts you wouldn’t feed to your dog, but when you read the ingredients, you don’t want any of it.” This was quoted accurately and completely by the TV news, the Portland paper, and the local paper.

Gary was eager to do a press release. He thought it would win the case if enough people realized that, as Gary put it, “the guy stole it!” He believed NSI would be impelled by public opinion to return Sex.Com. That seemed an unlikely result to me, but I didn’t oppose doing a press release. The case was news, and I had a legitimate legal reason for wanting to provide notice to the public that Cohen didn’t lawfully own Sex.Com -- I didn’t want him to be able to sell it to an “innocent buyer” who could then try to claim “bona fide purchaser” status, entitling the “BFP” to retain control of the name. Cohen was already making that argument with respect to the corporate alter-ego defendants, YNATA, Ocean Fund, and Sandman Internacional. The more people that knew Sex.Com was stolen, the less tenable it would be for Cohen to stage a BFP defense with new “innocent buyers.”

I hired a friend to help me put together an email list of high-tech reporters, and together we wrote an email press release of several pages, detailing the essence of the case as we knew it. The release accused Cohen of stealing Sex.Com, and announced that he was a convicted felon who had served time in Federal Prison. Just a couple of days before Cohen’s February 3rd deposition, I hit ‘send’ on my email and fired the press release off to a list of around thirty reporters. The reverberations of that act would be felt for some time.
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Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:43 am


On February 3, 2000, I woke up in my favorite hotel, the Hilton Torrey Pines, San Diego. Every time I go there, it is blessed with the same fresh smell of sea air, the sound of rolling waves gently sighing somewhere out beyond the balcony in the warm light. The rooms are homey and modern, in cool, well-matched colors. The air is fresh with the scent of huge eucalyptus trees. I was glad Gary had gotten to be a millionaire. The last time I stayed at the Torrey Pines was ten years before, when I tried my first case, so it had nostalgic associations. It was a good place to start a hard day. A Sikh drove me to Beth Ballerini’s court reporting office on Kettner Boulevard, where the tough part began.

There was Dave Dolkas, with a goatee and a laptop, and Bob Dorband looking fresh-faced and unflappable in his shirt sleeves, settled in behind the conference table, ready to rock. Bob Dorband is a charming man, not very big, with a full head of white hair that appears not to have gone grey so much as to have been chosen in precisely the same color as Mozart’s wig in the movie Amadeus. And while Dorband has never displayed Tom Hulz’s trademark manic Mozart laugh, that high-pitched yip that cracked up whole audiences the world over, Bob Dorband’s speech pattern does resemble the warm, convincing tone Mozart would use when he stretched the truth. Insidious, bedeviling, a tone to set your teeth on edge. Bob has a way of presenting his position so well that you feel foolish opposing him. Your own position starts slipping away like teflon under your fingers. He gives you argumentative vertigo.

And there, to my right as I walked in the door, at the head of the eight foot conference room table, sat a man with an incredibly ugly tie. The man with the very ugly tie also wore a very satisfied look. The look was one of those embryonic grins that seems about to gestate rapidly and cover the entire face with a giant smile of satisfaction. It was one of those looks that seemed to say, “C’mon, you’re dying to know what I’m smiling about, so ask me.” The smile was on the face of a good-sized Jewish man who overall looked humpty-dumptyish, although not grotesque, but more Bob Hoskinsy. And with a Bob Hoskinsy close-cropped haircut. Hoskins could probably do this role perfectly. Just cut the English accent, flatten the tone so it drops back in the throat, and blur it over with an American accent somewhere between Jersey and Newport Beach. It is a voice that lays out just the facts, ma’am. It is a voice that says he is not here to screw around, that he is too big for that, and that we should just get this over with because it’s a joke. The tie was red and black, pure strawberry red, India-ink black, with pleats in it. That tie was like the last thing a bug sees before it gets squashed flat by a flyswatter. I was not among friends.

Except Rich Diestel. And of course there’s Beth Ballerini, the proof of God’s mercy to the numerous San Diego attorneys who patronize her, no doubt because of her absolutely unfailing good cheer, casual blonde ambition, and total accuracy in preparing deposition transcripts. And meet the videographer, Jerry, a bit of a silver-haired guy who’s seen it all, most recently from behind the lens of a large legal videotape unit with dials and a backup videotape, provided courtesy of State Farm Insurance. Gee, I guess we’re all here, so we might as well start.

Right after Beth swears Cohen in, Dorband starts with a sort of soft left jab. “Charles, before we begin.”

I respond, “Sure.”

Dorband: “I’d like to bring up something that came to my attention yesterday, which was the filing of a press release apparently that came from your office. And are you acknowledging that there was a press release?”

Backing up, elbows forward, gloves high, I respond, “I’m not here to answer questions, Bob -- What’s your concern?”

Just getting wound up, Dorband starts with the body blows: “The timing of the press release was highly suspect. It happened the day before Mr. Cohen’s deposition.... The fact that this press release was issued I think is highly unethical and improper and an attempt to disturb my client’s ability to testify at the deposition today.”

Ouch! Unethical. I hate that word. It always means that things have become intensely personal. For unethical conduct the Bar can yank your ticket, pull your card, take the “esquire” right off the end of your name. And there was no doubt that playing with the news media put you right into an area where ethics could be an issue. I’d come out of prior media encounters with no more mishap than being misquoted, misinterpreted and subtly maligned. I hadn’t really thought it would be any different in this case, which was of course willfully stupid, because Cohen had already cross-claimed against Gary for defamation with respect to the Wired article. What was I thinking? Without realizing it, I was taking risks I’d never planned on, like a cabbie who gets caught up in a chase scene in some crazy movie, and ends up driving like Dale Earnhardt on his last lap, all because someone said, “Follow that car.”

But I’m not thinking about ethics for long. At that point, it’s a little bit after 9:00 a.m., I’m jack-full of Starbucks Americano, the judge told Cohen to be here, so he wouldn’t dare try and walk, and I’ve got to make this work.

Dorband lays out his proposal: “We will proceed with the deposition. If there are questions of a personal nature that my client feels uncomfortable in answering, we will reserve our rights to answer those questions at a later date after the judge has been able to rule on whether we can trust that the information that is going to be given in this deposition and in this proceeding will be kept confidential.”

Although Dorband didn’t have the right to demand confidentiality for this presumptively public proceeding, my back was against the wall. I had to get Cohen’s testimony, or all of the expense of flying to San Diego, and most of the advantage of having Judge Ware order the deposition to take place at all, would be lost. So I cut the deal. It would all go forward under wraps.

I felt like I was in a boxing ring. I am no boxer, being more of a tuck and roll Aikido type myself, but my dad was a professional boxer in his late teens and early twenties until a bout with TB forced him to hang up his gloves. His aggressive drive to compete in multiple weight-classes weakened his health. He told me he could lose or gain up to 20 pounds in a few weeks time. In the end, he said TB was a blessing. Good thing he caught it, or he’d have ended up like those other old Mexican boxers we’d run into on Sunday morning, shopping for tortillas and menudo in Phoenix. He’d point out a fellow with a loping stride and a slightly foolish grin and say, “Ring a bell next to that one and he’ll put up his dukes, asking ‘where’s the fight?’” He loved the sport and skill of boxing, but regretted its human toll. From this perspective, he taught me his fundamental rules -- keep your guard up, use lots of short jabs and very few big swings, and train for endurance so when you need to, you can outrun the other guy and the clock. Above all, avoid hits to the head. My dad sat in the back row during my first trial down in San Diego. On February 3, 2000, he was in a nursing home, silent among his 90 years of memories. I would fight this one for him.

The bell rang. I stepped forward from my corner, my father’s cautious voice in my ear. Cohen sat smirking, his bulk a silent challenge. He wasn’t here to box. He was a sumo wrestler with tentacles. He wanted to wrap one of those long sucker tentacles around me, lock me in stupid wordplay, make Beth’s fingers type endless bullshit, and squeeze the life out of my expiring body. Out of breath, out of words, my lifeless corpse would float to the surface. I could see that fate looming before me, to be left like flotsam in the wake of a remorseless con man who was absolutely detached from any personal issues I could affect. Cohen was above the fray. Dorband was just security. I was a nuisance, being evicted from a place I didn’t belong. Contempt rolled off Cohen like fog off the slopes of a mountain. Like a mountain, he shrugged at the insignificance of it all.

Cohen was what Francis Wellman calls “the perjured witness” in his book The Art of Cross-Examination. Wellman advises fast questioning to trip up the liar, because he “can’t make up lies as fast as you can make up questions.” To ask questions fast, you have to know what you’re going to ask. You need a list of questions. But if you put together a questionnaire, you may not listen to the answers you’re actually getting. If a smart witness understands that you’re working off a questionnaire, and you fail to explore the details of areas before moving on, they realize they can keep things from you, and you won’t notice it. They start to nod along with you, allowing you to believe what they want you to believe, knowing that once they get through an area, you are not likely to return to it. So a deposition is not conducted like an oral questionnaire. You must stay loose, and adapt your questions to the rhythm of the witness. One way is to hook your next question to their last answer. You do it like this:

CARREON: “Does he work with a firm?”

A. “Yes.”

CARREON: “Which firm is that?”

A. “Hochman & Cohen.”

At first, the witness has to go along with it to get your rhythm started. But the rhythm feels safe and harmless. Since the witness is on the other side of a push-me-pull-you setup, they feel somewhat in control. They relax, you can begin to take advantage of it, pulling harder here, pushing harder there, without engendering too much resistance. Pretty soon you are sawing through the facts, and with luck your adversary is going along with it, lulled by the fact that his client appears to be okay with it. That’s how it’s supposed to work.

With Cohen, of course, nothing works right. Take this typical piece of questioning about Ocean Fund International:

CARREON: “What ownership interest did you have in Ocean Fund International?”

COHEN: “Stock.”

CARREON: “How much?”

COHEN: “I don’t recall.”

CARREON: “Were you the majority shareholder at any time?”

COHEN: “No.”

CARREON: “Who was the majority shareholder?”

COHEN: “It’s ambiguous.”

CARREON: “It’s ambiguous? What part of majority don’t you understand?”

COHEN: “What part of time do you not understand?”

CARREON: “When Ocean Fund was created... the approximate date?”

COHEN: “I can’t even do that. I think -- I believe it was in the year 1996 or -- 7, but I’m not quite sure.”

CARREON: “Did you have to sign any papers in order to participate in the creation of Ocean Fund International?”

COHEN: “I probably did.”

CARREON: “And do you remember what the nature of those papers was?”

COHEN: “No, I do not.”

Cohen used my speedy rhythm to short-change me on information. As I learned things, I had to backtrack and pick them up and restart my questioning. Ordinary witnesses usually try and make the truth plain for you. Their biggest problem is mixing what they know with what they believe. Usually they know a lot less than they think they do, but they are so confident of the truth of it that they’ll just throw their whole story in front of you. You can pick out the pieces of hearsay, opinion and prejudice, leaving the diminished resultant facts for your use. An honest witness will fill you in on the who, where, what, why and when with a rounded, all-encompassing response, but I got none of that from Cohen. Check out his smooth denial here, where he claims to own no portion of several companies which are all owned by his offshore holding company YNATA:

CARREON: “Tell us what you know about what YNATA Corporation owns in terms of interests, financial interests in other corporations, please.”

COHEN: “Other than the corporations that I have listed which were Omnitech International, First City Financial, Sandman Internacional, Oceantel, those are the companies that I am aware of.”

CARREON: “Do you have any ownership in any of those companies?”

COHEN: “No.”

If an average witness had once held stock in these companies and later sold it, he would say so straight out. But Steve made me dig it out of him:

CARREON: “Have you at any time held an ownership in any of those companies?”

COHEN: “Yes.”

CARREON: “Which of those companies did you have an ownership interest in at some time.”

COHEN: “All of them.”

So now I just have to find out when he sold the stock, and then we’ll work our way back to when he bought it. Witness my attempt:

CARREON: “When did you cease to own Ocean Fund stock?”

COHEN: “1999.”

Great, I found out when he sold it. Now to just find out to who, and for how much.

CARREON: “Who did you sell it to?”

COHEN: “I sold it back to the corporation.”

CARREON: “For how much?”

COHEN: “I’m not sure of the exact amount.”

CARREON: “Can you please give me an estimate?”

COHEN: “No.”

When faced with an inability to estimate, a lawyer tries to help by holding up a “yardstick”:

CARREON: “Can you please come to the nearest $10,000?”

COHEN: “No.”

CARREON: “Nearest $100,000?”

Dorband interjects: “You don’t have to guess.”

Cohen takes the hint: “I’m not going to guess.”

CARREON: “I’m not asking you to guess. You can’t come to the nearest $10,000 and you can’t come to the nearest $100,000; is that correct?”

COHEN: “Yes.”

CARREON: “That would require you to guess. Can you come to the nearest $500,000?”

COHEN: “Yes.”

I’m thrilled. I’ve got the “when,” the “who,” and I’m about to get the “how much” to the nearest 1/2 million, (it’s gonna be a big number), so the shell game is almost over. I point at the shell with satisfaction:

CARREON: “And can you please give me that number, your best estimate?”

COHEN: “No.”

CARREON: “And why is that, sir?”

COHEN: “Because there’s a confidentiality agreement between myself and the other parties.”

Cohen grins as he lifts the shell, revealing nothing, and scoops up the winnings. It was like trying to hit an enemy in a nightmare. My punches felt weak and horribly ineffectual. If we’d been in trial, the judge would berate Cohen for his uncooperativeness, and the jury would dock him points for arrogance. But it was only a deposition, and lawyers are expected to extract facts in the face of resistance. When they fail in the effort, it can be pathetic. I remember hearing Oliver North humiliate special prosecutor Arthur Liman during the Iran-Contra hearings. North disarmed Liman simply by admitting he had lied under oath previously, while insisting that he was telling the truth under oath at the time. Usually, contentions like North’s fall flat, indicting the witness as a perjurer and undermining all credibility. But North was a gifted liar, and his justification -- that he’d lied to fulfill his patriotic duty -- will go down in history as one of the most successful public shellackings a lawyer has ever received at the hands of a felon. Voice choking and eyes watering, North convinced a nation of gullible viewers that lying was virtue and admitting it now was proof of his bravery. The lie slipped from Liman’s grasp, and further efforts to pin North down were, as they say, like trying to nail jello to a wall. Due to this performance, North was spotted as a promising Republican talent, and made his run for Congress.

Cohen’s deft economy in dispensing the truth, and his ability to entomb each needle of fact within a bale of misleading hay, should qualify him for some kind of position in government. He had a perverse grasp of corporate law, and an amateurish willingness to exploit the complexities created by multiple, overlapping corporations. In Cohen’s universe of puppet companies, nothing was what it seemed, every sleeve had a trick up it, and there was always another wrinkle to be explored.

Ultimately, Cohen’s testimony about his shell corporations became unbelievably tangled and incomprehensible, simply because his deposition was taken so many times that his lies became absurdly complex. In the end, Francis Wellman was proven right, except it wasn’t so much that Cohen couldn’t make up answers as fast as we could make up questions, but rather that his ability to make up credible lies diminished as he told more of them. Even as the contradictions became more numerous and blatant during depositions that continued in July, August, September and November, Cohen would never admit to having lied. He would just shake his head patiently once again to explain precisely how we had misunderstood him. He moved, as we say in the vernacular, from dazzling us with brilliance to baffling us with bullshit.

Near the end of the case, Cohen’s construct of lies became an absurd machine, a demented battle android half shot away by enemy fire, able to do little more than limp forward with hard-wired sincerity, entreating, “You do not understand... repeat... let me explain...” But on February 3, 2000, at around 10:30 in the morning, that battle droid was in fine form, and my punches were landing on solid armor.
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Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:44 am


“Just wait,” she said, “it’s only the beginning.” The lady telling me this was no ordinary 40ish 5’4” San Diego blonde with a bob haircut. She was Betsy Hartwig, an Assistant Attorney General for the San Diego office of the California Department of Justice. She was the prosecutor who convicted Cohen of bankruptcy fraud and related crimes back in 1992. We were eating cold sandwiches and coleslaw from paper cups in a deli down the street from Beth Ballerini’s office during the lunch break after Cohen’s morning session.

I really wanted her to open another prosecution on Cohen, this time for the theft of Sex.Com. But the Constitution requires that crimes be tried in the vicinity in which they are committed, and the theft was perpetrated in the Orange County office of Midcom Corporation. So Besty didn’t see how her office could get jurisdiction over it. In retrospect, I am sure she did not want to endure any more stress-induced lifespan shortening of the sort that occurs when you spend your time chasing Cohen.

I had obtained the transcripts of Cohen’s criminal trial and had a law clerk summarize them for me before I met Betsy. The transcript proved that Cohen had impersonated lawyer Frank Butler, and using that false identity, had represented a couple of clients named Polvadore in a bankruptcy proceeding. During that representation, he misappropriated money from the debtor-in-possession fund. He also advised his clients to hide their Rolls Royce rather than turn it over to the trustee, and aided their commission of other little improprieties. An IRS agent testified that despite many hours invested in reviewing financial records, the government still couldn’t figure out Cohen’s entire scheme, but some substantial sums were missing. The jury convicted Cohen of Bankruptcy Fraud, Making False Statements and Obstruction of Justice. Judge Judith Keep refused to allow him release pending sentencing and on January 27, 1992, sentenced him to 46 months. Cohen called her “a cunt” on the record, and appealed his conviction. He won his appeal as to one count of the conviction, and was remanded for resentencing. However, Judge Keep imposed the same sentence as she had the first time.

Cohen didn’t waste his time in prison, though. His fine mind was still appreciated by those who knew him. His friends Bonnie Hite and Jim Powell came to see him when they needed legal advice about getting out of a time-share condo deal. Cohen kept his legal skills sharp suing his wife and her lawyer in a RICO case, and filed some prisoner lawsuits against the Bureau of Prisons to get better treatment.

Cohen also made friends in prison with noted securities defrauder Marshall Zolp, the inventor of the famous self-chilling beer can. Never heard of it? That’s because the feds put an end to Zolp’s efforts to promote this non-existent, but highly-desired beverage container, after he scammed several million from investors. After he got out of prison, during a casual phone call Cohen introduced Zolp, who was still in prison, to Bonnie Hite, another of the Sporting Houses directors. When Zolp got out a few months later, he and Hite quickly married and moved to Portland, Oregon. The marriage ended in a few months, but Zolp and Cohen appear to have worked together to create a couple of companies, Sporting Houses Management, and Gighlieri Fine Arts. Perhaps best described as an “investment vehicle,” Sporting Houses, which ended up holding the registration for Sex.Com, was originally organized to gather investments and fund development of an offshore pleasure island Cohen called Camp Wanaleia, pronounced “Wanna-lay-’ya.” Jim Powell was also a Sporting Houses Director, and most meetings were held at Midcom, Barbara Cepinko’s company in Orange County. Cohen got an address for Sporting Houses in Nevada, and the company gathered about $300,000 from investors. Bank records I got from a Las Vegas branch of Wells Fargo showed Cohen in total control of the cash, which all went to him or one of his companies, Omnitec. Needless to say, Camp Wanaleiya, which was going to employ hundreds of prostitutes of the highest calibre, making them available to the most discerning connoisseurs of sensual pleasure, went nowhere.

Gighlieri Fine Arts was built around the most evanescent asset I have ever glimpsed; the slender side of an option to buy all of Lorenzo Gighlieri’s entire artistic ouevre. Gighlieri is perhaps the premier creator of tabletop bronzes for the golf and boardroom set. Picture classical forms, nicely rendered, smoothly polished, at home in a paneled den, next to some photos of young guys in old fashioned football uniforms. With a luxury car salesman as its CEO, this venture also evaporated. According to Bonnie, Zolp eventually got in trouble with his Probation officer for failing to report, and fled to Tiajuana, Mexico to live with Cohen. By the time I got on the scene in 1999, Zolp’s email address was His street address was in Tortola, British Virgin Islands.

Betsy took in this news with gentle interest. I probed to see if I could get her to prosecute Cohen for stealing Sex.Com. She said she was talking to a couple of investigators about checking into Cohen’s current doings, but I got the feeling I was working on a long shot. I had little time to worry about it, because I had to get back to the afternoon session.
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Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:45 am


In the French punk movie, “Hate,” one kid tells another a joke. A guy falls out the window of a high apartment building. As he’s falling past each successive floor, he tells himself “So far, so good, so far, so good...” When I came back from lunch to resume Cohen’s deposition, I felt like I had fallen off the roof of a 20-story building, and had just passed the 12th floor. Somewhere during the next 12 floors, preferably within the next four, I needed to reverse the force of my downward plunge.

Before lunch, I’d tried my usual approach of starting without documents, to avoid giving the witness a place to rest their eyes to avoid your probing stare. Questions answered in a vacuum, without dates and names and documentary references, are often more honest. But Cohen had given up nothing in two hours of wordplay, and the pavement was getting closer. I had to start using documents to slow my descent. I started with one that was bad for Gary, the Delaware incorporation papers for Online Classifieds, Inc., that Joel Dichter had formed when he was Gary’s lawyer. Dorband had taken control of Dichter’s strategy, but I figured it would help to get Cohen to admit that the incorporation was not fraudulent. I thrust the document at him suddenly, accompanied by a vague, sneering question. Dorband saw the danger of the tactic, which is meant to provoke the witness to speak carelessly in response. Dorband immediately began running interception.

CARREON: I have marked as Exhibit 1... a statement... a designation by foreign corporation. It appears to be signed by my client, Gary Kremen. Have you seen that before?


CARREON: What difference does that... document make to you?

DORBAND: Objection. Vague, ambiguous.

CARREON: Does it make any difference in this lawsuit?

DORBAND: Objection. Calls for a legal conclusion, also.

CARREON: To your knowledge.

DORBAND: If you have -- it would be an impermissible opinion.

CARREON: Do you --

DORBAND: If you have an opinion.

COHEN: If I have an opinion?

CARREON: Yeah, do you have an opinion?

COHEN: My opinion is that the attorneys of Gary Kremen tried to perpetrate a fraud upon the court.

CARREON: How does that document prove it?

COHEN: This is where they tried to back-date the corporation Online Classifieds, back to the date of 1994.

CARREON: Where do you see that attempt to back-date?

COHEN: Taking the reading of the original complaint plus this document plus the other documents.

CARREON: Where do you see on that document any attempt to back-date anything?

DORBAND: I believe that mischaracterizes his testimony.

CARREON: Do you see anything on that document that shows an attempt by my client to back-date anything? Look right on that document, don’t look any place. Don’t look anyplace else.

COHEN: I’ll stick with my last answer.

CARREON: And your last answer is what?

COHEN: Taking all the papers into consideration, that was of my opinion, not of a legal opinion.

CARREON: So you admit there’s nothing on this document at all here which backdates anything?

DORBAND: Objection. Mischaracterizes his testimony.

Okay, I’m falling a little more slowly now, and I’m ready to attack the main issue. I grabbed the corner of the most crucial document, the forged letter itself, and twirled it like a playing card toward Cohen while simultaneously asking him:

CARREON: Here’s what I’ve marked as Exhibit 2. Where did you get that? From the tooth fairy?

Dorband iced me down:

DORBAND: Would you please give the witness the opportunity to read the document, please?

COHEN: Would you read it to me, please?

CARREON: I’ll give it to your counsel.

COHEN: I’m sorry.

CARREON: Where did you get it? From the tooth fairy?

DORBAND: Objection, if you’re going to continue to badger the witness like this we’re going to terminate the witness -- terminate the deposition.

While Bob may have wanted to kill his client on occasion, I don’t think this was one of those moments. The little slip lightened the moment anyway. I started again:

CARREON: Where did you get that document?

COHEN: I got it from Vito Franco.

CARREON: How did he get it?

COHEN: He got it from Sharyn Dimmick.

CARREON: Where did he meet Sharyn Dimmick to get this?

COHEN: Her address in San Francisco.

CARREON: Does Mr. Franco have a criminal record?

COHEN: No, he does not. Or did not.

CARREON: Does he now?


CARREON: Now, where did you meet him?

COHEN: Where did I originally meet him?


COHEN: Through a friend.

CARREON: And where?

COHEN: I think in Los Angeles is where I actually met him.


COHEN: It’s been so many years. 20-some-odd years ago. 20, 25 years ago.


CARREON: When was the last time you saw Vito Franco?

COHEN: The last time I saw him?

CARREON: Yes sir.

COHEN: In November of 1999.

CARREON: What was that occasion?

COHEN: Sitting in a jacuzzi.

CARREON: Where was that?

COHEN: Tijuana, Mexico.

CARREON: Does he work there?

COHEN: At that time, yes.

CARREON: Well, does he work there now?


CARREON: He worked there then?


CARREON: With what?

COHEN: Sandman.

CARREON: What does he do?

COHEN: When?

CARREON: Well, what did he do back when -- you know, during the work day before he sat in the jacuzzi?

COHEN: He was building out the brand-new offices for Sandman.

CARREON: What’s his area of expertise?

COHEN: He -- background on him?

CARREON: Yes, please.

COHEN: He is an ex-police officer. He was a movie producer.

CARREON: With which police agency?

COHEN: I’m not sure. I think it was somewhere in Hawaii. He was -- that’s before he moved to California. He is a movie producer, distinguished, and he was also -- he also did building.

At this point, I was close to gold, but somehow got off track. When I reread the deposition, I’m not sure why. Maybe I was just afraid to move too fast. At any rate, for an intervening 70 pages of transcript we engaged in sparring matches, in which Cohen used poor recollection, diversion, the Fifth Amendment, and a private confidentiality agreement to evade, deflect and block meaningful questioning. I was about three floors from the pavement when I returned to the crucial line of questioning:

CARREON: All right. Let’s go back to the Sharyn Dimmick document. So Vito Franco gave this document to you, Exhibit number 2?

COHEN: That is correct.

CARREON: What did he tell you about it when he gave it to you?

COHEN: She signed it.

CARREON: She signed it. Did you send him to get her to sign it?


CARREON: Why...did you send him to get her to sign it?

COHEN: She agreed to transfer the domain name. Vito and I drove up to San Francisco, and Vito got it and he handed it to me.

CARREON: Well let’s put it this way. Did you ever see Sharyn Dimmick’s name on any document that purported to show that she was somebody with respect to Online Classified, Inc.?

COHEN: Personally?



CARREON: Did Vito Franco?

COHEN: I don’t know.

CARREON: Was there any other person involved in the production of [the letter]? And I’m not referring to Sharyn Dimmick, you know. I made it pretty clear that I don’t believe Sharyn Dimmick signed it. So besides yourself and Mr. Vito Franco was there anyone else that was involved in producing this document?


CARREON: Where was it typed?

COHEN: On the computer system that Vito had.

At this point, my heart stopped in its chest. I couldn’t believe I was getting this admission. He typed it! As the questioning progressed, I began to feel like I was in a dream. I wanted to pinch myself, because I couldn’t believe the beauty of the things I was hearing. I was afraid that Dorband was going to set Cohen’s chair on fire, or that Cohen himself would realize he was hanging himself. My headlong plummet had completely ceased. I was beginning to float upward as if in a dream. The dream continued:

CARREON: Did Mr. Franco tell you that Online Classifieds, Inc. had its own stationery and it did not look like this?


CARREON: Did Mr. Vito Franco tell you that he had generated this stationery on his computer?


CARREON: Did Mr. Vito Franco tell you why Sharyn Dimmick wasn’t able to type her own letter?


CARREON: You had never spoken to Ms. Dimmick yourself?

COHEN: Not to my knowledge.

CARREON: You have never spoken to anyone who represented themselves to be Ms. Dimmick?

COHEN: Not to my knowledge.

CARREON: You do not think it suspicious that Mr. Franco found it necessary to create the letterhead for the letter to be written on?


CARREON: You did not think it suspicious that a company that has someone called a president did not have its own stationery?


CARREON: Who drafted the text of the letter?

COHEN: The text of the letter?

CARREON: Yes sir.

COHEN: Vito.

CARREON: Did you help him?

COHEN: I may have.

CARREON: This is dated October 15, 1995. When was it prepared?

COHEN: I don’t recall.

CARREON: Was it prepared close to that date? Long before?

COHEN: I don’t remember when he actually talked to her before we drove up, so I don’t know what date it was -- that it was -- I know that he had asked me some questions about what should we put into the letter, and I responded to that.

CARREON: Had he interviewed Ms. Dimmick?


By now, it was clear that from any ordinary viewpoint, the letter was a forgery. Only in Cohen’s world do we rely on documents signed by people we haven’t met, printed on our home computer, using letterhead created for that very purpose. Franco, the guy who got the letter signed, would obviously be an important witness. So I asked about him:

CARREON: He located Sharyn Dimmick by what method?

COHEN: I don’t know how he located her. I honestly don’t know.

CARREON: Mr. Franco is still an employee of Sandman Internacional?


CARREON: Is he his own freelance person?


CARREON: Who does he work for?

COHEN: He doesn’t.

CARREON: He’s just chilling, huh?

COHEN: You could say that.

CARREON: Well, he was in a jacuzzi. I figured. Okay. Where is he? How can I get in touch with Mr. Franco?

COHEN: He’s in heaven.

CARREON: He’s in heaven? He’s in heaven?

COHEN: He’s in heaven.

CARREON: Wait. Well, we know that you and I have got a little bit of paperwork to do before we get in. So where can I find him short of there?

COHEN: He passed away.

CARREON: He did?

COHEN: Yes. He just recently passed away.

CARREON: I see. Where are his records?

COHEN: I don’t know.

CARREON: I’m not going to pass away, am I?

COHEN: I hope not.

I added that last question because it just seemed that anyone who had any relevant knowledge about this case ended up dead. Earlier, I had asked Cohen about the French Connection and the Ashton-Tate lawsuit against himself and John Cook. Since then, John Cook had died. Not only that, Cook’s mother had died when she was served with the lawsuit papers by Ashton-Tate’s lawyers. Right on the spot. Cohen also told two different courts on two different occasions that Frank Butler, the attorney, had a heart attack. Cohen even stored some of his financial records with his father, an accountant, also deceased. It was more than coincidence that people who had important things to say about Cohen’s business dealings seemed to be unavailable. Cohen’s witness list was comprised, in equal numbers, of expatriates, foreign nationals, and folks on whom the ticker had just run out. So I continued digging in the graveyard of Cohen’s memories:

CARREON: When did he die?

COHEN: He died -- he died when I was in Comdex in Las Vegas this last, I think it was October. He was supposed to call me -- sat in the jacuzzi the night before when I called his house, because I was upset because he didn’t call me, and then I found out that he had passed away.

CARREON: So you -- he died in Tijuana? Where did he die in Tijuana?

COHEN: He was a very private individual and I didn’t realize that he was as sick as he was, and Vito never told me -- when I was incarcerated, Vito had suffered a heart attack that I wasn’t aware of. And Vito used to go to the hospital, and I thought he was getting blood transfusions. And after he died I found out that they weren’t blood transfusions, they were kidney dialysis, and he went into the hospital for his kidney dialysis in Los Angeles. I believe it was Cedars.

CARREON: Cedars-Sinai?

COHEN: Yeah. And he told them he didn’t feel good, from what his kids told me, and he stood up and passed out and died.

CARREON: And that was in October of 1999?

COHEN: I believe so.

Well, Cohen might have believed so, but according to the responses to the subpoenas I sent to Cedars-Sinai, no such person had ever been a patient. But on February 3, 2000, I just dug for more details from Cohen about this invented person.

CARREON: What did he do for you?

COHEN: What did Vito do for me? Vito did all the work. Vito ran and worked in several of the companies back in that day and age.

CARREON: Did he do a lot of private investigating type stuff, hunting people up and --

COHEN: Yes. Yes.

Along with the forged letter, Cohen had submitted a second document with NSI to change the registration of Sex.Com into the name of Sporting Houses Management. In this document, filed online with NSI, Cohen pulled a classic “spoofing” trick. He filled out the form in Kremen’s name, because as the administrative contact, Kremen had the authority to change the registration. But he changed Kremen’s telephone number and email address to his own phone number and a distinctive email address: The name was owned by his friend Stephen Grande, married to Barbara Cepinko of Midcom. I wanted to get Cohen to admit that combining information like this had to be done for a fraudulent purpose, but he just wouldn’t go there. Maybe he was beginning to realize he’d given me too much rope already.

CARREON: [I’m going to] ask you to take a look at that document and ask if you’ve ever seen it before and when you saw it?

COHEN: I produced this.

CARREON: You produced that document?

COHEN: Yes, I produced that document.

CARREON: So you typed Gary Kremen’s name on there?

COHEN: That’s correct.

CARREON: Why did you do that?

COHEN: Because the letter authorized me to do it.

CARREON: Now, why didn’t you talk to Gary Kremen?

COHEN: What was the purpose in talking to Gary Kremen?

CARREON: You knew that Gary Kremen was the systems administrator. He was the only person authorized to transfer this domain name.

COHEN: Says who?

CARREON: He was the only person authorized to transfer it according to --

COHEN: According to who?

This last bit of denial didn’t matter much, though. He had lifted the veil quite enough. Maybe he felt the fraud had been declared legitimate for so long that he no longer saw any risk in discussing how the letter came into existence. He admitted he had never met Sharyn Dimmick, even though the letter said they had talked many times. He had written the letter on his own computer using a word processing program. The only person who had ever “met” Sharyn Dimmick was an old, dead friend of his. When he announced the news of Vito’s death, he chided me for showing no respect for the dead. I told him “Mr. Cohen, I refuse to feel sadness at the death of your witnesses.”

At his deposition, Cohen didn’t say that Vito had paid anything for the name, or Dimmick’s signature. Later, before summary judgment, he shifted to the position that he had paid $1,000 for it, but that he had no receipt for the payment and such exchanges would merely be small amounts between himself and Vito, a friendship that couldn’t be burdened with paltry matters like accounting for four-figure sums.

There it was, elegantly simple. The letter was a forgery, Cohen had no reason to believe that it was legitimate, and it was the operative cause for the transfer of Sex.Com. My entire downward momentum had reversed. I was weightless, floating upwards past the balconies. As I passed the rooftop, I kept rising higher. So far, so good.
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Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:48 am


The last we saw him, Judge Ware was sitting on the bench in his black robe, with his face as handsome as an oiled mahogany carving, giving me a short reprieve to depose Cohen and see if I could prove that NSI had deliberately helped Cohen steal Sex.Com.

The first rule you have to learn about litigation and trying cases is this one, “nothing gets in except through the mouth of a witness.” That’s right, no witness, no evidence. You can have a stack of documents 500 feet high, and unless they are “official documents,” like court records, they are all inadmissible hearsay until a witness testifies that they wrote them, or read them, or relied on them, or in some way did something that makes them admissible. So don’t go to court with a note or a letter. Go to court with a witness with the letter in his hand.

I had a lot of NSI documents and a lot of reason to believe that NSI had been so sloppy in transferring the domain name that it went beyond mere negligence, and rose to the level of recklessness, perhaps even disclosing the intention to help a wrongdoer steal the domain name. But why would a Judge believe what I had to say about NSI? I was the lawyer for the people who were suing them. It was time to get some mileage out of my rent-a-nerd.

Ellen Rony is obsessively precise. This characteristic pays off with an expert, who is hired for only two reasons -- to say the things you want them to say, and to stand up under cross-examination when the other guy tries to get them to admit that they’re wrong, or didn’t read all the relevant documents, or that some other experts disagree with them, or that they’re not sure, or that all the money they are being paid to testify has affected their testimony. A precise person finds it easy to pleasantly disagree, which leads to greater clarity of opinion, rather than mere hair-splitting, as the other guy would have it. Precision also provides an excellent blind for a bald denial. Which is the little curtain behind which the clever expert withdraws when all else fails.

In addition to being precise, Ellen had another good quality. She really thought NSI had screwed up. Ever since she’d learned about the theft of Sex.Com, she’d been disturbed by NSI’s behavior. She was particularly surprised that NSI seemed totally comfortable having a blatant thief own the domain name, because she was well-acquainted with Phil Sbarbaro, the “house counsel” for NSI who had rebuffed my attempts to settle the case on easy terms. “Phil,” as she called him, had clearly impressed her, because she described him and his suits in that honey tone women unconsciously adopt when describing powerful men. From her description, which was admittedly brief, I imagined Phil to be in his mid-40’s, the kind of lawyer who favors custom-tailored banker-type suits, has a rather close-cut salt and pepper hairstyle, smiles charmingly, extends his hand ingratiatingly, looks the speaker in the eye and responds to all attention like the captain of industry he is. To me, he was just one more obstacle to getting Sex.Com, so she could think whatever she wanted to about him. And little did he know it, but Phil was about to get his tit in a wringer.

Ellen and I got together over a weekend, discussed the way NSI had transferred the domain name, and put together a lengthy declaration, must have been 15 pages, where she swore under oath that the forged letter was the most obvious fraud imaginable, and should have raised red flags for NSI. The letter, she noted, contained several absurd statements, including the idea that a company called “Online Classifieds” wouldn’t have an Internet connection, that “Sex.Com” would be given away for free by a company involved in the Internet business, and that somebody giving away a domain name would simply sign a letter approving the transfer, and let the other party handle it with NSI. She then analyzed, with reference to four specific criteria, exactly how NSI had failed to follow its own policies, in particular by failing to contact Gary Kremen before transferring the domain name to a new registrant.

Apparently, Ellen’s declaration landed with a resounding thump on Sbarbaro’s desk, bypassing his urbane superego, due to the shock of having Ellen Rony, the author of The Domain Name Handbook, that is to say, in Phil-Sbarbaro-speak that mousy little hobbyist who called herself a “scribe” and presumed to document the “history of the Internet” as if anyone owned the Internet besides NSI, that poor woman whose mind had been manipulated by Charles Carreon’s words and Gary Kremen’s money, in other words, that woman who, who... who the hell did she think she was?

I can see it now. He calls his associate Kevin Golden on the office intercom. Golden appears, with his Irish choirboy looks and his notepad. Sbarbaro is already dialing Ellen’s number. He points Golden to a chair and hands him the declaration of Ellen Rony. Golden hasn’t fully appreciated the significance of this. Or maybe he hasn’t read it at all. Doesn’t matter, the phone’s ringing. Answering machine. He leaves a message, telling Ellen to call him. Intense conversation follows between Sbarbaro and Golden. Golden feels defensive because he was unaware of the problem being so serious. Sbarbaro is over-reacting. Golden hasn’t often seen him like this. They keep talking until a while later when Ellen calls back.

Phil puts her on the speaker phone. He feels like Frank Sinatra, hearing that some mug has just ratted on his best friend. He’s going to play it cool, but with plenty of steel. He starts out by telling her how disappointed he is, that he thought she was a better friend than that, that NSI has such an important influence on the Internet, and that what she has done bodes ill for future collaboration. All that easy access to NSI documentation and information that she’s had, including the link to her website, all that is put in jeopardy by this ill-considered action. Do you know anything about this Charles Carreon? He’s insane, he tells her, echoing the words of David Dolkas who told the court in alarm, “Carreon’s conduct must be stopped.”

And this is where you have to cheer for Ellen. She’s thinking, “look, Phil, I’m not a god-damned pet canary that lives on crumbs. If you wanted to hire me as a consultant, you could have sent me a check a long time ago”. But she doesn’t say this, instead she tells him that she’s sorry he’s upset, but she thinks NSI made a huge mistake here, and they ought to fix it. She may have even said a good word about me.

Well, leaning back into his chair and smiling at Golden to show him how a guy handles this, he tells her that well, Ellen, hate to break it to you but you’re not really an expert about NSI policies. He tells her he’s going to have her “disqualified” as an expert, and have her declaration “stricken.” Ouch, that’s gotta hurt!

And that’s not all. If her declaration isn’t stricken, he’ll have to take her deposition. (Gasp!) And when he does, he tells her, he’s going to “let the Panzers out, and I’m going to cut off your toes.” He’s satisfied with himself when he makes this statement. He can feel her wince as her nether digits are removed. She’s not Jewish, but nobody likes Panzers, the feared World War II tanks that Rommel drove to victory in North Africa, mounted with the dread 88 mm. cannon that could blow a Sherman tank wide open while facing no risk of harm to itself. Just a little bit of history out of respect for Phil, since he is an ex-military man and I bet he still has his dress whites pressed and ready to go.

Well, you can imagine that Ellen was on the phone to me pretty quick after that happened. Me, I was crazy, livid, and not the least because he said I was crazy. I’m sensitive about that stuff, and it really got my blood going. So what did I do? Like any lawyer who is already mad, and wants to get even, I hit the books. Pretty soon I had it in hand, the Erickson case from the Ninth Circuit Court of Appeals, which clearly holds that it is improper to attempt to influence or coerce the other side’s expert witness, or even to communicate with them directly rather than through the office of the lawyer who retained them. Thus armed with certain foreknowledge of his wrongdoing, and wanting to see if he would stick his foot in it any further until it became unretractable, I sent Phil a short letter, rebuking him for threatening my expert with “Nazi imagery,” and “threats of dismemberment.”

Phil’s response was most gratifying. He wrote back that he didn’t need my permission to call his old friend Ellen Rony, and that he was entitled to tell her anything he wanted. He did not deny having used Nazi imagery or threats of dismemberment, which under the circumstances, being something that an ordinary person would certainly deny if it were untrue, constitutes a “tacit admission” under the Federal Rules of Evidence. Then, and only then, did I write him the letter telling him about the Erickson case. His next letter was full-speed in reverse. It was so delicious I should have framed it. He said he was sorry, said he routinely did that sort of thing when he was a federal prosecutor, and offered to pay the fees and costs resulting from this “ex-parte contact” with my expert witness, which he grudgingly conceded was apparently technically unethical. Gary still hasn’t gotten a penny from Phil Sbarbaro for the assault on Ellen, but I am sure he will ultimately spend enormous sums in an unsuccessful effort to force Sbarbaro to fulfill this promise. Nor has this captain of industry shown the small speck of gentility necessary to send an apology to Ellen, who apparently, is no longer his friend.
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Re: The Sex.Com Chronicles, by Charles Carreon

Postby admin » Fri Jun 13, 2014 1:48 am


In the Internet business, At the peak of the boom, NSI was city hall, as in, “you can’t fight City Hall.” Reading the history of NSI’s judicial victories is about as uplifting as re-reading the Dredd-Scott decision. (You’ll recall that was the case where the United States Supreme Court held that a man was property, if he was a slave in his state of origin, even when he crossed over into a state where slavery was illegal.) The NSI cases evoke the same sense of the courts bending to the winds of powerful interests. By accepting NSI’s version of the facts without exposing them to scrutiny, the courts helped NSI build fortresses of judicially-reinforced ignorance. From reading the opinions, it is apparent that the judiciary collaborated with NSI to allow the wool to be pulled over its eyes. How could this happen?

The history of NSI may give some clues. How did it get going? How did it gain so much power? What interests does it really represent? So now for the quick history of the Internet that will soon be learned in the cradle from the mouths of Internet Barbie and Virtual-War G.I. Joe.

In the beginning there was DARPA and ARPA, and their mission was to provide a redundant network for communication among defense and educational computer installations. By redundant we mean that even if one link in the system breaks down, the entire system continues to function. What is amazing is that these scientists managed to collaborate to create the system. Under the benevolent aegis of defense spending, unimpeded by the concerns of crass commercialism, the engineers designed communication protocols based on the UNIX computer language that enabled many different kinds of computers running different kinds of software to communicate over the phone lines.

In essence, the early Internet pioneers put universal communication functionality at the top of their priority list. The most important thing was for all of the computers to be able to talk to each other. Historically, the Internet was foreshadowed by the legend of the Tower of Babel. This early public works project was made possible only because human beings possessed a common language. According to Hebraic historians, utilizing this common language, the nations of the earth attempted to build a stairway to heaven. Jehovah became wroth with this demonstration of arrogance, and rather than burning the tower down as he might have on another day, struck on a more devious solution. Jehovah “confused their speech.” He smote them with the curse of varying languages. The builders suddenly found themselves unable to communicate, and as a result, abandoned their plan to ascend to the heavens by means of a ladder.

Even if we can’t talk to each other, the Internet pioneers decided, our machines can! But the common language developed by the engineers had a disadvantage -- it was numerically-based, cryptic and engineer-like. Sure, an engineer can rattle off an IP address (that’s “Internet Protocol” address) like his newborn’s birthday, but the rest of us have trouble remembering our phone numbers. So if I wanted my computer to call your computer, I would have to input all of these digits.

Along comes John Postel, the patron saint of the Internet, who certainly looked like a Deadhead, and worked for the University of Southern California Information Sciences Institute. While doing contract work for the U.S. government, Postel came up with a clever idea. Since anything arbitrary can equal any other arbitrary thing in the world of mathematics, why not equate numerical IP addresses with arbitrary strings of letters? Since any string of letters can equate to any string of numbers, all you need is a database that interrelates the strings of letters with the strings of numbers and automatically routes messages to the appropriate computer. And thus was born the age of the Dot-Com.

All IP addresses, decreed St. Postel, would end with a three-letter suffix, like .Gov, .Net, .Org, and most importantly to our story, .Com. To the left of the Dot, the user could put anything they wanted, up to a limited number of spaces. (This space has grown so much now, that domain names can practically be a paragraph long.)

Domain names, you might expect, would be a natural-born hit, a marriage of necessity and style. It was sort of bohemian, if you think about it. Bohemians started naming their cars to personalize the smog-belching carriages that rule and enable our lives. Now we could personalize our computers, and with more than mere sentimental effect. Naming your car is something you stop doing when you get your first real job (although the trend resurges among soccer moms, whose Suburbans proudly bear names like “Great White Beast,” inevitably chosen by the micro-Viking progeny of a true trophy blonde).

But a name for your computer is not just a sentimental tag attached to a mechanistic object. It is a grubstake in the new economy. It is a homestead on the information frontier. It is a doorway to a community of knowledge, information and entertainment that is so compelling in its current, high-speed incarnation, that broadband users, who get more information faster, spend 28% more time at their computers than dial-up users. Dial-up now has market penetration roughly equivalent to that of television in the late 1950’s. Meanwhile, the demographic profile of the average Internet broadband user is identical to the demographic of the dial-up user five years ago. I couldn’t have rattled off this stuff three years ago, and by the time you read it, the numbers will have changed. And yet it was all there in potential form in the early 1990’s, a glimmer in John Postel’s eye.

When Postel invented them in 1984, domain names were adopted only by a tiny group of engineers spread around the country. They started emailing each other about their typical geeky topics, one of which was the future structure of the Internet. For about ten years it was basically managed by volunteers. In 1994, Postel wrote an email to some friends who were also helping to run the system, laying out the plan for an agency to administer the registration of domain names. Postel and his friends created an entity known as IANA, the Internet Assigned Names and Numbers Authority.

IANA operates out of a building in Marina Del Rey, California, and hosts a website at; however, it does not have any corporate or governmental existence that I’ve been able to discern from my research. In response to a lawsuit seeking to compel IANA to create a “.Web” top level domain name, Postel filed a declaration stating that IANA was merely a “function,” performed under contract for a security agency of the United States Department of Defense. Apparently, at one time, IANA had control over all of the domain names. Later, IANA transferred responsibility for managing the four main top-level domain names (.Com, .Net, .Gov and .Org) to the International Corporation for Assigned Names and Numbers (“ICANN.”)

Meanwhile, the cash for funding the registration program came to be administered through the National Science Foundation, which put the domain name registration function out for bid to data processing companies. The contract was just for a few million bucks, so in May 1993 it went to NSI, a small company in Herndon, Virginia.

The National Science Foundation paid NSI to register domain names for free. In December, 1994, seven months after Gary registered Sex.Com, the NSF recommended that users start paying to operate the system. In May, 1995, NSI was bought lock, stock and barrel for $4.8 Million, by SAIC, Science Applications International Corp., a privately held San Diego company with a Board of Directors peopled by defense establishment magnates, including former Secretaries of Defense Melvin Laird and William Perry, former NSA chief Bobby Inman, and former CIA Directors Robert Gates and John Deutch. On September 14, 1995, NSI announced it would start charging $5 per domain name registration.

The cash cow started producing immediately. Between September 1995 and March 1996, NSI took in $20 Million in registration fees. The arrow just headed straight up from there, like an X-15 pilot in the movie, The Right Stuff. Boy, did NSI have it. Fueled with the power of absolute monopoly over a desirable resource, NSI went from being a cheap date to a supermodel in two short years, turning into a stock market darling at the beginning of the tech-IPO craze. NSI proudly described its glowing success in a July 1997 stock prospectus:

“Net registrations within the TLDs maintained by the Company increased by 233% from approximately 246,000 domain names registered at March 31, 1996 to approximately 818,000 domain names registered at March 31, 1997. The Company believes that commercial enterprises and individual Internet users worldwide are increasingly recognizing the .com TLD as a desirable address for commercial presence on the Internet. *** [T]he Company believes that the potential for continued growth of domain name registrations by commercial entities and services related to those registrations is substantial. Net revenue from Internet domain name registration subscriptions accounted for 76.5% of the Company’s net revenue for the three months ended March 31, 1997.”

The day NSI went public, at the opening bell on September 26, 1997, the market was drooling, and the first trade closed at $25/share, 40% above the $18/share offering price. By the end of the day, NSI had a market cap of $382.5 Million, and SAIC had sold enough stock to harvest a $9 Million profit, while keeping a 28% interest in the company. A little champagne was consumed in San Diego that night. The fruit of the Internet, born in the soil of DARPA, the Defense Advanced Research Project Agency, fell quite close to the tree.

Eventually, administration of the government contract with NSI passed from the National Science Foundation to the United States Department of Commerce and ICANN. A period of conflict between Commerce and NSI took place during 1999, with NSI taking the position that it “owned” the right to register all .Com domain names in perpetuity. NSI also claimed it owned the entire database of five million .Com registrations that it had registered during the period of its government-created monopoly. In late 1999, NSI gave up its death grip on the .Com franchise and database when it agreed with ICANN to allow the creation of additional registrars who could compete in the registration of .Com and other domain names. However, above all of the registrars, NSI continued to hold the privileged position of being both a registry and a registrar.

There is only one domain name registry, and it is NSI. There are now many registrars, but they all must register their domain names with NSI, the world’s only registry. For this service, NSI charges $6. Thus, if you register a domain name with any other registrar, $6 of what you pay goes to NSI. Meanwhile, NSI collects the $6 plus a premium that has steadily declined from around $30 for every name that it registers directly through its NSI.Com registration portal.

The agreement with ICANN in 1999 also provided that NSI would have to choose between being the registry and being a registrar by 2001. However, for those who read the papers closely, it was disclosed in 2001 that NSI had managed to renegotiate the agreement, allowing it to continue operating as both the registry and a registrar until 2005. Since being acquired in March 2000 by Verisign Corporation, NSI and its corporate parent are probably destined for a merger with Microsoft. (Anyone hear the opening strains of Terminator II?) For all of these reasons and more, I took to calling NSI the “stainless steel saint.” Every lawyer knows that some companies are more fun to sue than others. NSI was no fun at all.

NSI’s counsel of record, Dave Dolkas of Gray, Cary, Ware & Friedenrich, had the kind of self-assurance that told you this man had no question where his next meal was coming from. Dolkas was tall, dark, handsome, and well-accustomed to winning. He wore his good quality suits very nicely, maintained unflappable dignity in the face of punk tactics, and seemed to know exactly how little work he needed to do in order to get out of a case for NSI. He relied on precedent, legion in his favor, which he recited in a matter-of-fact, almost bored tone. Without getting excited, he would ask the simple question, “Why are we being sued here?” This tactic has worked so well both with the public and the courts, that Ellen Rony entitled her chapter on NSI in the Domain Name Handbook, “NSI: Caught in the Crossfire.”

NSI was caught in the crossfire in a number of cases. That is the primary problem with the body of law that was created when NSI responded with a coordinated strategy to a series of helter-skelter lawsuits attempting to compel it to do all kinds of stuff. These cases were often litigated by plaintiffs who exercised little forethought and not much staying power, so NSI racked up a series of victories. In NSI’s repertoire of favorable precedents that they plied before the courts like a string of get-out-of-jail-free cards, are many instances of bad facts making bad law. For example, back when they had the registrar monopoly, they were sued for refusing to dot-com the word “fuck.” Guess when they won that case? When it became “moot,” because other registrars had been created that were ready, willing, and able to register Fuck.Com or anything else you could think of. The meaning of that case, to Dolkas, would be that NSI always wins. To me, it says that if you stall the process long enough, you can thwart it. But which meaning would the court infer?

NSI’s opening brief told Judge Ware that the entire process of registering a domain name, or transferring an existing domain name, was so automated that it was almost automatic. In essence they argued that Cohen’s letter would have passed in front of a minimum wage employee recruited from a technical college in Alexandria, Virginia, who would have accepted such a transfer as a matter of course and performed the change of registration as directed therein by the original registrant, Online Classifieds, Inc.

NSI retreated from this position in later filings, when I pointed out that Cohen had faxed the letter directly to David Graves, an individual who was far from minimum wage in the NSI hierarchy. In fact, Graves was the person regularly designated to testify on NSI’s behalf in litigation. Additionally, at Cohen’s deposition that took place after NSI filed its initial moving papers for summary judgment, Cohen testified he had spoken directly with David Graves, who had essentially told him what to put into the forged letter:

CARREON: Did you have any communication over the phone with anyone at NSI?


CARREON: Who were those people? Pertaining to this transfer right here.

COHEN: There would only be one of the -- Dave Gray (meaning David Graves).

CARREON: And what did you talk to Mr. Gray about?

COHEN: Mr. Gray asked me to send him a copy of the documentation I had for the transfer.

CARREON: And this was all you were able to send him, this -- Exhibit 2?

COHEN: That’s correct. Unless there was a cover sheet, which I don’t remember, and there may very well have been.

As a result of this additional revelation, I made a motion to Judge Ware requesting to take the deposition of David Graves. Judge Ware denied the motion two months after granting summary judgment. Other motions I made while NSI’s motion for summary judgment was pending, like the one protesting Phil Sbarbaro’s improper contact with Ellen Rony, were also ignored until after NSI was safely out of the case.

NSI’s exit from the case became final on May 8, 2000, nearly six years to the day after Gary registered Sex.Com, on May 9, 1994. Judge Ware’s order granting NSI’s motion for summary judgment recorded the date in the first line of the factual recitation. Judge Ware concluded that Kremen had no contract with NSI, making no mention of my argument that, by agreeing to become one of the registrants of domain names, Kremen had contributed to the growth of a user base that had concrete value to NSI, which it exploited specifically in its IPO stock offering by boasting about the number of registrants in its database. Judge Ware also concluded that Kremen was not a “third party beneficiary,” that is to say, someone entitled to make a claim under the contract between the National Science Foundation and NSI, pursuant to which NSI became the registrant of domain names in the first place. Since NSI was paid millions of dollars to register domain names by the NSF, it looked to me a lot like a situation where the NSF had sort of crowed out, “drinks are on the house,” allowing anybody and everybody who wanted to register a domain name to have one for free. So it would seem that, in order to maintain quality control, anybody could complain about the quality of his drink. For purposes of quality control, it makes more sense to give registrants like Kremen the power to sue NSI, since as a practical matter bureaucracies that grant contracts to companies like NSI rarely police them effectively. And in this case they certainly did not.

Then Judge Ware got around to the big important argument. Was it possible to nail NSI for conversion? Judge Ware said no, concluding that there is “very simply no evidence establishing that a domain name, including Sex.Com, is ‘merged in or identified with’ a document or other tangible object.” He acknowledged that “California law does recognize ‘conversion of intangibles represented by documents, such as bonds, notes, bills of exchange, stock certificates, and warehouse receipts.’” But he adopted NSI’s argument that “a domain name is a form of intangible property which cannot serve as a basis for a conversion claim.”

Wasn’t the registration agreement at least as much of a “document” as a warehouse receipt? The registration agreement gave the administrative contact sole authority to control registration of the domain name just like a warehouse receipt entitles the holder to claim the warehoused goods. When Gary printed out the online registration agreement and mailed it to NSI via certified mail, he emphasized the importance of this document. And the online list of names and numbers known as the Domain Name Server Tables is an electronic document.

Electronic documents are old hat under the Federal Rules of Evidence, which recognize all systems of symbol recordation, from clay tablets to palmtop advertising, as legally entitled to the name of “document.” Smoke signals are probably out. But the registration agreement and the DNS Tables are, respectively, the deed and the land office records of the world of cyber real-estate. If a claim check for a parking lot or a dry cleaner is good enough, surely an online, printable registration record satisfies the document requirement.

Perhaps to avoid dallying with this uncomfortable notion, Judge Ware’s opinion then launched into a litany of justifications for keeping to a conservative course of action, noting that Kremen’s claim “invites abandoning the traditional strictures of conversion to encompass forms of intangible property never contemplated in its formation.” Well, I’ll agree that when the first common law judge held the stable liable for conversion when the wrong fellow rode off on the wrong horse, he wasn’t thinking about Internet domain names. But the basic obligation that the stable operator breached when he gave the horse to the wrong rider is the same one that NSI breached when it let Cohen steal Sex.Com. Judge Ware was really saying that a law that has long been good enough for the stable hand or the warehouseman is too harsh for NSI, an enormous corporation awash in Internet money thanks to a tax-payer funded monopoly. He said, “The Court finds it inherently unjust to place NSI in this untenable position by virtue of performing a purely ministerial function.”

Judge Ware then gave an economic argument in favor of his decision: “Furthermore, the threat of litigation threatens to stifle the registration system by requiring further regulations by NSI and potential increases in fees.” Where he got that information, I’ll never know. There were no facts presented to support that conclusion. The Judge clearly had not paid any attention to NSI’s fees, which had skyrocketed far beyond the basic charge originally authorized. NSI is currently the most costly provider of domain name registration services, adding on oodles and oodles of extras whenever possible above the basic $6 registration fee, which of course, it also collects. And in any event, the “security costs too much” concept just doesn’t make any sense to me, when the essential service NSI provides is keeping accurate records of domain name ownership. That’s the bare, central task. It’s like saying we don’t have enough money to train nurses how to draw blood with clean needles. That’s what they are doing. They should do it perfectly every time.

Trying to avoid “creating the proverbial slippery slope,” Judge Ware buttressed his decision with the language of judicial restraint: “The Court is compelled to uphold this distinction rather than contort the cause of action to encompass property never contemplated.” But this was not true judicial restraint -- in fact its very opposite. The trend of California law has always been to use the tort of conversion to deter the theft of property, whether tangible or intangible, so long as the property could be said to be “merged with a document.” Only by ignoring the evidence and refusing to acknowledge that the registration agreement is a document of title, was Judge Ware able to avoid the effect of this rule.

When judges declare themselves powerless to act, you can bet they’ll be passing the buck to our elected representatives, in lines like this: “The Court leaves it to the legislature to fashion an appropriate statutory scheme to protect dormant domain names unprotected by trademark law.” But the reference to trademark law and “dormant” names is irrelevant to the case of Sex.Com. Even if Gary had activated a Sex.Com website on the Internet, that wouldn’t have given him trademark rights. Indeed, Judge Ware so ruled six months later, when he denied Cohen’s claim of trademark protection and granted Gary’s motion for summary adjudication. And even if the website had been heavily-used, that wouldn’t have given rise to a conversion claim, either, since the theft of “eyeballs,” as dot-commers refer to web-surfer traffic, would only be the loss of business goodwill, which is clearly not subject to conversion. So what’s all that about?

It’s all about avoiding any analysis of my claim for conspiracy to convert. Remember that one? Where I alleged that Cohen and NSI had collaborated to help Cohen steal the name? Well, I had found some evidence of that, when Cohen testified that he personally talked to David Graves, who told him what needed to be put in the forged letter in order to arrange a transfer without contacting Kremen. I had that testimony, but of course I needed to question Graves. I noticed his deposition and filed a motion with Judge Ware to compel NSI to produce him. I told the Court in my motion that David Graves had received the fax directly from Cohen, and that Cohen had previously talked to Graves to find out what information he should put in the forged letter. I never got to take Dave’s deposition, because Judge Ware’s opinion neatly undercut the necessity of looking at whether Cohen and Graves conspired to convert the name. Indeed, even if they did, under Judge Ware’s ruling, it wasn’t important.

The judge’s arguments in support of the ruling -- avoiding imposing liability for a routine function, not increasing the costs of registration, and leaving the issue to the legislature -- don’t justify the denial of Gary’s claim for conspiracy to convert. Liability for conspiring with Cohen would not result from the performance of a routine function. Theft is not routine. Holding NSI liable for agreeing to accept a forgery would not create any “slippery slope,” at least in the way we usually consider these things. It would fairly impose liability for an out-and-out theft. Judge Ware’s opinion for NSI is most notable for its failure to discuss electronic documents and the unexamined contents of the Cohen-Graves communications. However, that hardly makes it unique in the annals of legal history.
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