The Players Ball

by David Kushner

  But while Cohen broke ground on his internet company, he was still having to contend with swatting Kremen away. The stakes couldn’t have been higher. Sex.com was the basis of everything, and he couldn’t afford to lose it. And more, NSI had notified him that they were conducting their own internal investigation into the domain name’s registration; if Kremen’s allegations in his lawsuit were true, NSI went on, not only would they return Sex.com to Kremen, but seek indemnity from Cohen as against any liability from Kremen’s suit.

  But the more Cohen read up on the case, the more confident he became. Cohen had noticed that Kremen had filed his complaint by naming his old company, Online Classifieds, as a co-plaintiff. But when Cohen searched an online database, he came to a startling realization: Online Classifieds hadn’t even been incorporated at the time Kremen registered the Sex.com domain. This meant, he concluded, that he could have the case dismissed on the grounds that Online Classifieds didn’t even exist. Whoever owns this domain isn’t Gary Kremen, Cohen’s attorney, Bob Dorband, could argue. In fact, it wasn’t until just before filing the lawsuit against Cohen that Kremen had his attorney incorporate Online Classifieds. Cohen even got the documents to prove it. And so, with his attorney’s help, they filed a motion to have the case dropped.

  Cohen flexed his confidence when a reporter, Craig Bicknell from Wired, called him to do a piece on the battle over Sex.com. “Let me make it real simple for you,” Cohen told Bicknell, “our audience is not America. It’s the whole world. There’s only one word in the whole world that everyone understands—sex. You type the word ‘sex,’ you come to Sex.com.”

  When the Wired article came out, on April 15, 1999, Cohen got what he called “an emergency call” from Levinson to check out the story. Cohen’s eyes skimmed over the words. He was relieved to see that the NSI spokesperson wasn’t taking sides, given the company policy of letting disputants sort out their own resolutions. “It’s up to the two parties to work it out,” the spokesperson said. But the deeper he got into the story, the more alarmed he felt. Sex.com, Wired wrote, was “a blindingly garish site that would put pre-Disney Times Square to shame . . . if even half the allegations that Kremen makes are true, the tale behind Sex.com is the most sordid in the short history of the Internet economy.”

  Cohen’s enemies were quoted anonymously speaking out against him. One webmaster dismissed Sand Man and Ocean Fund as part of his con. “The companies don’t exist, except in name,” the webmaster told Wired. “He created these shell corporations with P.O. boxes in other countries, so it’s a real pain in the ass to serve him with subpoenas.” Kremen agreed, suggesting that Cohen’s move was a way to keep him from getting Sex.com back. “It’s to make it hard to go seize it,” he said. “It was stolen, literally stolen,” Kremen went on. “The case is simple, it’s about an international con man, who was twice in jail, forging a letter . . . and taking away a domain name—and Network Solutions doing nothing about it.”

  By the time Cohen finished the piece, all he felt was one thing, as he would soon tell the court: rage.

  * * *

  “Will you state your full name, please?”

  “Gary Alan Kremen.”

  “Mr. Kremen, how old are you?”

  “I’m 35 years old.”

  “Have you ever been known by any other name?”

  “Idiot. Fool. Hey You, et cetera.”

  It was April 19, 1999, inside the conference room of a fancy law office in San Jose, California, where Kremen was being deposed in his case against Cohen and Network Solutions. Nervous and uncombed, his paunch wedged against the shiny round conference table, he struggled to remain calm as he fielded questions from Cohen’s attorney, Bob Dorband, with NSI’s two stoic lawyers and a videographer with a giant camera zooming in close. His effort to lighten the mood with his wisecrack about his aliases fell flat. “Have you ever given testimony in a case before?” Dorband asked.

  “No,” Kremen replied. But in the interminable eight months since he’d filed the lawsuit, the case had been taking its toll. “It’s given me an upset stomach and headaches,” he explained, “and my back hurts, and my spleen hurts too.” The stress was getting to him, he admitted. He was taking Trazodone to help him sleep, Paxil for anxiety. This seemed to explain why Kremen looked bug-eyed and bleary, his hair slick from sweat. Dorband, sensing an opportunity to discredit Kremen, asked if he was “taking any drugs that might impair your memory?” Kremen was honest to a fault. “Maybe,” he said.

  Tracking Cohen was taking up more and more of his time and energy: finding out how much money he was making, how many ads he was selling, how he was profiting from what was rightfully his. He’d surf over to Sex.com, and feel his gut twist every time he saw another banner ad on the filthy homepage. It wasn’t just the loss of business that was eating away at him, it was his burning need to prove himself again.

  Since leaving Match, he’d been on overdrive: investing in start-ups, and helping other companies buy and sell domains. There had been successes and riches. With the boom of the net, NSI was now registering nearly 200,000 new domains a month, and more and more companies were paying a premium for names. Kremen helped AltaVista, a search engine, sell its domain to Compaq for $3.3 million, and brokered other deals for computers.com and coffee.com.

  He’d garnered the attention of The New York Times Magazine, which featured him in a story about the domain name battles called “Greed Dot Com”—and questioned the honorability of the trade. “If you’re not using a domain name yourself, what about just giving it back?” the story asked. “Giving it back?” Kremen replied incredulously. “It’s property! That’s like saying, I’m not going to use this piece of land, I’m going to give it back.”

  All the while, the bile of the Match.com fiasco had only grown worse. Cendant, the company that had purchased the site the year before, was now about to sell it to Ticketmaster for $50 million. But Kremen, who no longer had a stake in the business, didn’t make any cash. His idea. His site. His invention. Gone. And why? Because he’d tried to do the right thing, keep them from ditching it too soon, opening it up to the gay and lesbian market, and more. Even worse, he felt like everyone in the Valley seemed to know. “When you start a company, everyone knows it,” he told the Mercury News for a story about the struggles of dot-com moguls. “It made me a little bit gun-shy. It’s a type of performance anxiety.”

  It wasn’t just his professional struggles that were in the public eye, it was his personal ones too. The news stories about online dating were still billing him as the lonely heart who gave love to a generation but still hadn’t found it himself. “It’s really a bummer,” Kremen told the San Francisco Bay Guardian, which included a photo of him looking forlorn, holding a dozen roses. “I’ve helped a lot of people but it just hasn’t helped me.” For all these reasons, he was even more determined to wrest Sex.com back to his control again. The site was “a key cornerstone property in one of the biggest areas of the Net,” he said, easily worth $100 million, or more. And he didn’t need to be a degenerate to cash in.

  As he told the attorneys, he had already written up a business plan. He was not about to become a pornographer. Instead he was going to take what he called a “softer” approach to Sex.com. The site, he intended, would be educational, Kremen explained, similar to other successful health and wellness sites appearing online, such as Dr. Koop (the former surgeon general’s site, which had received more than a billion dollars in capitalization). Kremen would take a “Joycelyn Elders approach instead of the Larry Flynt approach,” as he put it. “What I could have done with it is made it a portal, as I talked about, for kind of health-related information, sex—positive information that would be accepted as very good content by several companies that are now publicly traded.”

  Kremen bristled when he was asked if, instead, he’d simply tried to register any other sites after he “lost” Sex.com. “I didn’t lose it,” he said. “It was stolen.” All that mattered was that Cohen had robbed him,
and he was pissed off. And the more they pressed him, the more he pushed back—likening Cohen’s actions to those of “an international con man” and “criminal mastermind.” He suggested he had not only stolen the site, but doctored old records of the French Connection to make it appear like Sex.com existed decades before the dot-com nomenclature even existed. “NSI should have known that,” he snapped, “they controlled them all. They were grossly negligent.”

  “You consider Mr. Cohen to be a criminal mastermind?” Dorband asked.

  “Criminal, yes,” Kremen said, “mastermind, we’ll see.”

  And if he was facing a criminal mastermind, Kremen resolved after the deposition, then he was going to need more help fighting back against him. A friend suggested she knew just the right attorney for him. So one day in the summer of 1999, Kremen drove his beat-up old Honda down to Ojai to meet Charles Carreon, a long-haired, leather-jacketed, motorcycle-riding, forty-three-year-old attorney who seemed just wild enough to take on the wildest case online.

  Like Kremen, Carreon had spent his life looking for and living on new frontiers. Raised in a strict Mexican Catholic family in Arizona, Carreon escaped by becoming a full-blown child of the 1960s—dropping acid, joining the apocalyptic cult Children of God for a time, and backpacking Europe, before fleeing back to America to pursue Buddhism and law school. Since getting his law degree at UCLA, Carreon had been defending small-time drug dealers in rural Oregon, but had moved to Ojai with his family for a fresh start—one that the I Ching had not yet revealed for him.

  It didn’t take long after talking to Kremen over a lunch of Hawaiian pizza to feel like the universe had put a new path before him. As Kremen told him the story of his battle against Cohen, Carreon took an instant like to this uncombed oddball from Silicon Valley. He appreciated what he later described as Kremen’s “mischievous, nerdy but huge energy,” the way his mind fired in a million directions a minute. But he could also sense that Kremen was feeling utterly beaten by Cohen, and desperate for a way to win. “You didn’t perceive the value of Sex.com initially,” Carreon told him, philosophically. “It’s a very bad habit to allow people to take things of great value away from you and not fight until you lose or win. It is a much better solution to lose that battle having fought it.”

  Kremen felt a kinship with Carreon’s fighting spirit, the way he twirled his chrome-handled lock knife while he spoke, and freely quoted from the tattered copy of Sun Tzu’s The Art of War he carried everywhere in his briefcase. “I have heard of some campaigns that were clumsy and swift,” as Carreon quoted, “but I have not heard of any campaigns that were lengthy and skillful.” Kremen thought he was some kind of hippie genius, and, more important, someone who gave as much of a shit about this case as he did. After all the madness, Kremen had become wary of trusting anyone—personally or professionally—but Carreon broke through. Finally, Kremen thought, somebody cares.

  And when Kremen described all the money to be had, Carreon, who’d been struggling to get by, widened his eyes. “This is the case I’ve been waiting for,” Carreon told him. In return for $100 per hour and 15 percent of Sex.com when Kremen got it back, Carreon agreed to work for him full-time. With a stake in the most valuable site online, he figured he’d soon make millions.

  The two quickly became inseparable, a gonzo duo like Hunter S. Thompson and Oscar “Zeta” Acosta in Fear and Loathing in Las Vegas. Carreon followed Kremen back on his motorcycle to Haight-Ashbury, where Kremen was now living in a second-floor walk-up with the smell of pot wafting up through the window. Long into the night, they stayed up poring over the case. Kremen fumed over how he was being portrayed by Cohen and NSI as if he stole Sex.com, when all along it was his.

  Carreon twirled his pocketknife, and tried to put him at ease. Cohen’s attorney, he told him, was just practicing what he called “smallpox blankets and firewater,” like when lawyers conspired to steal Indian land with biological warfare and fake documents. “That’s how the West was really won,” Carreon said, “it was sneaky and dirty. Like the old rail barons, Cohen had produced a phony deed to steal Sex.com.” This is why Kremen had needed to hire someone with “Oregon frontier savvy. Muleskinner wisdom,” as Carreon put it. “Someone like me.”

  Up until then, Carreon determined, Kremen had been keeping too low a profile with his battle for Sex.com. When Kremen explained that he didn’t want to be perceived as a pornographer, Carreon pushed back. By acting that way, he said, he and Cohen just looked like “two junkies fighting over a dime bag,” as he put it. “Your average judge or juror might throw up his hands and just say, ‘Who cares? It’ll kill you both!’ ” Carreon advised a more philosophical tactic. “We have to escape the stigma that attached to sex itself,” he said.

  He fished around the apartment through the strewn Wall Street Journals and Barron’ses to find Kremen’s handwritten, two-page Sex.com business plan. “We have to embrace what everyone has overlooked,” he went on. “Gary Kremen, the Stanford MBA and Internet visionary, the originator of Match.com, the world’s largest matchmaking site, would have developed Sex.com as,” he quoted from the business plan, “a ‘public health, woman-friendly site’ à la ‘Dr. Ruth’ or ‘Dr.Koop.Com.’ ” The words sounded like music to Kremen. It was a fantastic idea. Match gave credence to the entire idea of a “wholesome” Sex.com, he thought.

  But that wasn’t all, Carreon went on. If they were going to embrace the idea of a kinder, gentler Sex.com in order to help win it back, they had to dig in their heels on a bigger idea, one that Kremen had been evangelizing but no one was yet realizing: this was a fight for property rights. The price of online property, after all, had only been skyrocketing: WallStreet.com had recently sold for $1 million, Business.com for $7.5 million.

  As Carreon pointed out, California law defined property as “everything capable of being owned.” Sex.com not only fit the bill, it was what Carreon called “a property magnet.” Every credit card subscription that Cohen was processing, Carreon explained, represented property that Kremen rightfully owned. “You do the math,” Carreon told Kremen. “That’s a lot of money for a country boy.”

  And, Carreon went on, pursuing the property claim would bolster their case against NSI too. “If Sex.com was property,” he later wrote about the case, “and Gary was the owner by virtue of being the first to register the domain name, then NSI should have some obligation to protect his property from being transferred to another person without his permission.” Therefore, the stakes—not just for Kremen, but any future prospector online—were immeasurable. “Being the most valuable domain,” he went on, “Sex.com presented the best-case scenario for a judicial finding that domain names are in fact property. The eyes of the world would be upon this case.”

  * * *

  Even though he was the spokesperson for the world’s largest hotel owner, Starwood Hotel and Resorts Worldwide Incorporated, Jim Gallagher wasn’t accustomed to getting woken up in the middle of the night with an urgent call from the press. But that’s what happened at 1 a.m. on June 15, 1999, when a reporter from the Las Vegas Sun rang, wanting to know if the press release was true. Gallagher gripped his phone. Two months earlier, Starwood had agreed to sell its eight Caesars Palace properties to Park Place Entertainment for $3 billion, but there was nothing new to report. What press release? Gallagher wanted to know.

  “Internet Porn Giant to Buy Caesars Palace,” read the title of the item that had just hit the PR Newswire. “Ocean Fund International, a British Virgin Island Mutual Fund and the owner of the world’s largest pornographic Internet site, Sex.com, today submitted a $3.6-billion, all-cash offer to purchase the eight Caesars Locations recently purchased by Park Place Entertainment.” The company pledged an additional $2.5 billion for capital improvements, including plans to build a sports arena at Caesars Palace in Las Vegas.

  The move was just the latest in the company’s expanding empire, the press release touted. “There are some people in this industry who claim to make a lot of money,�
�� Ocean Fund’s chair, Sir William Douglas, stated. “In fact, Sex.com does 86% of the sex-related business on the web. We make more than Penthouse, Hustler, Playboy, and all other major sex web sites combined. I challenge anyone who claims to do more business in this industry to produce auditable numbers.” The company’s wholly owned subsidiary in Mexico, Sand Man Internacional, was already investing $100 million to bring free fiber optics to every resident and business in Tijuana. “We are extremely proud of our demonstrated record of success,” Sir Douglas concluded. “We will do no less with the addition of Caesars to the Ocean Fund leisure and luxury-industry portfolio.”

  But as Gallagher groggily explained to the reporter, he had no idea what this was about. Despite what the release claimed, he went on, Starwood hadn’t received an offer—or even heard of Ocean Fund at all. They weren’t the only ones mystified by the press release, which was riddled with typos and errors (Caesars’ riverboat, “The Glory of Rome” was misspelled “The Glory of Roam”). Neither Ocean Fund nor Sand Man was listed with the Securities and Exchange Commission. “We’d characterize it as bizarre,” said an analyst at Bear Stearns. “Our advice to investors is to dismiss it as noise.”

  When reached at his Salt Lake City office, Bob Meredith, the lawyer for Ocean Fund, remained just as circumspect about the company’s offer. “I don’t know how much thought they have put into it,” said Meredith, who could not provide more detail on the company’s board than what was published. “Douglas?” he told a journalist at the time. “He’s some cat in the Virgin Islands is all I know.”