… and I am Somebody male. in my thirties. recovering alcoholic. live in minneapolis. work in progress. gay. serenity please.

The arrogance

06.04.2005 · Posted in In the news

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I wonder if this kid is going to get away with this again. After being busted a few years back for selling cable decoders, he was asked to pay back $60,000 of approximately $385,000 he made.

Now he’s made in excess of $18 million and he hasn’t even been charged with a crime yet, though everything’s been seized.

His father and girlfriend say he’s done nothing wrong, but they’re obviously blinded by ignorance.

Oh, and I went to high school with this kid. He was a year younger than I.

Read the full story at StarTribune.com.

Story reprinted here because StarTribune.com generally doesn’t keep stories alive for very long.

A web of trouble

Warren Wolfe, Star Tribune
June 5, 2005

In 1998, a few months after Chris Smith dropped out of Lakeville High School, his concerned father talked to him about the benefits of college — and was startled by his son’s reply.

“Dad, I made $69,000 online by 11 a.m. Why go to college?”

Over the next seven years, Christopher William Smith became known as a notorious Internet spammer nicknamed “Rizler,” who, the FBI says, graduated to selling addictive drugs online and over the phone.

The golden-haired entrepreneur with a knack for computers was taking in $2 million a month by the time he was 25, enough to buy a string of luxury cars, including a Ferrari, a BMW and four Mercedes-Benzes, and to move into a $1.1 million house in Burnsville, court papers say.

For him, the Internet bubble of the late 1990s just kept expanding. At first he used the Internet to find leads for insurance companies, then filled e-mail boxes with billions of spam pitches for penis-enhancement products, cable television decoders and other products, the documents say.

Smith also leaped into the lucrative prescription drug market, selling addictive drugs such as Vicodin through his online pharmacy and a staff of 85 telemarketers, court papers say.

The bubble may finally have burst in May when federal agents raided his Burnsville company, Xpress Pharmacy Direct, shutting it down and seizing $4.2 million in assets. Court documents accuse Smith of fraud and money laundering, but no one has been charged with a crime.

From his start at age 10 selling popcorn and cotton candy at church fairs, Chris Smith has done well in business.

“I remember Chris sitting on my lap when he was one year old, trying to feed a floppy disk into my old Apple computer,” said his father, Scott Smith, 55, of Lakeville.

He described his son as “brilliant but bored” by school. “Chris was raised knowing he could figure things out, knowing he could accomplish a lot with hard work,” his father said.

“Chris is kind of like me, only smarter,” said Smith, who has made and lost several million dollars himself.

In the 1970s and ’80s, Scott Smith was a part owner of Minneapolis night clubs Scotties on Seventh, Graffitti’s and Schiek’s Cafe. He lost it all after he was critically injured in a car accident in 1985. Smith was divorced soon after that. He now owns Diaper Deck, a Lakeville company that is mainly responsible for introducing diaper-changing stations in public bathrooms.

Chris grew up splitting his time between his father’s house on Lake Minnetonka and his mother’s house on Crystal Lake in Burnsville, his father said. Chris Smith attended the Academy of Holy Angels, a Catholic high school in Richfield, but began skipping school, his father said.

Father and son then moved to Lakeville, where Chris switched to public school in January 1998 for his senior year. He didn’t graduate.

He soon moved to Cannon Falls, Minn., where his dad had a Diaper Deck plant. Chris started a small business installing radios and other electronic equipment in cars, and soon discovered a new business, using Internet ads to seek out potential customers for insurance companies, his father said.

“He found he could do pretty well … finding people who were looking for insurance and selling their names to insurance companies,” his father said. “I was amazed. [The insurers] paid him $35 for a potential customer.”

Chris Smith then turned to other Internet ventures — and trouble was not far behind.

Web-based enemies

By March 2001, private investigators were staking out Chris’ business in Cannon Falls. They worked for Time Warner, the cable television giant, which alleged that Chris Smith’s new venture, Blast Marketing, sold cable TV decoders on the Internet to customers in New York City. The devices allow people to receive cable TV channels without paying for them.

Federal marshals seized Blast’s business records and decoders in June 2001 under a court order obtained by Time Warner. The company alleged that Smith’s decoder sales brought in $385,000 in the first half of 2001. When lawyers questioned Smith about selling decoders, he declined to answer, citing his Fifth Amendment right against self-incrimination, court papers say.

A federal judge in Minneapolis told Smith to stop selling cable decoders and ordered him to pay $60,000 in damages to Time Warner. Smith went on to other Internet ventures.

Anti-spam groups began to allege in 2002 that he was hijacking websites of other companies — in effect taking control of their Internet addresses — to send out unauthorized e-mails for a variety of products.

Across the Web, Chris Smith made enemies. An anonymous operator of one anti-spam website posted copies of what supposedly are Smith’s passport and other documents. The Web page also describes Smith’s online activities and lists his home and business addresses. A headline in large, red letters on the Web page says “BEWARE!!!”

An FBI affidavit filed in U.S. District Court in Minneapolis last month said that Smith “appears to be notorious throughout the Internet world for illegal or questionable conduct since at least 2001… [selling] cable descramblers, fake college degrees, eBay auctions, human growth hormones, male enhancement drugs and hair growth products.”

Through his father, Chris Smith declined to be interviewed for this article. His father spoke about his son’s life, but said little about allegations in government documents that he helped his son disguise profits from the Internet drug business.

“I love my son. I’m proud of him. I know he didn’t do anything illegal,” he said. “That spamming stuff they talk about, sometimes Chris may have been a middle man helping other business people, but he never broke the law. I’m sure of it.”

Smith’s attorney, William Michael, said the FBI affidavit and other court documents distort the work of a legitimate businessman.

Operations offshore

America Online disagrees. In March, the Internet service provider sued Smith, alleging that he violated anti-spamming laws through a company called Advistech SA that he established in Costa Rica.

Like the Web, Smith’s operation was not limited by national borders.

Some of Advistech’s computer operations were based in New York City in 2003, at times operating under a fictitious name, according to the AOL lawsuit filed against Smith and others. Smith authorized wire transfers from a Costa Rica bank to finance some elements of the operation, the suit says.

Day after day, Advistech’s computers spat out e-mails that directed potential customers to the operation’s websites, court documents say. The e-mails offered generic Viagra, diplomas from Trinity Southern University based on person’s “life experience,” X-rated images of “the youngest girls on the net” and the Maximum X10 “all-in-one male sexual enhancement breakthrough,” according to the AOL lawsuit.

During seven months in early 2003, Smith and his associates transmitted more than 1 billion spam e-mails to or through AOL’s computer system, using Internet addresses that had been hijacked from a Delaware company, the lawsuit alleges.

Smith used several aliases, according to the lawsuit, including Dieter W. Doneit-Schmitz, Eric Smith and Bruce Jonson. The suit also alleged that he submitted false information to obtain a Minnesota driver’s license under an alias. On the Internet, he created websites with the Rizler name.

Calling to complain

By 2003, Smith was advertising prescription drugs on the Internet, former employees said. He added a call center in Burnsville in August 2004.

“I worked night and day, 60 or 70 hours a week, and Chris expected people to work hard,” said Sara Seikkula of St. Paul, who became customer service manager in January.

Seikkula said Smith’s operation had 12 websites, but they all linked to Xpress Pharmacy Direct. Employees were told the businesses operated legally. The operation also used telemarketers who called potential prescription drug customers, she added.

“I don’t know where the lists came from,” said Seikkula, but business “went through the roof” after Smith obtained the customer names.

Some people got multiple calls, making them so angry that they called back to complain, Seikkula said.

Telemarketers could earn $1,000 or more per week, partly through commissions, she said. Chris Smith also pushed them to make calls, she added.

“Chris was basically a nice guy, but he expected you to work, keep making calls. He’d come up with ideas, and he’d expect you to go with it. You didn’t say no,” she said.

Complaints by some customers and former employees late last year led to the investigation by the FBI, Drug Enforcement Administration and the Food and Drug Administration, court documents say.

Xpress Pharmacy Direct allegedly offered a wide range of prescription medications, including addictive drugs, court papers say. Smith had neither a state pharmacist license nor a separate federal license required for narcotic medications.

Customers often paid inflated prices, court papers say. A 90-pill supply of the anti-anxiety drug Xanax cost government investigators $349.99, more than twice the price charged by a well-known Internet pharmacy.

The FBI estimates that Smith took in $18 million this year.

Xpress Pharmacy Direct didn’t require customers to have prescriptions. Instead, a New Jersey doctor was paid $7 per prescription to sign at least 22,000 prescriptions, including many for hydrocodone, the narcotic ingredient in Vicodin, an FBI affidavit says. Orders based on these prescriptions were filled by two pharmacies in California and Oregon and sent to Xpress Pharmacy customers, the affidavit said.

Smith’s attorney bristles at government descriptions of Smith’s firm. Xpress Pharmacy merely “facilitated doctor-patient relationships and doctor-pharmacy situations in order to help patients. It was not a pharmacy,” broke no laws and did not need a license, Michael said.

Smith’s father said Chris ran a fast-growing, legitimate business. “Are those investigators after Chris just because he’s successful, because he’s made good money?” he asked. “Chris is too smart to make the kind of mistakes they say he made. He’s just too brilliant.”

Anita and the FBI

That’s essentially what Chris’ wife, Anita, told FBI agents when they arrived at the family’s home on May 10, the same day his office was shut down, Scott Smith said.

Guns drawn, FBI agents pushed into Smith’s posh Burnsville house, searching for evidence that his Internet prescription drug business was violating federal laws.

Scott Smith said that hours after the raid, Anita Smith offered this account of what happened. Chris Smith wasn’t there, but Anita sat holding her 3-year-old son as agents searched the house.

An FBI agent asked Anita why she would stay with a man with Smith’s history.

“Because I love him, and because he’s the smartest man I ever met,” Anita Smith said. “He could learn your job in a week.”

The agent broke out in laughter.

Warren Wolfe is at wolfe@startribune.com.

15 Responses to “The arrogance”

  1. Jealous??? you too could have made millions and ended up in jail…

  2. No, not jealous, but I wouldn’t turn away the millions. I’m more intriuged and curious.

  3. Interesting article thanks for posting. It’s amazing at how far some people will take things just to make money. Thank god for those of us with some morals.

  4. Why do people keep talking about how smart he is, as if that were some kind of defense against breaking the law? “Yes, he repeatedly and knowlingly provided services that, while they may not have been strictly illegal, were certainly against the spirit of the law. But notice how brilliant he is!” It’s a little like admiring Hitler for making the trains run on time.

  5. He only made money because there was a demand for what he was doing. Not saying he’s innocent or anything, just saying. But, because he’s a spammer, I say cut off his fingers. 🙂

  6. Boys, get your torches.

  7. Wow. If I were him I would take the money and run and retire.

  8. WOW!! Will you keep us posted on what happens? The whole story has moral questions all over it. I wonder what he thinks.

  9. The guy made a lot of money, if i’d hav seen the opportunity i would hav done the same,… simply supply and demand, if people didn’t want the stuff he was sellin then he wouldn’t have made his money,… loads of peeps criticise the people who spam n all that but the net is just like any other community there’s good guys and there’s bad guys, at the end of the day it’s down to the individual to look after themself,… i say good for him, saw an opportunity and took it…. if he’s as smart as people say he is then the courts won’t be able to convict him. he’s due in court on wednesday so we’ll see how he gets on lol.

  10. Stevo – I completely understand your viewpoint, but what he did was ILLEGAL. You simply cannot sell prescription drugs without a doctor’s recommendation. I would suspect that the doctor providing these subscriptions en masse will also lose his license over this.

    There’s been an update to this story. Chris reportedly fled to the Dominican Republic after the initial shutdown of his opperation. There he setup a duplicate opperation and is back in business again. All this after a judge ordered him to cease all such activities. I’m curious to find out how the case evolves.

  11. Aye of course you’re right, I don’t condone him doing anything illegal, and if someone flee’s the country after being ordered to shut down then there’s got to be something not right going on :D. It’s the spamming that I meant to refer to (although obviously this is illegal too, in places) in an open community it’s going to happen and there’s always going to be some people wanting the products or else they wouldn’t make the effort to do it. – definitely gonna keep an eye on how the case pans out. catchya later 🙂

  12. I know this guy broke at least ONE law. I am on the Federal Do-Not-Call list and his companies repeatedly called me, even though I asked them not to and made them aware that I was on that list. These people are scum. I’m glad to see he was caught!

  13. 2 Bad I’m NOT ur mom cuz I’d SLAP UR FACE if ya came anywhere near me with a lime green Lambourghdini! YUK! U might have 2 settle 4 a new Cad or Buick euery 18 months or so. Richter Pd some heavy penalties and is operational again but if U don’t cut the crap U NEVER will get a chance again! We have not met but I know U have a heart: U just don’t know it. People as smart as U have problems all their lives-U gotta learn to deal with that or U make mountains out of mole hills, which U just did. Fk all themoney! All over the web there are schemes like yours. I also saw several pages of algorythms after some text that read: here’s how he did it. Everyone is talking about it. Many are dummies and think U were growin’ stuff down by the pond @ shipping it out the door. That’s How they interpret what they heard. How do U interpret the law, Chris? When UR workin’ the keys like U do, U don’t focus on laws-U just go crazy rakin’ in mega $. Sort of like a gambling addiction.

  14. Rizler can’t swim. Chris Smith can do so very well and will.

  15. Hope Chris will be ok cuz everything I’ve read he’s done is still happening online in some fashion. In- crease the # of spam-ers @ they’ll go broke @ quit! Save Taxpayer money and make anti spammers quit stalking people: Predatoqy Laws should be enacted to keep them from destroying people.