Blast from the past:

An arbitrator has ordered Media Breakaway and Chief Executive Scott Richter to pay the social-networking giant $4.8 million in damages and $1.2 million in legal fees, according to legal filings.

I won’t be digging into this like I would have in the Spamroll days, but I will admit I’m a bit dismayed if this was truly a case of Richter’s affiliates getting away from him. The reasoning: plenty of internet entrepreneurs push the envelope - it’s just that some glad hand while they are doing it, which results in tacit approval of actions, while others take the tack that it’s easier trying to ask for forgiveness later. Whether the latter was the case here I do not know - all I know for certain is that history has a way of following you around.  On that note, there’s more on Richter’s past dealings here.

(h/t to Techdirt)

Spamroll hasn’t followed the trials and tribulations of the Scott Richter/OptInRealBig bankruptcy cases in a while, well because it all seemed like such old hat. Richter had been taken off of ROSKO, and I figured it was only a matter of time before he and his band of lawyers figured a way out of the mess.

It now seems they have.

According to news released this morning by Microsoft, a settlement has been reached with Richter and OptInRealBig to the tune of $7 million. The whole thing is contingent on Richter’s lawyers filing a request for dismissal of the bankruptcy case, which they are expected to do forthwith.

Microsoft will be using the money to fight spam (according to them), as well a splatter around some funds to other causes just and right. Richter will be monitored closely for years to come, but he says he has come clean, so that shouldn’t be a problem.

This comes hot on the heels of Richter and Company reaching a settlement with Elliot Spitzer a few weeks back, but only for a measly $50,000 (hardly newsworthy compared to MS’s $20 million plus claim).

I’ll try to post the Request for Dismissal when it is available.

According to Brian McWilliams, Spam King Scott Richter has been taken off ROKSO, otherwise known as the Registry of Known Spam Operations.

Now speculation is being made as to whether Richter has gone legit. I say it is simply too soon to tell.

In order to get off the ROSKO list, a spammer has to comply with a fully confirmed opt-in mailing list, meaning people must sign up to receive mail and confirm that signup in an additional email. Richter claims he has done this, and he likely has (something being removed from ROSKO proves as well). But he and his company are being scrutinized by the US Bankruptcy Court, for goodness sakes. If he continued spamming, the US Trustee, Microsoft, and all the rest would be screaming bloody murder, and the judge might very well throw the case out (as Richter filed primarily to avoid the pile of lawsuits following him around).

Two points will need to be considered going forward. First, will Richter’s operations suffer from opt-in, such that the business results decline enough to question its going concern capabilities? And second, will Richter start spamming again once a bankruptcy plan is confirmed (if it ever is)?

Time will tell.

The other day, Scott Richter (or someone claiming to be him - maybe one of his posse), sent me an email with with a court ordered creditor notice. Now Aunty Spam has posted a similar message.

I am so disappointed - I thought I was special.

I am not sure if it was really Mr. Richter that just sent the nice message over to me or not, but if it was…thanks! I have been a bit behind pulling court docs on the OptInRealBig.com Chapter 11 case, and am happy to receive this latest from Scott.

The following document is the notice fixing the deadline for those wanting to file a proof of claim against the bankruptcy estate. For those who think they may have a claim against OptInRealBig and still don’t know what to do, use this form letter to contact the US Trustee’s Office.

Now, on to Scott Richter’s message…

****************************************************

“Since your my new secret admirer enjoy”

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLORADO

In re:
Case No. 05-16304 HRT
Chapter 11
OPTINREALBIG COM, LLC
EIN: 88-0508281,
Debtor.
_________________________

In re:
Case No. 05-16340 HRT
Chapter 11
SCOTT ALLEN RICHTER
SS No. XXX-XX-4865,
Debtor.
Jointly Administered Case No. 05-16304 HRT

_______________________________________________________________________

NOTICE OF ORDER FIXING DEADLINE FOR FILING PROOFS OF CLAIM AND INTEREST
PURSUANT TO F.R.B.P. 3003(c)(3) AND 2002(a)(7)
_______________________________________________________________________

TO INDIVIDUALS AND ENTITIES WHO MAY BE CREDITORS OF THE DEBTORS:

PLEASE TAKE NOTICE that the Bankruptcy Court has entered its Order
fixing July 29, 2005, as the last date for filing Proofs of Claim or
Interest in the above-captioned jointly administered Chapter 11 cases.
A separate form Proof of Claim is attached for each bankruptcy case.

ANY ENTITY THAT IS REQUIRED TO FILE A PROOF OF CLAIM OR INTEREST
AND THAT FAILS TO DO SO BY 5:00 P.M., MOUNTAIN STANDARD TIME,
JULY 29, 2005, SHALL NOT BE TREATED AS A CREDITOR OR INTEREST HOLDER
FOR THE PURPOSE OF VOTING OR DISTRIBUTION, AND ANY CLAIM OR INTEREST
OF SUCH ENTITY SHALL BE FOREVER BARRED.

This requirement for filing claims or interest applies to all
pre-petition claims or interests, claims or interests which arose prior
to the date of the Chapter 11 petitions, March 25, 2005, which are not
scheduled, or are scheduled as disputed, contingent or unliquidated in
the schedules of liabilities filed with the Court by the Debtors, or
are scheduled and such creditor disagrees with the amount of the
scheduled claim.

To be deemed properly filed, a Proof of Claim must be filed with the
Clerk of the United States Bankruptcy Court for the District of
Colorado, United States Custom House, 721 19th Street, Denver, Colorado
80202-2508. Proofs of Claim or Interest are not deemed filed until
actually received by the Clerk. CLAIMANTS OR INTEREST HOLDERS WHO HAVE
ALREADY FILED THEIR PROOFS OF CLAIM OR INTEREST SHOULD NOT FILE A
DUPLICATE CLAIM. Claimants who have filed proofs of claim or interest
MAY file an amended proof of claim or interest.

ANY PROOF OF CLAIM OR INTEREST NOT PROPERLY FILED WITH THE CLERK
WITHIN THE TIME SET FORTH ABOVE WILL BE FOREVER BARRED FROM SHARING
IN THE ESTATE OR BEING TREATED AS HAVING A CLAIM OR INTEREST FOR
PURPOSES OF VOTING OR DISTRIBUTION.

A copy of the Court’s Order may be inspected at the Office of the
Clerk at the addressed listed above.

DATED this 6th day of June 2005.

LINDQUIST & VENNUM P.L.L.P.
By: /s/ John C. Smiley
Harold G. Morris, Jr., #8409
John C. Smiley, #16210
600 Seventeenth Street, Suite 1800 South
Denver, Colorado 80202-5441
Telephone: (303) 573-5900
Facsimile: (303) 573-1956
E-mail: hmorrisster@gmail.com
Counsel for OptinRealBig com, LLC

SENDER & WASSERMAN, P.C.
By: /s/ Bonnie Bell Bond
Harvey Sender, #7546
Bonnie Bell Bond, #14923
1999 Broadway, Suite 2305
Denver, Colorado 80202
Telephone: (303) 296-1999
Facsimile: (303) 296-7600
E-mail: richternotice@sendwass.com
Attorneys for Scott Allen Richter

_______________________________________________________________________

Please see http://www.optinbig.com/bk for links to the PDF version of
the above Notice, as well as the original Order and attached required
Proof of Claim Forms.

Thank you.

**********

The above message was received by Spamroll on June 7, 2005 at 5:19 pm, via email.

Ethan Preston has posted some additional analysis and opinion on the latest legal manuevers in the OptInRealBig and Scott Richter bankruptcy cases.

Ethan points out that Microsoft’s argument that the cases were specifically initiated to avoid the litigation in Washington State holds some water, while the question of whether to remove the confidentiality of the spammer affiliates remains unanswered.

You can pick up more on the case from Ethan at eplaw.us, or from Spamroll under these headings:

Scott Richter’s Personal Bankruptcy Petition;

Recent Court Order in Scott Richter Bankruptcy Case;

Anatomy of a Spammer – Part 1 - OptInRealBig;

Anatomy of a Spammer – Part 2 - Scott Richter;

More Opinion on the Richter/OptInRealBig Bankruptcies;

Spamroll visits Bankruptcy Court - Richter Files (cont’d); and

Dear Potential Creditor of OptInRealBig.

During my visit to bankruptcy court last week regarding the OptInRealBig and Scott Richter cases, I noted that there were quite a few large creditors present, but not a lot of little ones. I am not sure if people realize this, but if you were the recipient of spam from OptInRealBig.com or its affiliates, you too may have a claim against the company.

While you have to be certain in your facts, there is a way for you to obtain information on filing a claim or even joining the creditors’ committee (should one ever be formed - I do not think this has happened yet).

How pray tell? Just ask Spamroll..

I’ve posted a form letter below that you can use for the purpose. You can copy and paste the contents into your favorite word processor.

***BEGIN FORM LETTER***

Leo Weiss
U.S. Department of Justice
Office of the United States Trustee
999 18th Street, Suite 1551
Denver, CO 80202

Re: OPTINREALBIG.COM, LLC - Case No. 05-16304 HRT
Related Case: SCOTT ALLEN RICHTER - Case No. 05-16340 HRT

Dear Mr. Weiss,

As a recipient of unlawful email advertising from OPTINREALBIG.COM, LLC, I believe I am an unsecured creditor in the bankruptcy proceedings. I am interested in joining (or forming) a creditor’s committee and would be willing to actively serve on such a committee.

Even if a creditor’s committee is not created, I would like to file a proof of claim. Please send a form for making such a claim to:

[address]

Also, please add me to your alert list, regarding any relevant dates that might affect my rights.

Thank you for your assistance.

Best Regards,

/s/

***END FORM LETTER***

Edit at will. Postage not included!

I had the chance to stop by the US Bankruptcy Court yesterday, to observe the latest in the OptInRealBig and Scott Richter bankruptcy cases.

It was less than a packed courtroom, with roughly 15 people there including Judge Tallman and myself. Mr. Richter had no huge entourage - it was just he, two lawyers, his father, and one other. On the other side, we had an attorney representing the US, one for Microsoft, one for American Family Insurance, and one for Daniel Balsam (who flew in from California this morning). In addition, there were two other attorneys present as part of a potential creditors committee (not yet formed).

The hearing lasted about an hour, and all the talk was from the legal advisors and the judge.

First up, John Smiley, counsel for the company, advised on the status of the case, and summarized the legal actions against his client that forced the bankuptcy filing. Smiley declared that all litigation was related to “prior actions”, meaning OptInRealBig is supposedly in compliance with CAN-SPAM and various state laws on a go forward basis. That comment got a few smirks from the other side.

Smiley then pointed out that the idea was to file a plan of reorganization sometime this summer, and that he expected the company to continue as a going concern. Again, some faint chuckles from the opposition. He then stated that the company had obtained insurance coverage, and that professional fees related to the case would be difficult to estimate, based on the expectation that the case could be potentially “very litigious.” Everyone in the room breaks out in a smile.

Smiley closed by reiterating that the company was on solid ground, and expected to do roughly $40 million in profitable sales for the year.

Next up was Scott Richter’s counsel, Harvey Sender. He essentially agreed with everything Smiley said, and reiterated that Scott and the company would be able to pay their debts, including the legal judgments, out of the company’s operating cash flow on a go forward basis.

Now, the folks who want Richter and Co. wiped off the map take the stage.

First up was Leo Weiss, counsel for the US Trustee’s Office (part of the DOJ). Weiss was quick to point out that the magnitude of the Microsoft claim would essentially wipe Richter out, so Microsoft was essentially holding all the cards related to any vote on reorganization of the business. Weiss also questioned the sincerity of Smiley’s claim that OptIn and Richter were operating in compliance with the spam laws (and from the looks of the faces in the courtroom, so did everyone else), and noted that additional claims against the debtor were likely still accruing (due to non-compliance).

Next, the creditors’ counsels speak. Carl Ecklund (for Microsoft) states that this bankruptcy is a stall tactic, plain and simple. He says this case is about litigation - nothing more. Everyone nods partially in agreement, and partially as though Ecklund isn’t saying anything that everyone in the room doesn’t already know. Timothy Dalton, representing California litigant Daniel Balsam, says a few words, and then it is Judge Tallman’s turn.

The Judge cuts to the chase, pointing out that there are two significant issues needing to be addressed:

1) The Motion to Protect Confidential Information - meaning can the debtor keep the names, addresses and other “proprietary” information regarding their affiliate network away from prying eyes.

The significance of this is that many of those affiliate are contact points for the company and its proprietor. They provide products and lists, and may create marketing materials and do a lot of spamming themselves. Opening up these lists would open up a can of worms, with folks like Microsoft being a pack of birds ready to feast on them. Richter and Co. know that if this happens, the business is DEAD.

Note that Microsoft recently received a favorable ruling on a similar matter, as Brian McWilliams just reported over at his Spam Kings weblog.

Judge Tallman told John Smiley he had read the argument presented in response to the creditors’ motion to unseal this information, and suggested that Mr. Smiley submit a new response with some additional case facts and reference. Mr. Smiley agreed to do so, and the Judge set a date of May 27th to hear additional oral arguments, and make a decision.

2) Motion to employ Goodman and Richter as Special Counsel - meaning can the bankruptcy estates pay Steven Richter, Scott’s father, for legal services ancilliary to the case.

Microsoft and Co. probably thinks this is a way for the debtor to put some money in Scott’s father’s pocket. In addition, Steven Richter is general counsel to the company, and the creditors claim that he was once a member (owner) of OptInRealBig.com, LLC. Some debate ensued in the courtroom, whereby Leo Weiss stated that the debtors disclosures in this regard were “inaccurate.”

Judge Tallman asked Steven Richter and John Smiley, point blank, if Steven Richter was a member, or had ever been a member, of OptInRealBig.com, LLC. John Smiley declared absolutely not, and Steven Richter confirmed it. Judge Tallman stated he would review the matter, and make a decision in the afternoon, notifying both sides via conference call at roughly 2:30pm.

Immediately thereafter, the hearing was adjourned.

Interesting is the easiest (and most politically correct) way to describe this “spam king” legal case. With both sides, and the Judge, acknowledging that this is going to be a litigious ordeal, I suspect there is more fun close on the horizon.

As a side note, I believe the Richter’s are going to be playing some tunes for the press. When Richter’s lawyers arrived, John Smiley was quick to glance over to me, and say “There’s the press.” A few minutes later, Steven Richter approached me, inquiring whether I was from the media. I said no. Mid-way through the hearing, it was noted that one of Steven Richter’s proposed functions as Special Counsel would be to draft press releases. Interesting indeed.

Stay tuned..

Ethan Preston has put together some additional in-depth analysis on the Scott Richter and OptInRealBig bankruptcies. Mr. Preston also points out some legal issues on the case, with emphasis on the asset protection issues that will present themselves (including potential preference payments), as well as the potential liability from the Microsoft case. For those less versed in bankruptcy law and restructuring procedures, it is an interesting read. Thanks Ethan.

*****UPDATE*****

Mr. Preston has extended his commentary with a closer look into some of the actions Microsoft is pursuing in the bankruptcy. As preference payments are the name of the game right now (determining who and what was paid and why, just prior to the filing), Microsoft is (or will) object to payments made to Scott Richter’s father (for legal representation). Mr. Preston is close to concluding that Microsoft wants nothing less than to make Scott Richter a destitute man.

Scott Richter and OptInRealBig.com have filed financial disclosures in accordance with their recent bankruptcies. Here are the salient points related to Scott’s financial situation…

Income

Total spamming income from 2003 to the bankruptcy filing date - $2,965,144

Total other income from 2003 and 2004 - $681,836

Disbursements

Payments to creditors within 90 days of filing - $295,074, including $4,000 paid to Bally’s Las Vegas, and $410,000 still owed to the IRS

Payments to “Mother of children” in the last year - $28,000

Total suits party to within last 90 days – 6, including Microsoft and the New York Attorney General

Total gifts to family in the last year - $22,000

Gambling losses - $5,000

Bankruptcy counsel payments - $50,000

Other payments – Montana property purchase at $30,000

Assets

Real property - $857,501, including $550,000 primary residence and numerous rental and other property in Montana and Colorado

Personal property - $2,278,937, including cash, art collections, fish tanks, a massage chair, an IRA account, $1.3 million in a securities account, some hockey sticks and tennis “rackets,” two leased Lexuses, and two dogs (valued at zero - personally, I consider my dog my most valuable asset)

Secured liabilities - $397,000, including a mortgage on the primary residence of $350,000

Unsecured liabilities - $410,000 (IRS monies owed)

Other unsecured liabilities - $57,169,773 (includes projected Microsoft judgment of $57 million)

Projected Income and Expenses

Income - $78,385

Expenses - $67,456

You can see the Statement of Financial Affairs, filed with the United States Bankruptcy Court for the District of Colorado (640k pdf zipped) here (since removed). If you find any mistakes in the above summary, please let me know.