How one of the most notorious alleged hustlers in the history of e-commerce made a fortune on the Web
If you want to get a sense of Jesse Willms at his absolute peak—the wealth, the lifestyle, the aura of swaggering invincibility—then the weekend of November 12, 2010, is where we want to begin. That Friday afternoon, resplendent in a lustrous violet button-down, Willms packed half a dozen friends into a private plane on a frosty Edmonton, Alberta, tarmac and jetted off to Las Vegas. En route, Willms uncorked a bottle of Dom Pérignon and passed it around so everyone could take a swig. Then came the shooters: for the men, Jack Daniel’s; for the women—three leggy brunettes and a statuesque blonde—Smirnoff with Red Bull. Soon enough, off came Willms’s shirt, as often happened on festive occasions. After landing in Las Vegas, the group piled into a titanic silver limo and made for the Encore, where they checked into an $8,000-a-night, 5,829-square-foot duplex suite—a favorite haunt of Prince Harry. For the next two days, Willms and his entourage danced atop nightclub tables, shopped at Tiffany, went for thrill rides, and caught an Usher concert, all before flying back to Alberta in time for work on Monday morning.
Of course, for an ascendant young tycoon like Willms, a flashy weekend in Vegas hardly registered as a noteworthy event. In those days, Willms spent quite a few of his off hours celebrating in grand style—carousing at the Playboy Mansion, racing Formula One cars—and with good reason. At only 22, without even a high-school diploma to his name, Willms had forged himself into a veritable e-commerce titan, with footholds in online auctions, health products, data services, and more. His company Just Think Media may have been the most successful Internet venture no one had ever heard of: in 2009, with just 20 employees, it earned more than $100 million in revenue. Few entrepreneurs, past or present, have ever built such a lucrative company so young. Not even Mark Zuckerberg could match the achievement; in 2006, the year he turned 22, Facebook reportedly grossed just $48 million. Basking in the neon radiance of Vegas, his eyes steely and sure, Willms looked like a triumphant mogul poised for greater triumphs yet.
But though this trip was routine by Willms’s standards, anyone familiar with his affairs likely would have been amazed that he had the nerve to take it at all. Even as he and his friends struck cocky poses and fanned stacks of cash at each other’s cameras, Willms knew that he was the subject of an exhaustive investigation by the Federal Trade Commission. And what this investigation would determine, essentially, was whether Willms, the white-hot e-commerce whiz, was actually one of the most egregious scammers in the history of the Internet.
In May 2011, after a year-and-a-half-long investigation that tracked his cash streams all the way to England and Cyprus, the FTC filed a sprawling lawsuit against Willms. The agency’s allegations were enough to drive an icy spike of fear into the heart of anyone who has ever typed in a credit-card number online: between 2007 and 2011, the lawsuit claimed, Willms defrauded consumers of some $467 million by enticing them to sign up for “risk free” product trials and then billing their cards recurring fees for a litany of automatically enrolled services they hadn’t noticed in the fine print. In just a few months, Willms’s companies could charge a consumer hundreds of dollars like this, and making the flurry of debits stop was such a convoluted process for those ensnared by one of his schemes that some customers just canceled their credit cards and opened new ones.
If you’ve used the Internet at all in the past six years, your cursor has probably lingered over ads for Willms’s Web sites more times than you’d suspect. His pitches generally fit in nicely with what have become the classics of the dubious-ad genre: tropes like photos of comely newscasters alongside fake headlines such as “Shocking Diet Secrets Exposed!”; too-good-to-be-true stories of a “local mom” who “earns $629/day working from home”; clusters of text links for miracle teeth whiteners and “loopholes” entitling you to government grants; and most notorious of all, eye-grabbing animations of disappearing “belly fat” coupled with a tagline promising the same results if you follow “1 weird old trick.” (A clue: the “trick” involves typing in 16 digits and an expiration date.)
On Web sites small and large, from backwater message boards to reputable news outlets, these sorts of ads have been appearing for years—long enough that most of us have learned to see them as the background static of the Internet. Because the work-at-home schemes and mango-based colon cleansers they peddle are so obviously fishy, the companies that promote them are seldom spectacularly profitable. Willms, on the other hand, used these same channels to capture 4 million paying customers and nearly half a billion dollars in sales, all at an age when many people are spending their work hours upselling the Never Ending Pasta Bowl at Olive Garden. “There are others doing similar things,” Ben Edelman, a Harvard Business School professor and an expert in online-advertising fraud, told me. “But Willms was doing it on a remarkable scale, by all indications as large as anyone—maybe the largest.”
Thus, simply accusing Willms of being a scammer does him a disservice; what he accomplished elicits something close to awe, even among his critics. “Jesse ran what was effectively a phantom empire scattered all over the world,” one of the many lawyers who have been involved in litigation against Willms told me. “His genius was that he was able to make it all function, and make it all look like a legitimate enterprise.”
Now 26 and already having made and lost multiple fortunes, Jesse Willms provides us with a perfect symbol of the savage landscape of online commerce. If the Internet is still in many ways a Wild West, seemingly ungovernable in its vastness, then people like Willms may well be its canny snake-oil salesmen, talking fast and hustling unsuspecting consumers in the digital equivalent of broad daylight. Of course, few among us open our Web browsers expecting to enter a wonderland of honesty and civility—but still, given its ever-growing prevalence in our lives, the Internet continues to be astoundingly underpoliced. Regulatory authorities like the FTC are undermanned; courts seem reluctant to punish offenders; and worse yet, even the sheriffs we believe are imposing order online—Google, Yahoo, Microsoft—often end up providing scammers with a platform for deception. To understand Willms’s success, then, is to understand a much larger expanse of the Internet’s seedy commercial underbelly, along with the hazards it poses to anyone who ventures online. So the question is, how did he do it?
When we use the term con artist, we typically place the emphasis on the first word while forgetting the implications of the second: that there is, after all, a real art to fleecing people. And no matter whether you believe Willms deserves a marble bust in the scamming pantheon, there is little question that he was something of a virtuoso—a Web wunderkind. By the time he’d built and lost his first fortune, Willms was still just a teenager, but the experience taught him something important: what it would take to really make a killing on the Internet.
Even as a small child, Willms had a knack for commerce. (This is probably a good time to mention that Willms, despite telling me in an early phone call that he would be “happy” to speak with me, later declined through his lawyer to be interviewed for this story—though he did e-mail answers to a few questions not relating to his business. He also let me speak with his mother, Linda.) Born in April 1987 to a rural Alberta family with an entrepreneurial streak—his father, Dave, runs a welding-equipment company, and his mother, a onetime cake decorator, manages revenue property and used to maintain a few “small entrepreneurial businesses” on the side—Willms quickly developed a fascination with trade. Whenever his mother brought him along to the grocery store as a boy of 3 or 4, he would beg her to narrate every step in the checkout transaction. Years later, once he was old enough for a paper route, he spent his wages on stacks of business books, hunting through them for the secrets of how moguls like Warren Buffett and Jack Welch achieved their success.
After his family relocated to the Edmonton suburb of Sherwood Park in the early ’90s, Willms spent entire days alone in his backyard, building complex forts and networks of waterways. “He sort of did his own thing,” Linda Willms recalled. “He wasn’t a moody kid or anything. He could just easily amuse himself.” In school, Willms was an honor student, but he seemed only mildly engaged with his studies. Former classmates described him as a kid with few friends who often cracked strange jokes. “Jesse was a misfit, like a nerdy class clown,” one told me. “He wasn’t a rule breaker, but he wasn’t a model student either.”
At 16, in 2003, Willms found his first serious business opportunity. He discovered that if he picked up a cheap enough copy of, say, Microsoft Office, he could resell it at a profit through a forum like eBay. He became so good so quickly at flipping software this way that he decided to develop a full-fledged online storefront, which he dubbed eDirect Software. Before long, Willms lost interest in school completely, as, in his mother’s words, “the entrepreneurial spirit took over.” His grades plummeted. By the beginning of 12th grade, Willms was often asking his mother to ferry him home at lunch so he could put in an extra hour of work on eDirect. Finally, they struck a bargain. “I knew that if I made him go to school, it would be a daily fight,” Linda Willms told me. “So we made a deal that if he could make money by a certain time frame, he could drop out of school. If he didn’t, he would take all of his core subjects the next semester.”
But there was never any real question about whether Willms could make money online. Soon, he assembled a staff of nearly a dozen people and opened an office. Before his former classmates even graduated from high school, Willms had shaped eDirect into one of the largest Microsoft resellers on the Web. He also began to acquire a reputation around Sherwood Park as a business prodigy; those who had scoffed at him in school suddenly saw him driving around town in his $280,000 black Lamborghini Murciélago. (Willms also kept a bright-yellow one garaged in Las Vegas for whenever he visited.)
Just as with his later work, Willms’s success with eDirect seemed, on the surface, to be the product of a staggering business talent. The problem was that even then, his greatest gift was for navigating the more shadowy areas of the marketplace—which is why Willms, at 18, became the target of a lawsuit by Microsoft that accused him of trafficking in massive quantities of “counterfeit, tampered and/or infringing” copies of its software.
How, you might wonder, does a teenager achieve something like that? When Willms first launched eDirect, he filled orders on a case-by-case basis: he would find an inexpensive piece of software, sell it online, and clear a $20 or $30 profit. But if he wanted to expand, he would need access to a steadier product supply. Somehow, around the time he first started hiring acquaintances from school to handle customer service and Web design, Willms began obtaining large quantities of Windows-related CD-ROMs—some of which had once been shipped with Dell computers, some of which were of murkier provenance. “It was a gray area,” a former employee told me. “Our job was basically to convince people that it was fine to install this software.”
As eDirect expanded, so did the number of customers complaining about dubious products. “It became a frustrating place to work, because I was the one trying to convince customers that it was fine, but after a while, you’d have to lie to them,” the same former employee told me. “The reason I quit in the end was that we got these copies of Office sent back to us, and the foil on the top saying it was authentic just peeled right off. I said it was clearly pirated, but Jesse was like, ‘No it’s not!’ ”
In March 2006, after receiving hundreds of complaints about eDirect-sold software and repeatedly warning Willms to stop selling copyright-infringing products, Microsoft finally sued. What the company found in pursuing the case surprised even its hardened anti-piracy lawyers. “Usually with people involved in counterfeiting and piracy, you see people acting very cautiously, very suspiciously,” says Scott Wilsdon, Microsoft’s lead counsel in the suit. “The opposite was true with Jesse. It looked like he went into this from the outset to grab as much cash as he could as quickly as he could. He seemed to have no concern for the customer and no appreciation of the consequences.”
What appeared to be a simple case involving an average teenager quickly turned into something far more complex. When Microsoft, through a court order, seized Willms’s PayPal account, the company’s lawyers thought they’d get a couple thousand dollars. The account contained more than $200,000. Likewise, Microsoft seized eDirect’s software inventory with only modest ideas of what it held. “In cases like this, you usually expect to find a few thousand units,” Wilsdon explained. Instead, according to court documents, authorities discovered some 66,000 questionable Microsoft products, in warehouses and customs facilities spread all across the country, from California to New York. More surprising still was the way Willms had obtained much of this software in the first place: through mysterious channels from the Jordanian government, which had originally acquired it for educational use.
The lawsuit cleaned Willms out. Against the wishes of his parents, who wanted him to “let it go,” he mounted an energetic defense, claiming he had done nothing illegal. Willms eventually agreed to an unspecified six-figure settlement, surrendering his two Lamborghinis and a Dodge Viper and agreeing never to sell Microsoft products again. (The companies behind FileMaker Pro and Norton AntiVirus—whose software eDirect had been marketing as well—also sued Willms, who agreed to similar prohibitions with them.)
That was fortune No. 1, lost and gone. Before the dust from the litigation had even begun to settle, however, much grander, more beguiling plans for fortune No. 2 were already well under way.
It’s worthwhile to pause for a moment, before getting into the story of that second fortune, so we can explore the current craft of online scamming—specifically one of its primary tools, an often confusing, usually respectable, and occasionally downright devious practice called affiliate marketing.
Of course, for nearly as long as there has been an Internet, there have been Internet fraudsters—from traditional swindlers running versions of centuries-old cons to basement-dwelling hackers sifting through e‑mail accounts. But now that the Web has emerged from its gawky postmillennial adolescence to become a fixture of American life, most of us have grown so familiar with the classic online scams that we can’t help but chuckle at the idea that anyone ever fell for them. With the exception of those who have been lost in the wilderness for the past decade, virtually nobody would wire cash to anyone identifying himself as a Nigerian prince or open Viagra-themed e‑mails from senders with names like Horatio Hugemember. We know the potential pitfalls of buying on eBay, and we recognize the constant threat posed by identity thieves. We have, in short, become appropriately wary of revealing personal information to unknown entities online.
And yet most of us have not fully realized the extent to which scams are now operating through sites we’ve come to trust. A lot of this happens when scammers buy targeted ads that crop up alongside a user’s search results on Google, Yahoo, or Microsoft’s Bing. (More about this later.) But perhaps the least heralded—and often most pernicious—offenders here are so-called marketing affiliates, who are, in essence, the door-to-door salesmen of the Internet: independent operators who buy ad space on trusted sites and then steer consumers to other companies’ products in exchange for a cut of whatever sales they generate. Theoretically, at least, affiliates offer companies huge advantages over conventional marketers. If you’re a small manufacturer who wants to publicize your new line of muscle-building supplements, but you don’t have the budget for a traditional Web-marketing campaign, affiliates provide a way to do this while charging virtually nothing; you pay them only when they make a sale. That’s the upside.
The downside to affiliate marketing is its astonishing rate of fraud. Because affiliates put up their own money to pay for ads pushing these products, they have a strong incentive to dupe consumers, so they can recoup their investment. If you’ve ever clicked an ad or a “sponsored link” about, say, a spectacularly effective new weight-loss scheme, which then leads you to a fake news article (or “farticle,” in the industry parlance) filled with sketchy scientific findings and constant entreaties to buy a product “risk free,” then condolences are in order: you’ve likely stumbled into some affiliate’s trap. “Affiliates are the most creative bunch of people you’re ever going to find, because you’ve got 5,000 people promoting the same product, and they’re all trying to get an edge,” Jim Lillig, an Illinois-based affiliate-marketing strategist, told me. “So of course you’re going to have people pushing the envelope. Some will do anything and everything to promote a product they think they can make money with.”
All across the Web, affiliate ads have spread like a tropical rash; nearly every high-traffic site, from FoxNews.com to ESPN .com, runs at least a few of them. And despite these companies’ frequent claims that they are actively weeding out affiliate links to potential scams, Web surfers rarely need to look hard to find evidence to the contrary. In 2009, for instance, an MSNBC.com story that called attention to the outbreak of fraudulent advertising featured an MSNBC.com vice president expressing zero tolerance for “fakeosphere” ads—yet as the affiliate-marketing and Internet-fraud expert Pace Lattin pointed out when I spoke with him in late 2012, those very ads continued to proliferate on MSNBC’s site.
“Here’s ‘Las Vegas Celebrity Doctor uncovers one simple trick for a flat belly,’ ” Lattin told me, browsing through a random MSNBC.com page. “I click on it, and it goes to a fake news site. You’ve got sponsored links that say ‘Nevada mom publishes a free facelift secret, doctors angry,’ which goes to a fake blog. There’s one that says ‘Mom outsmarts Botox doctors with her $4 trick to wrinkle-free face, only six trials available,’ which is completely fraudulent; it’s obviously not true. These are all fake.” FTC guidelines require such sites to label themselves as advertorials, but their creators often skirt those guidelines by disguising the disclosure with small, vanishingly pale fonts.
Obviously, Jesse Willms was one man out of thousands trying to make money through affiliate-driven sales. Yet in all my reporting on the shadowy world of affiliates, he remains the only one I have seen referred to not just as an “Internet pimp” but as a “legend” of the field—the half-billion-dollar man.
After Microsoft crushed his company, Willms sifted a valuable lesson from the remains. The lesson was not in what he’d done wrong, but in what he’d done right: a person, he now knew, could make a hell of a lot of money selling products without ever coming within 1,000 miles of them. At eDirect, Willms’s greatest profits came after he began “drop-shipping”—that is, employing remote warehouses to ship off goods he had acquired sight unseen. The only problem with the eDirect model was that not all the software was technically his to sell. If he could drop-ship his own product, though—outsourcing everything about it but the marketing and the revenue—the potential windfall could be huge.
So the question was: What could he sell? According to an article by Joe Castaldo in Canadian Business magazine, Willms pored through heaps of Web data on popular searches and ads to figure out what might catch fire with consumers. The answer he arrived at was weight-loss products. Specifically, he targeted a Chinese tea called Wu-Long, which was gaining a reputation among diet-craze chasers as a fat-burner. Moving with the blinding speed that would become his trademark, Willms rechristened his enterprise Just Think Media, outsourced production of the tea to a “white label” company—a business that creates generic formulas of products and then lets others slap their own labeling on them—and started selling. By the time Microsoft reached its settlement with Willms, in February 2007, he was already pushing Wu-Long through an assortment of Web sites.
To put it mildly, these sites contained a significant amount of deceit. One of his apparent sites, dietawards.org, masqueraded as the home of a panel of nutritionists, doctors, and “one high-priced Hollywood personal trainer” that had deemed Willms’s tea its diet of the year in a ceremony at L.A.’s Staples Center, none of which was true. Another evidently Willms-affiliated site, oprahsdietsecret.com, blared “As Seen On Oprah” in a splashy pop-up graphic and juxtaposed pictures of the talk-show maven with pitches for Willms’s tea. (Oprah later sued Willms and other advertisers for linking her to products she claimed she had never endorsed.) Some versions of the sites even featured a picture of a handsome Asian man with the caption “From the desk of Jesse Willms, Weight Loss Coach and Fitness Guru.”
To make matters worse, Willms had allegedly lifted much of his Web design from the site of another company, Okuma Nutritionals, which had created the Wu-Long name. (Okuma sued and later settled with Willms.) Soon enough, Willms began calling his product Wu-Yi, and he stuffed his sites with “scientific proof,” more “as seen on” endorsements, and customer “testimonials”—some of which appeared to describe experiences with his products over a longer time period than the company had even existed. One woman, Brook Barth, found out that her name and before/after photos were being used to endorse Wu-Yi tea—which she’d never heard of—only when her grandmother’s friend stumbled across a Willms Web page. Barth told 20/20 that after she complained, Willms paid her $1,000 for permission to continue using the pictures. (Willms’s lawyer claims the testimonials were from actual customers and the scientific research came from “reputable experts.”)
Despite all the questionable claims—or, more likely, because of them—the Wu-Yi scheme was such a success that it provided a template for Willms’s future ventures. While his tea business peaked and waned, Willms rapidly debuted lines of colon cleansers, teeth whiteners, and, most notably, acai supplements, sales of which exploded after Dr. Oz spoke of the berry as a potential anti-aging panacea on television. Over time, the Web pages that Just Think Media built for these products hosted increasingly honed versions of the classic Willms themes: dubious scientific claims; implied endorsements from celebrities like Rachael Ray and networks like ABC; incredible “testimonials”; manipulative plays on insecurities (“You wouldn’t have to worry about being the ‘fat bridesmaid’ at your sister’s wedding!”); and “iron-clad” guarantees that “free trials” of the products were absolutely “risk free.”
Needless to say, none of the foregoing tactics could be considered so groundbreaking as to merit several hundred million dollars in sales. But this was all just a starting point; Willms’s true genius was for making tweaks to an existing scheme in order to blast it from mild profitability to blockbuster success.
Fundamentally, Willms’s new business prospered because of two crucial decisions. The first involved the way he took advantage of affiliate marketing to publicize his wares. As Willms must have known, he was neither the only person trying to sell diet products on the Internet nor the only one using affiliates to do it. How, then, could one company break through the noise? Willms’s solution to this dilemma was crafty: he decided to sell not just one brand of each product, but dozens. Whereas his competitors might offer a single acai label, Willms saturated the market with a dizzying variety of them, all of which were essentially the same product; for example, Willms sold his acai pills as AcaiBurn, Ultra AcaiBurn, Extreme AcaiBurn, AcaiSlim Detox, and AcaiEdge Max, among many other names. And this is where his creativity in using affiliates came in. Because he had brand names to spare, Willms could offer each one as an “exclusive” to an individual affiliate network—complete with its own custom-designed, demographically targeted Web site—which made the network far more enthusiastic about pushing the product. Sweetening the deal even more, Willms paid some of the highest bounties around: reportedly as much as $80 a sale, on products whose advertised price might be less than that.
Suddenly, affiliates began racing to deliver customers to Willms’s sites, which tied in perfectly with his second, far more devious maneuver: his approach to billing. To make a profit when he was paying such generous fees to affiliates, Willms had to ensure that each sale led to as many credit-card charges as possible. So beneath his promises of a “free trial,” the FTC alleged, Willms buried an assortment of charges in the fine print of his terms and conditions. After the 14-day trial period for each product, customers automatically became enrolled in monthly subscription plans, for up to $80 a month. Consumers generally didn’t realize this had happened until they either saw the charges on their credit-card statements or received a product they hadn’t ordered, by which point it was too late.
And for his unhappy customers, the charges for the original product were only the beginning of a long, difficult journey. One autumn day in 2012, I spent an afternoon in a vacant conference room at the FTC’s Seattle office looking through the agency’s yard-high stack of files on Willms. Even an hour of perusing Willms’s business tactics was enough to make me want to cut up my credit cards and retreat to a tribal society that barters with root vegetables. In addition to the consumer grievances about shoddy products (one woman, for instance, claimed that the colon cleansers she ordered made her rectum bleed), the FTC’s investigation revealed in vivid detail the tortuous paths Willms made customers travel when they wished to cancel or receive refunds.
With few exceptions, a “free trial” from Willms included hidden extras like a “Comprehensive Weight Loss ebook” or a club membership, each of which carried separate monthly fees, according to investigators. Figuring out what, exactly, the fees were for usually involved a small feat of detective work. In a typical complaint, a customer who had signed up for an AcaiBurn trial found charges from eight different entities on his credit-card statement, many with cryptic names like VHACCESS and ezykit; Candice Rozak, an Edmonton-based customer who signed up for the trial, reported being charged a total of $731 over a few months in this way. Adding to the challenge was Willms’s practice of charging random dollar amounts for the hidden extras—$7.22, $2.97, $3.34—that would look like legitimate purchases. According to the FTC, these irregularly denominated charges were some of Willms’s biggest moneymakers, because consumers either assumed they were genuine or didn’t know to be wary of them. They recurred on some consumers’ cards for months and months.
But even if a customer succeeded in sniffing out all the monthly fees, canceling those charges posed a new ordeal. According to documents filed in the FTC suit, Willms and his employees approved separate call-center scripts for each of his products, all seemingly aimed at creating confusion and halting progress. When customers succeeded in getting through to a call center and asked to “cancel everything,” employees were instructed to give misleadingly literal replies: “Sure, I can help you cancel Acai for $87.62.” If consumers requested to cancel the other charges, according to the FTC, they learned that they had to call a separate line for each product—even though the numbers led to the same call center, and possibly to the very same employee. (Willms’s lawyer claimed that the company received complaints from only a small fraction of its customer base, and that it contracted with “highly qualified” call centers who “guaranteed their compliance with all applicable laws.”) The process for receiving refunds was more complex still, involving thickets of rules and refusals. The only reliable way for customers to get their money back was to threaten to contest the charges with their credit-card company or file a report with the Better Business Bureau.
Over time, Willms’s appetite for new quick-hit opportunities grew positively voracious. In the summer of 2009, for instance, a Utah company called dazzlesmile—which sells teeth-whitening tablets developed by a pair of dentists—began receiving an influx of strange complaints. “People started calling and saying ‘I don’t want this—I’m going to return this pen,’ ” said Roger LeFevre, dazzlesmile’s CEO. “We were like, ‘What are you talking about? A pen?’ ” Soon, angry customers—some complaining of burned gums—were sending the company hundreds of teeth-whitening bleach pens bearing the dazzlesmile name, all of which appeared to have been made cheaply in China.
LeFevre tracked the pens back to Willms, who had been using affiliates to advertise and sell them. “It was an out-and-out hijacking,” LeFevre told me. “They counterfeited our product, they pirated our Web site, and they basically directed all of their customer service to us.” At the peak of Willms’s sales, LeFevre says, dazzlesmile was receiving 1,000 calls a day from customers trying to cancel orders for a product it didn’t even sell. When irate consumers made the name dazzlesmile synonymous with online scamming, LeFevre’s sales effectively dropped to zero. Dazzlesmile sued Willms in November 2009; he later paid a settlement.
Regardless of what you might think of Willms’s business ethics, no one could argue with his results. From 2007 onward, Willms was awash in cash, the whole enterprise reaching its high-water mark in 2009. He intended to enjoy it while it lasted.
Along with the change in Willms’s finances came a parallel change in his lifestyle. Although he had never been popular in school, one associate told me that he “bought friends” when his diet-product sites rocketed to success. Some he installed as executives at Just Think Media; others formed a sort of entourage around him, benefiting from his largesse. “There was no hiding the fact that Jesse literally had millions of dollars,” recalled a former schoolmate. “Everyone wanted to be his friend. It was crazy, like the guy was a celebrity.”
Though some former employees say Willms remained socially odd—fidgety, averse to eye contact, and difficult to hold a conversation with—he rapidly established a reputation as a hard partier who liked to throw his money around. At his newly built manse, complete with an entrance fountain and multiple kitchens, Willms kept the refrigerators abundantly stocked with alcohol and snacks for his get-togethers. And at Edmonton-area bars, Willms cultivated the image of a high roller. “Jesse always gets VIP service at any bar he goes to,” one acquaintance told me. “Even if it’s a bar where you wouldn’t even know they had VIP service.” Another recalled seeing Willms order 50 cocktails at a restaurant and then leave most of them untouched on the bar. “It’s almost like the show Entourage, and Jesse was Vinny,” he said. “He’d buy 100 shots at once and pass them around to anyone who walked by.”
Willms also frequently took the revelry on the road. Although many pictures of him have disappeared from Facebook since the FTC lawsuit, the hundreds that remain show Willms and his friends taking at least a dozen trips to Las Vegas and Los Angeles on chartered planes during Just Think Media’s most lucrative years. The images capture his crew of early-20‑something men and their predominantly blond female companions living impressively large: throwing cash into the air at clubs; flying in fighter jets; lounging in the $40,000-a-night Hugh Hefner Sky Villa at the Palms in Las Vegas. One photo features Willms at the Hollywood Walk of Fame, kneeling beside the star dedicated to Donald Trump.
Yet his former employees say the carousing never impaired Willms’s focus at work. “Jesse was always there in the morning, punctual like everyone else,” one former employee told me. “He would take a jet out to Vegas on Friday after work, but then he would be back on Monday morning, not hungover. If you didn’t hear rumors about it, you wouldn’t even know.” In fact, notwithstanding the enormous sums flowing through Willms’s accounts, his onetime employees recall Just Think Media’s office as a typical small-business environment. Willms was a friendly and organized boss; according to the Canadian Business story, he often handed out to-do lists in the morning and expected to see them returned, completed, at the end of the day. He paid well, but expected performance. When one employee began showing up late or hungover—sometimes because he had been “out with the boss last night,” another employee told me—Willms fired him.
Indeed, the office milieu at Just Think Media was so conventional that few employees said they suspected anything untoward. Actual products seldom appeared at the office; his employees generally just designed Web sites and handled customer service. Sure, a lot of people seemed to be complaining, but didn’t every company get complaints? And wasn’t Willms some kind of business whiz? “Nobody really questioned him,” one former staffer said. “You just thought he was well connected, and did what he said.”
If anyone complained about hidden charges and demanded a refund, Willms’s customer-service workers explained that it was the consumer’s responsibility to know what he was buying. In early 2010, for instance, Willms debuted a site called SwipeBids, under the umbrella of a company he called Terra Marketing Group, to host “penny auctions” (in which buyers paid a small fee in exchange for each bid they placed). The page gave the strong impression that one could test out the service with 300 free bids, yet once customers signed up, Willms immediately charged them a nonrefundable $150 fee, the existence of which was often only revealed on a separate page, in a small font, according to the FTC. When complaints started pouring in, one of Willms’s Web designers was incredulous. “On the page where they sign up, it was so clear,” he told me. “Why did everyone expect to come to that site and get everything for free?”
Eventually, though, the ire of thousands of customers began to redound to Willms himself. By 2010, his various offers had drawn so many complaints that any Internet search for his name threatened to turn up nothing but negative results. Willms handled this as, by now, you might expect he would: by hiring a search-engine-optimization company to create a bewildering array of interlinked Web sites with domain names like jessewillmsethics.com and jessewillmscharity.com in order to stack his search results with favorable material.
For a man who was accused of running an epic series of online scams, Willms has had a remarkably forthcoming presence on the Web. Over the course of hundreds of blog posts—many no longer online—he opened up about everything from his zeal for philanthropy (“Charity Is My Driving Force”) to his deep feelings on Mother’s Day. Several entries caught Willms reflecting on how to be a good date; be attentive, he recommended, and always pick up the check. One post showed three photos of him chatting with George W. Bush at what he called a “networking event” and featured Willms reflecting on the humanitarian lessons he had learned from the former president. Yet another captured Willms reflecting on, well, reflecting. “Reflection doesn’t have to be about charity and personal development,” he advised would-be reflectors. “You can reflect on any subject you want to.” The overwhelming impression one receives from these posts is of a man whose passion for ethical business principles is matched only by his burning desire to sponsor needy dolphins.
Naturally, little of this information appears to be genuine; Willms probably didn’t even write most of it. His charitable giving was legitimate (one former employee told me Willms began donating money “to not look like the bad guy all the time”), but many of his posts on other topics veered into the surreal. When the writers ran out of variations on words like integrity and principles, for example, they started pages about shopping, history, even dinosaurs. (One site speaks of Willms’s “deep and unfading love of calico cats.”) I spent hours one morning trying to catalogue them all, but they never seemed to end; I gave up counting at about 60 individual sites. Credibility did not appear to be a prerequisite in creating these pages, so long as they made searchers wade through reams of Google results before arriving at anything real. And Willms was not afraid to create trouble for those who did break through this wall: several times, when he spotted an unflattering story about him or his ventures, he had his lawyers send threatening letters demanding that it be removed.
Despite the external criticism, Willms’s customer policies didn’t seem to change much. Instead, he doubled down on ham-handed image management: his self-promoting sites; his sudden splashes into philanthropy; his new predilection for issuing questionable press releases, including one that proudly celebrated the fact that his main personal Web page, jessewillms.com, was now “the 15,773th most popular site in all of Canada.” But while some guileless consumers bought this act, one important group definitively did not: investigators at the Federal Trade Commission.
By late 2009, FTC officials could see that affiliate-pushed “negative option” scams—in which customers sign up for “free” trials and then find themselves trapped in expensive continuity plans—were becoming a pandemic. As the federal government’s primary consumer-protection arm, the FTC was the agency expected to do something to address the issue, yet it faced a major problem of scale: it was one Wyatt Earp among thousands of Internet swindlers, many of whom had disguised their tracks with shell corporations. So the agency tapped its consumer-complaints database to target a few big players. Near the top, with more than 2,500 Better Business Bureau complaints, were Willms’s companies.
The case soon fell to Kathryn Decker, an energetic lawyer who has spent three decades with the FTC’s Northwest regional office, in Seattle. As had happened with the lawyers in the Microsoft suit, Decker watched in astonishment as a seemingly straightforward investigation of a 20-something mushroomed into the biggest case of her career—one that involved distributors all over the globe and hundreds of millions of dollars in transactions. Willms learned of the investigation early on and agreed to turn over his records, but it still took Decker and her staff a full year just to sort through his byzantine affairs. “People who would be added to the case would take a while to catch up, and then they’d say, ‘Okay, I need to take a break,’ ” Decker told me in her 28th-floor office, with the cobalt waters of Puget Sound spread out behind her. “There was that much to learn.”
The FTC investigators were also surprised to find that while they were pursuing a case of such ever-growing complexity—encompassing credit reports, anti-aging products, work-at-home schemes, and more—Willms plowed along undeterred with his embattled penny-auction sites. And his displays of wealth continued as well. In April 2011, for instance, mere days after an investigator from Canada’s Competition Bureau, working in collaboration with the FTC, raided his company’s trash in search of evidence, Willms threw a blowout 24th‑birthday party for himself at a casino resort near Edmonton. As Canadian Business reported, publicly posted photos of the event showed Willms arriving in a white limo wearing a dazzling red suit, popping champagne, and posing with a Shake Weight. “I think he enjoyed himself immensely,” Decker noted.
Yet for all Willms’s hijinks, Decker and her colleagues were never less than impressed with their subject’s cleverness. “He came across as very smart, savvy, ambitious, and hardworking,” Decker told me. Willms’s enterprise, the FTC’s investigation suggested, was less a product-delivery business than a highly sophisticated mechanism for gathering credit-card numbers. “This was not a legitimate business model, in which you try to get customers to keep ordering your product,” Decker said. “The product was never the point. The point was to get as many hits on each credit card as you could.”
Many other businesses had tried to run comparable schemes—at the same time, the FTC was pursuing similar cases against two more companies—but Willms’s operation, according to the FTC, was by far the largest, the craftiest, and the most tenacious. Take, for instance, the lengths to which Willms went to keep his beleaguered business plugging along. Once he began to run afoul of Visa’s and MasterCard’s risk-management systems because of the high number of refunded charges his sales were generating, Willms was in danger of losing his ability to conduct credit-card transactions. As a solution, he allegedly recruited five people (one was a dog groomer) to “run” shell companies for him, paying them each $3,000 a month to do little more than sign papers. Willms appeared to have kept these partners every bit as in the dark as his customers. When one of them, Adam Sechrist, started receiving stray complaints, he was told to reroute any grievances to a man named Enrique Fuentes. “Hey, is Enrique Fuentes an actual person?,” Sechrist asked in an e-mail to one of Willms’s associates. As far as the FTC can tell, the answer to that question is no. (All five of the shell-company signees were eventually sued alongside Willms in the FTC case and agreed to five- or six-figure settlements.)
By the spring of 2011, Decker and her team realized that Willms’s ventures were sprouting new tendrils so quickly that they couldn’t hope to keep up. “At a certain point you have to cut it off, or you’d be investigating him for the rest of your career,” she told me. That May, Decker filed the FTC’s suit against him. (Willms, I should note, has never been charged with any crime; the FTC’s authority is civil, not criminal.) The complaint accused Willms of nine separate infractions, from illegally charging consumers’ credit cards to deceiving customers about “risk free” offers and outside endorsements. His team of lawyers contested it all, even accusing shady affiliates of stealing customers’ credit-card numbers. In a cunning turnabout, his lawyers also argued that when Willms claimed a product had been “seen on” CNN or ABC, what he really meant was that it had been advertised on their Web sites.
But it’s hard to counter Willms’s attorneys when they point out that his terms were right there for consumers to peruse. Screen captures from the FTC’s files show that Willms often placed the details of his offers next to where customers entered their credit-card information. If people neglected to read up on what they were buying and simply clicked through—just as we all do every day, when Apple or Microsoft presents us with a new novel-length list of terms and conditions—was this Willms’s fault or the customers’? The FTC worked around this by arguing that what matters in deceptive marketing is the “net impression” consumers take away. “You cannot go through six different Web pages that say ‘Free, Free, Free, Free,’ and then get to the last one that still says ‘Free’ but adds in small print, ‘If you choose to continue having white teeth, you’re going to be charged X, Y, and Z,’ ” Decker told me. “Because it will not have gotten rid of the impression that it was free.”
In the end, Willms’s arguments won little sympathy in court. After initial settlement talks faltered, the FTC convinced U.S. District Court Judge Marsha Pechman that leaving Willms in business posed a sizable danger to consumers. So, in September 2011, Pechman froze his assets and banned him from selling anything with a negative-option feature, essentially incapacitating his business. Within half a year, Willms assented to a staggering $359 million settlement—representing, according to the FTC’s final accounting, the “total un-reimbursed consumer injury” he caused—and agreed never to use negative options, misrepresent his products, or mislead credit processors. As part of the deal, he also agreed to sell off his mansion, as well as a $30,000 fish tank, a $12,000 fur coat, and other possessions, although he did not admit to the FTC’s allegations or to any violations of the law.
The scam-wary American consumer might hope that this victory for the FTC would have put Willms out of business permanently and sent shock waves through the seedy back alleys of the Internet. It has done neither.
After reading through Jesse Willms’s online exploits, one perfectly reasonable reaction would be to cling ever tighter to the sites you trust—to vow never to stray from the seemingly safe paths laid out for us by Web gatekeepers like Google, Yahoo, and Microsoft. Since these companies have huge financial stakes in maintaining user faith, the thinking might go, they would surely never endanger that by doing business with potentially shady companies or affiliates. Right?
Well, no: the evidence shows that they, too, often work with unsavory advertisers—sometimes knowingly. In fact, the Harvard Business School professor Ben Edelman’s Web site houses a numbingly long list of cases in which trusted companies have sold ads for services they knew to be suspicious or fraudulent. Take Yahoo-owned Right Media: according to a 2009 analysis by Edelman, at least 35 percent of its inventory at the time consisted of deceptive ads, like pop-ups made to resemble Windows-operating-system prompts, and notifications that Internet users have “won” Walmart gift cards. (In response to this analysis, Right Media noted that it expected members to follow rigorous standards and pledged to remove improper ads “as quickly as possible.”)
Or consider Google, whose famous motto, “Don’t be evil,” has not prevented it from engaging in suspect practices for the sake of ad sales. (Lest we forget, Google exists primarily to sell advertising; in 2012, 95 percent of its $46 billion in revenue came from selling ads.) According to court documents, Willms paid Google at least $1.7 million to advertise his various sites. And while the tech behemoth has often claimed that it couldn’t possibly monitor all of its advertisers’ practices—and thus shouldn’t be held liable for them—recent events have called this argument into question. In August 2011, for example, Google agreed to a $500 million forfeiture after a government sting revealed the company’s willingness to work with online pharmacies that were illegally selling prescription drugs. The investigation found not only that Google was aware these advertisers were breaking the law, but that its employees helped offenders prepare ads for prescription-free drug sales (reportedly including human growth hormone and the abortion drug RU-486) that would skirt Google’s own regulations.
Google has also been accused of profiting from so-called typo-squatters (who set up sham sites with misspelled URLs like twittter.com) and wittingly selling ads to companies offering counterfeit products. On occasion, scamming advertisers are found to be operating on all three of the aforementioned Web heavyweights at the same time. In November 2011, for example, inspectors for the federal government’s Troubled Asset Relief Program shut down 125 alleged scams that had been using ads on Google, Yahoo, and Bing to defraud homeowners through supposed mortgage-modification services.
When someone like Edelman draws attention to this explosion of scam-linked advertising on the Web, the tech companies that carry those ads tend to throw up their hands and claim that the Web is so huge, no one could hope to monitor it all—an argument Edelman finds dubious. “This is potentially highly regulatable,” he told me. “Think about how much easier it is to track behavior that’s occurring on the Internet. But it’s easy to get ourselves tied up in a knot where Google will tell you, ‘Oh, there are so many different ads, it’s so hard to verify.’
“We put a man on the moon. If we put our minds to it, we can fix this stuff,” Edelman continued. “The problem is that a lot of the folks who can stop it don’t have much incentive to stop it.”
To Edelman, the main obstacle to better-regulated Web commerce is the judicial branch’s unwillingness to force online gatekeepers to change their practices. “The Internet is a Wild West in part because the courts have made it so,” he told me. As evidence, he pointed to Goddard v. Google, in which the plaintiff sued Google after she clicked on a search ad for free ringtones that led to an allegedly fraudulent site. A U.S. District Court judge dismissed the case. “In particular, he held Google not liable for deceptive ads that Google knew about and charged extra for,” Edelman said. “It’s absolutely outrageous. How can it be that Google knows the ad is deceptive, Google charges extra for it, and still somehow is not liable? If Jesse Willms is responsible for the bad things his contractors did, why is Google not responsible for the bad things its advertisers did?”
From individual affiliates up to those in the highest aeries of the tech ecosystem, few are ever held accountable for endemic fraud. “There’s a fine line between shutting down the Internet and policing it,” said the FTC’s Kathryn Decker. “We just try to hit that right balance and hit the big players, because we can’t go after everybody. That’s the truth of it.” At the very least, Edelman says, Web gatekeepers might pay special attention to when advertisers use the word free, since those claims are usually far from true, or keep better track of habitual offenders.
Yet even in the case of Jesse Willms, a man Google arguably has ample cause to be wary of, the company continues to run ads for his ventures today. When I contacted Google to ask about this last year, a spokesman would give me only a three-sentence statement claiming that the company has “zero tolerance for bad ads in our systems” and that it terminates these ads “as quickly as possible.” About its ongoing relationship with Willms—who has been accused of being one of the most prolific swindlers in the history of Internet marketing—Google had no comment. Discussing a specific advertiser, I was told, is a violation of company policy.
Despite the publicized $359 million settlement with the FTC, Jesse Willms is doing just fine financially—and he has a new yellow Lamborghini to prove it. One reason for his quick return to prosperity is that he was never actually going to pay the advertised settlement amount; the financial judgment was suspended, as long as he surrendered his assets. In reality, Willms likely never had that much cash. Most of what he took in (that wasn’t spent in Vegas) went right back out to pay affiliates and distributors. After he settled his tax debts, Willms turned over a total of just $991,000 to the U.S. Treasury, according to the FTC’s enforcement division. “People like Jesse Willms, we’ve found, like to spend their money,” Decker told me. “That makes it very difficult to get enough money to make injured consumers whole.”
But the other reason for his continued prosperity is that he remains very good at making money on the Internet. Although Willms wrote in his one substantive e‑mail to me that the FTC suit “represents the biggest challenge I have ever had in my life”—one that made him contemplate “closing down my business and going back to school”—some of his acquaintances claim that Willms seemed barely perturbed as his second fortune looked likely to disappear. “Right when he got sued by the FTC, I went to a bar downtown, and he was there,” one former employee told me. “I was talking to him, and he seemed totally oblivious to the whole thing. It was bizarre.”
With the deftness that has characterized his entire business career, Willms left diet products behind and pivoted into information services. His major ventures today provide consumers with driving records, criminal records, and vehicle-history reports (just as Carfax does) across dozens of different pages, notably carhistory.us.org, dmv.us.org, vehiclehistory.com, and vehiclehistoryrecord.com. In fact, anyone looking for these services would have a hard time avoiding him: as of November, if you searched vehicle history on Google, Yahoo, or Bing, ads for Willms’s sites were among the first things you would see. By the looks of it, Willms offers a terrific deal—just $1 for a vehicle-history report, compared with $39.99 for one from Carfax. Because of this, Willms’s lawyer claims that the sites have received “several hundred thousand positive comments related to the product.”
When I looked into the sites, however, I also found hundreds of online reviews accusing them of being scams. In many of these reviews, customers complained of looking through their credit-card statements to find that, instead of being charged $1 for their report, they were charged for what turned out to be a “volume discount” subscription program that gave them 25 reports a month (you know, for those of us who like to query the history of our own cars nearly every day) for anywhere between $119.40 and $199.50, billed out over the course of a year. None of the customers seemed to have had any clue they’d signed up for this, and most reported difficulty getting their money back. “I got my refund ONLY after filing a complaint with the BBB,” one wrote. (Willms’s lawyer said that rates of refunded charges remain low, that the company has made “substantial efforts to improve customer satisfaction,” and that it “provides an immediate refund to any unsatisfied customers.”)
It’s hard to say whether this venture, so similar to his past ones, represents Jesse Willms’s essential genius or a stubborn dedication to signing up consumers for services of which they might be unaware. Perhaps both. Yet the more troubling implication of his current success is this: he probably isn’t doing anything illegal. The disclosures are all there, checked by his legal team. He is obeying the letter of the law, if not the spirit.
Or, put another way: You, as an online consumer, are on your own. You cannot trust the Web’s gatekeepers to protect you from suspicious operators, nor can you rely on an undermanned Federal Trade Commission to keep the Internet’s millions of businesses in line. At least for now, every time you give your credit-card number to an unfamiliar online company, you will have to make a leap of faith. This is the bargain we all have to accept as citizens of the Web.
And besides, there’s little point in getting worked up about something like Willms’s vehicle-history venture. By the time this story is published, the sites may well be gone. Once again, Willms will have moved on to another scheme.