Saturday, January 28, 2012

Noir: KIM DOTCONvict

Mega-man: The fast, fabulous, fraudulent life of Megaupload's Kim Dotcom

Mega-man: The fast, fabulous, fraudulent life of Megaupload's Kim Dotcom
Since the shutdown of Megaupload, stories have erupted about the life and exploits of the company's founder, a self-styled "Dr. Evil" of file sharing. Kim Dotcom's opulent digs, high-end cars, fondness for models and other Bond-villain-esque behaviors have been splashed across websites and have confused evening newscasts for the last week.
The man once known as Kim Schmitz (and as Kimble, and as Kim Tim Jim Vestor, and finally as Kim Dotcom), now awaiting extradition from New Zealand to face charges of conspiracy, money laundering and copyright crimes in the US, has enveloped his actual life in a cloud of hype and bluster that echo the worst of the dot-com bubble from which he took his new surname. In 2001, the Telegraph called Schmitz "a PR man's nightmare and a journalist's dream." 
Schmitz wrote recently that all that's behind him a now; a family man, he's even happy to meet the neighbors for coffee. But when New Zealand police arrived at his mansion outside Auckland last week with helicopters, they cut their way through various locks and then into the home's safe room, where Dotcom was reportedly standing close to a sawed-off shotgun, and they took him into custody. The worldwide raids, in which hundreds of servers were also seized in the US and in which 100 officers raided homes and offices in Hong Kong, have just added another layer to the legend Dotcom has been building since he was a teenager: god of hackers, Midas-touch Internet investor, Modern Warfare 3 multiplayer champion.
Dotcom has gone out of his way since the early 1990s to put himself at the center of media attention. He's certainly got it now. But who, really, is this guy?

The rise of Kimble

Kim Dotcom enjoys a bath with balloons.
Kim Dotcom enjoys a bath with balloons.
Born in Kiel, Germany to a Finnish mother (the source of his dual citizenship), Schmitz has made a career out of being larger than life, which seems appropriate for a six foot, six inch man (give or take an inch—his height seems to change with every report) who can fill a room with his 300+ pound presence.
In the early 1990s, Schmitz used a little hacker cred and the growing paranoia over the powers of computer hackers and phreakers to launch a media-powered cybersecurity career. He got his first shot at media stardom in 1992, when he was interviewed by the German press and then featured in a December Forbes article on the "computer hacker crime wave." Schmitz took advantage of the complete lack of technical credibility of reporters and the growing "hacker mystique" to create a sexier, more dangerous version of himself—if not James Bond, then Dr. No.
Giving his hacker handle "Kimble" (which he later claimed was taken from the name of the main character in the film The Fugitive), and claiming to be the leader of an international hacker group called Dope, Schmitz said he had hacked hundreds of US companies' PBX systems and was selling the access codes at $200 a pop, bragging that "every PBX is an open door to me." He also claimed to have developed an encrypted phone that could not be tapped, and to have sold a hundred of them.
In his 2001 interview with the Telegraph, he also claimed to have hacked Citibank and transferred $20 million to Greenpeace, a claim refuted by Greenpeace, which had a total operating budget of just twice that in the mid-1990s. (While Citi washacked in 1996, it was by a group of Russian hackers—and they certainly didn't donate the money to charity.) He also claimed to have hacked NASA and said that he had accessed Pentagon systems to read top-secret information on Saddam Hussein during the Gulf War.
There's no record to substantiate most of this; perhaps some of it is true. What he did do was steal phone calling card codes and conduct a premium number fraud similar to the recent rash of Filipino phreaking frauds. He bought stolen phone card account information from American hackers. After setting up premium toll chat lines in Hong Kong and in the Caribbean, he used a "war dialer" program to call the lines using the stolen card numbers—ringing up €61,000 in ill-gained profits.
Schmitz was also playing pirate in other ways. Andreas Bogk, a member of the Chaos Computer Club, recently told the Wall Street Journal that Schmitz set up a computer system for the uploading and downloading of pirated PC software, charging people for access. (Schmitz exposed the scheme in an interview with a German television news program, and it was subsequently shut down by Deutsche Telekom.)
Schmitz's efforts to branch into the "legit" world of security consulting with his security company Data Protect initially backfired by exposing his real identity—and by allowing it to be connected to his hacker credentials. InMarch of 1994, he was arrested by police for trafficking in stolen phone calling card numbers. He was held in custody for a month, then arrested again on additional hacking charges shortly afterward—and again released. In 1998, he was convicted of 11 counts of computer fraud, 10 counts of data espionage, and an assortment of other charges. He received a two-year suspended sentence—because, at just 20, he was declared "under age" at the time the crimes were committed.
But Schmitz used the notoriety to boost his security business. He soon landed a security contract for Data Protect with the airline Lufthansa by demonstrating an apparent security vulnerability—though according to claims by others in the German hacking community, his connection to the airline was thanks to collaboration with an insider there, and to the hacking skills of an accomplice.
The influx of cash began to fuel Schmitz's fantasy fulfillment engine, funding his love of fast cars and outrageous antics. He promoted his new bad-boy rich hacker genius image through a bizarre Flash movie called Kimble, Special Agent, in which his cartoon alter-ego drives a "Megacar" and then a "Megaboat" before breaking into Bill Gates' compound and riddling the wall behind Gates with a machine gun (spelling out "Linux" with bullet holes). The cartoon was the first public demonstration of Schmitz's obsession with all things Mega.

Rags to riches

A year after the slap on the wrist, Schmitz shifted his focus from phone fraud to Internet start-ups. Almost from the beginning, he made an effort to portray himself as someone who was Germany's answer to Silicon Valley—even if he was closer to than to Yahoo.
His first effort tied together two of the great loves of his life: the Internet and expensive cars. Schmitz and Data Protect led the development of a real Megacar, an Internet-connected luxury car system with its own Pentium III Windows NT on-board computer, router, multi-camera video conferencing system, and 17-inch display. To get the broadband bandwidth required, the car had 16 multiplexed GSM cellular connections.The sticker price started at $90,000.
While it went nowhere, the press it received helped raise the profile of Data Protect—and of Schmitz. Schmitz was also making other efforts to create his persona. In 1999, according to New Zealand's Investigatemagazine (PDF), he was spotted at the airport in Munich getting his picture taken inside parked airplanes, which he then used to suggest that he owned them.
Scenes from Kimble Goes Monaco Parts I and II
Scenes from "Kimble Goes Monaco," Schmitz's self-financed documentary of a lavish trip to the Monaco Grand Prix.
In 2000, Schmitz sold an 80 percent stake in Data Protect to the German conglomerate TÜV Rheinland, which bought the company for its "in-depth network expertise." Schmitz held the remaining stake through his new holding company, Kimvestor.
Flush with at least some cash, Schmitz was quick to burn some of it by waving his own particular brand of freak flag. He hired a German centerfold, a collection of other actors, a film crew, and fast car aficionados for a self-produced film called Kimble Goes Monaco—a road movie about a lavish trip to Monaco, including a cruise on a rented yacht. The movie was punctuated with Schmitz playing with expensive toys, and featured a bizarre Bill-Gates-is-spying-on-me subplot.
Kimble Goes Monaco
The image Schmitz was selling was embraced by the press, as a 2001 Guardian report on his "rags to riches" tale shows:
The 6'4", 18-stone giant has since divided his time between growing Kimvestor - which he values at 200m euros - and spending his money on top models, fast cars and expensive boats. He now owns a Challenger jet, a helicopter, several sports cars and a yacht. Last May he spent $1m (£684,000) chartering a 240-foot luxury yacht for a week, mooring it in Monte Carlo harbour for the Monaco Formula One Grand Prix and throwing lavish parties for guests including Prince Ranier of Monaco.
Mission Kimpossible
Whatever money was actually being made at this point is unclear, but Schmitz continued to live in grand style—or at least keep up the appearance of it. He kept adding to his collection of exotic and high-end cars, and also ran into trouble across Europe for his involvement in illegal street racing. He returned to race in the Gumball 3000 in 2003, pumping up his "Dr. Evil" image by bragging about bribing Moroccan police to stop a competitor—and then bumping that car when he discovered it was ahead of him.
Kimble drives dirty in 2003's Gumball 3000 road race
During all these exploits, Schmitz was using his Web presence to attempt to recruit volunteers to power his new Kimpire, offering promises of future wealth to those who made it to his "Hall of Fame," begging on his site for translation services, Web referrals, and even free Web hosting:
Every Kimpire profit will be shared between everybody who made it to the Hall of Fame. If you make substantial contributions to the Kimpire, your name will appear in the Hall of Fame. Earn respect, friendship, wisdom and money with your support for the Kimpire. The Kimpire can make you rich and the other way around. The Kimpire will rule the world, so better be a part of it ;-)… If you know cool words that include "KIM", send them. Some examples: Kimpire, Kimply the Best, Kimasutra, Kimmercial, Kimpany, Kimvestor, Kim Kong, Mission Kimpossible, Kimsalabim, etc. The best words will make it to the upcoming release of the Kimpire Lexicon.
A "Kimpire" might sound ridiculous, but it was about to become a reality—thanks to file hosting. 

Mega Millions

All this was prelude to what would become Schmitz's biggest actual moneymaking scheme—the file-sharing business. To get the project rolling, Schmitz decided it was time to make a full break from his highly dubious reputation. In 2005, the name of Data Protect was changed to Megaupload, and Schmitz registered yet another company—Vestor Limited—as its owner.
That wasn't the only obscuring going on. About the same time, Schmitz officially changed his legal name to Kim Dotcom—and used his Finnish heritage to register a passport under the name "Kim Tim Jim Vestor" as well, using the address of a step-sibling in Turku, Finland. The Vestor persona was used in the creation of Vestor Limited. It wasn't until 2007 that Kim Dotcom was revealed to be connected in any way to Megaupload, and his role as founder wasn't revealed until 2011 by the company.
But as Megaupload's profits mounted—both from legitimate use and from the alleged piracy of content ranging from music to porn—Dotcom's 68 percent share of the business finally made him the sort of money he had always acted like he had.
The US government, in its indictment against the "Mega Conspiracy," said that the company had pulled in US$175 million since its inception, most coming from users who paid for premium download accounts. The money was spent lavishly. By the time of the raid on Megaupload, Hong Kong police said that Schmitz had been renting an actual office in a luxury Hong Kong hotel suite that went for HK$100,000 (US$12,800)—perday.
The Mega offices in a Hong Kong hotel suite
The Mega offices in a Hong Kong hotel suite
Married with three children, Dotcom eventually decided to move to New Zealand to better enjoy his wealth and toys. He attempted to purchase a NZ$30 million (US$24 million) mansion outside Auckland—and smooth his path to residency through a NZ$10 million investment in government bonds, putting him into the "high investment" category for immigration. He donated heavily to the Christchurch earthquake relief fund and even paid for a half-million dollar fireworks display on New Year's Eve 2011 in Auckland.
Kim Dotcom's New Years' Eve fireworks spectacular
While waiting for the paperwork to clear, Dotcom arranged a lease of the desired Coatsville mansion from a company set up by the mansion's previous owner, the founder of the "Christmas hamper" layaway businessChrisco.
In the meantime, he erected a sign at the gate to the mansion's property declaring it to be "Dotcom Mansion," and started strewing the property with his toys—including cars with the now-infamous collection of vanity plates.
Kim Dotcom's Rolls, minus its vanity tag.
Kim Dotcom's Rolls, minus its vanity tag.
Some of Kim Dotcom's cars in his estate's garage before they were seized by police
Some of Kim Dotcom's cars in his estate's garage before they were seized by police
Photo illustration by Aurich Lawson (After Pen & Pixel)

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