A web of trouble
Last update: June 4, 2005 at 7:16 PM
A web of trouble
Warren Wolfe, Star Tribune
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
Star Tribune All rights reserved.
425 Portland Av. S., Minneapolis, MN 55488 612) 673-4000
A web of trouble
Warren Wolfe, Star Tribune
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
Star Tribune All rights reserved.
425 Portland Av. S., Minneapolis, MN 55488 612) 673-4000
posted by josh at 8:33 PM
