Click Fraud—Allen Tam

Allen Tam, a Daly City, California, man has been indicted by a federal grand jury on conspiracy, wire fraud, and mail fraud charges related to a “click fraud” scheme.^[1] Click fraud is the term that is used to “describe the practice of skewing pay-per-click data by generating illegitimate ‘clicks’ or ‘hits’ on internet ads.”^[2] While it is often discussed in connection to Google’s AdSense program^[3] the particular scheme alleged in Mr. Tam’s indictment is centered on an internet firm named FreeRide.com^[4]

According to the indictment, FreeRide.com “offered a ‘rewards’ program to Internet uses based on various on-line activities, including viewing Internet advertisements (or “banner ads”), completing consumer surveys, and purchasing products on-line.”^[5] By viewing advertisements and taking surveys, FreeRide.com members “could redeem accumulated points for products from … various retailers,” such as Amazon.com, Sharper Image, and CDNow.com.^[6] Members of FreeRide.com had to agree to conditions specified in the terms of service, one of which was the prohibition on “using an automated system, device or program or other similar method (including ‘robots’ or ‘scripts’) to accumulate FreeRide points or to emulate and fabricate search usage and web site visits without individual manual navigation.”^[7] Mr. Tam allegedly took source code from his employer and developed a “robot” to accumulate points for him and others.^[8] This behavior, according to the government, constituted conspiracy, mail fraud, and wire fraud violations.

Mr. Tam is the only person indicted in the scheme, though there are allegedly at least three other individuals named in the indictment.

This is certainly not the first instance of an individual being prosecuted for what is essentially a breach of contract, and it fits within the definition of fraud: a scheme or artifice allegedly was devised to defraud, and the wires and mails were allegedly used to carry it out.
If Mr. Allen pleads guilty or is convicted by a jury, he may be eligible for a “sophisticated means” or “special skill” enhancement under the US Sentencing Guidelines. Section 3B1.3 allows the sentencing judge to increase the offense level of a defendant by 2 if he “used a special skill, in a manner that significantly facilitated the commission or concealment of the offense.”^[9] Section 2B1.1(b)(9)(C) allows a judge to increase the offense level of a defendant by 2 if “sophisticated means” were used to execute or conceal the offense.

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[1] Josh Richman, Bay Area Man Indicted in Online “Click Fraud,”, Oakland Tribune, Mar. 30, 2006. See also, Man Charged Over Click Fraud Scheme, The Register, Apr. 3, 2006; Hacker Codes “Robot” Program to Fraudulently Click On-Line Rewards Program, Linux Electrons, Apr. 3, 2006; US Attorney’s Office, Daly City Man Indicted in “Click Fraud” Scheme, Mar. 29, 2006.
[2] The Register, supra note 1.
[3] See, e.g., Stefanie Olsen, Exposing Click Fraud, News.com, Jul. 19, 2004; Adam Penenberg, Click Fraud Threatens Web, Wired, Oct. 13, 2004;Brad Stone, When Mice Attack, Newsweek (via MSNBC.com), Jan. 24, 2006; Burt Helm, Click Fraud Gets Smarter, Business Week, Feb. 27, 2006.
[4] The Register supra note 1.
[5] United States v. Tam, No. 5:06-cr-00208, Indictment 2, (N.D. Cal. 2006) (available through PACER).
[6] Id.
[7] Id. at 3.
[8] Id. at 4-6.
[9] See also United States v. Prochner, 417 F.3d 54, 61 (1st Cir. 2005) (defendant used “bots” to check stolen credit card numbers for validity).