SnapNames: Former exec. bid up domain prices

SnapNames, the largest reseller of Web site names, Wednesday alleged that a former top executive secretly bid on tens of thousands of domain name auctions over the past four years, driving up costs for other bidders and enriching himself in the process. SnapNames owner Oversee.net said it learned about a month ago that the executive had been bidding on its domain auctions in violation of company policy that bars employees from doing so. Mason Cole, vice president of Oversee corporate communications, said the executive was dismissed Monday. The company Wednesday began notifying affected customers via e-mail, stating that "in every auction where the employee's fictitious account submitted a bid which resulted in a higher price being paid by the winning bidder, SnapNames will offer a rebate, with 5.22 percent interest (the highest applicable federal rate during the affected time period), to affect customers for the difference between the prices they actually paid and the prices they would have paid, had the employee not bid in the auctions." The message to customers said the bulk of the bidding occurred on auctions between 2005 and 2007, but that the employee's bidding affected about 5 percent of total SnapNames auction since 2005. In addition, Oversee said the incremental value from the bidding represented approximately one percent of SnapNames' auction revenue during that same time. Cole said as many as 50,000 domain name auctions may have been affected by the employee's unauthorized activity. Cole declined to say what legal steps, if any, Oversee planned to take a result of the incident. "He had pretty deep insight into our system," Cole said of the former executive. "I don't know whether he was one of the founding employees [at SnapNames], but he was one of the first." Oversee alleges that the employee made the bids using an auction account set up under the alias "Hank Alvarez". The company says that in certain cases where the employee won the action, he paid for the domain and then arranged to refund a portion of the winning bid amount to his account.