'Body by Jake' Sues AOL for Fraud and Forgery
In a bizarre lawsuit that accuses AOL employees of forging signatures on legal documents and purchase orders, renowned bodybuilder and developer of the Cardio Cruiser Jake Steinfeld is suing AOL for breach of contract, unjust enrichment, fraud and failure to pay $295,000 in consulting and marketing fees, Google Watch has learned. In a complaint filed in New York federal district court earlier this week, Steinfeld's company Body by Jake alleges that AOL failed to pay Body by Jake after agreeing to promote Jake's new book "I've Seen a Lot of Famous People Naked and They've Got Nothing on You!" on AOL.com. Under the terms of two written agreements, Body by Jake agreed to provide consulting services to AOL. In exchange, AOL agreed to pay $595,000 to Body by Jake, crossmarket the book and host a contest on AOL.com. However, the complaint alleges, AOL never paid the agreed-upon sum and instead tried to dupe Body by Jake into accepting less money than it was owed. The complaint says AOL eventually paid $300,000, but only after AOL employees forged the signature of Body by Jake's representatives on contractual papers that changed the terms of the agreement. Under AOL's agreement with Body by Jake, AOL agreed to purchase 100,000 copies of Jake's book. The complaint states that not only did AOL not purchase the books, but also forged purchase orders and presented those receipts to the plaintiff. When Body by Jake attempted to resolve these problems with AOL's counsel in June 2006, AOL accused Body by Jake of conspiring with former AOL senior vice president Paul "Schmidi" Schmidman to defraud AOL. In the complaint, Body by Jake says AOL's lawyers accused Schmidman and Body by Jake of entering into a professional services agreement without AOL's authorization. "This lawsuit is based on unapproved actions taken by an employee who is no longer with the company," said an AOL representative. "It involved a small marketing project that went beyond the original terms of the agreement and did not properly follow internal corporate procedures. AOL will contest the lawsuit, its allegations and its damage claims, which we believe to be unfounded and misdirected." Schmidman left AOL in summer 2006 and was recently named chief operating officer of CenterStaging Musical Productions, where he manages the company's online portal, rehearsals.com. The terms of Schmidman's departure from AOL are unclear. Schmidman did not return several calls seeking comment. While at AOL, Schmidman was reportedly involved with AOL's Live 8 project, although that detail could not be confirmed. Live 8 aired in 2005 and was one of the Web's most successful streaming events at the time, credited by some as reinvigorating the ailing portal. Revealing advertising agreements AOL also agreed to pay 50 cents for every 1,000 unique visitors who viewed an AOL-owned site on which that video could be streamed or downloaded. What's more, AOL was to pay Body by Jake 20 percent of the ancillary income and gross sales from advertising revenues derived by AOL from the book promotion. Body by Jake alleges that AOL never disbursed those funds, either. Can AOL control its employees? But this lawsuit is only the most recent example of internal problems at AOL. In August, AOL's CTO Maureen Govern left the company after members of her staff released customer search data on the Web. AOL was also in the news this year when a customer wasn't allowed to end his account with the dial-up provider. The customer recorded his conversation with an AOL call center employee who refused to let him end his service. Two years prior, an AOL employee was charged with stealing the company's 30 million name subscriber list and selling it to spammers. **This article was updated to include comments from AOL and industry sources, and to provide background on AOL issues. |



Comments (24)
I find it ironic that in the quote from Paul Schmidman the word inaccuate is spelled "innacurate
Posted by Dan Shultz | September 19, 2006 12:55 PM
I find it ironic that in the comment above from Dan Schultz the word inaccurate is spelled "inaccuate"
Posted by Shadow | September 19, 2006 1:13 PM
I find it ironic that in the comment above from Shadow the name Shultz is spelled "Schultz"
Posted by Mucous | September 19, 2006 1:26 PM
Paul "Schmidi" Schmidman seems to have been acting as a representative of AOL in his actions with Body by Jake, and that there was no reason for Body by Jake to assume that he was not empowered to speak for AOL for contract negotiations. If a senior vice president of a company makes you a promise on behalf of the company, as far as I'm concerned, it's binding. AOL owes Body by Jake the remainder of the funds promised, and ought to throw in some restitution for this kind of BS game that seems to be coming out.
Posted by Dr_Zinj | September 19, 2006 1:39 PM
I find it ironic that the quote was about Schmidman, not by Schmidman and what the heck is an inaccuate?
Posted by BillB | September 19, 2006 1:41 PM
I find it moronic that the mispelled quote, attributed to "Schmidi", was actually a quote from "an industry source".
Posted by Your Conscious | September 19, 2006 1:43 PM
I can't believe that people actually took the time to check the spelling of an article and then comment on it. Does anyone work in this country anymore??? BTW You go Jake. Stick it to the man!
Posted by Bewildered | September 19, 2006 2:01 PM
Y eye aint nvr ceen aye buncha wakkoes spelin' aye buncha cow pie slingin' wiper snapin' holer swalerin' mud slingin' trayl dust eetin' krap az eue c hear! trie thiss wun en yur spelchekr boyz!
Posted by West_TX | September 19, 2006 2:06 PM
Gesundheit.
Posted by Steve Bryant | September 19, 2006 2:25 PM
I agree with Mucous. When a company has allowed an officer level executive (which is pretty much what 'Vice President' implies) to open negotiations with another party, that other party has a reasonable expectation that the officer is negotiating both in good faith and with authority to bind the company. In that respect, Schmidman was acting as an authorized agent. When a company fires an agent, or if the agent quits, it is the company's responsibility to make a public notice that they ahve withdrawn agency authority, and to make a reasonable effort to inform existing partners with whom that agent had dealings. It is not the responsibility of the other company to keep checking whether the agent still has authority to bind the first company. This is pretty much exactly the situation of typical cases taught in every law school and business school. If the facts are as presented in the article, then AOL owes Body By Jake the money. AOL should shut up and pay up. Instead, they seem to think they can exhaust BBJ's resources until BBJ folds up and agrees to a lesser settlement. Shame on AOL!
Posted by Gardog | September 19, 2006 2:27 PM
I find it moronic that anyone cares how inaccurate is speeeeled
Posted by head phones ex | September 19, 2006 2:41 PM
Someone needs to look up the word "ironic." It doesn't mean what you think it means.
Posted by Reliza | September 19, 2006 3:16 PM
I find it ironic that anyone agrees with "Mucous".
Posted by Other Fluid | September 19, 2006 3:18 PM
When I tried to cancel my membership with AOL after my free month was up (in 1993), I was on hold three separate times for forty-five minutes, an hour three minutes, and thirty seven minutes. My letter complaining about it was never answered, and I ended up getting charged another month. As far as I'm concerned, AOL has always been about screwing people for money, and outside of Nevada that's illegal. I hope BBJ ends up owning AOL.
Posted by major AOL hater | September 19, 2006 4:07 PM
AOL has always treated its customers like crap so good luck to B by J ' No Company deserves it more than AOL C
Posted by CotuitC | September 19, 2006 10:40 PM
Go Jake! Back in the 90s after AOL's "all you can use" monthly fee debacle when nobody could get online ... I called to cancel and was given the runaround. Finally, took down all info on the rep I spoke to, time, etc. and was shocked to find on my next credit card statement they went ahead and billed me again. I called their "service center" and was told I never cancelled and that I was lying. I quoted chapter and verse of times, names, and they still denied it. Called the credit card company to contest the charge and was told ... "they do this all the time. We will take it off; no problem." Every now and then I am asked to respond to a survey as to how likely I would be to do business with AOL and I always say ... never. Screw me once but not again. Why people continue to use them when so many other better providers are out there amazes me. BTW, so happy to see the spelling police frequent this site. Was wondering where they were hanging! ;-)
Posted by RED | September 19, 2006 11:20 PM
Correct spelling is a sign of intelligence and attention to detail. Not caring about correct spelling is a sign of ignorance, stupidity or both.
Posted by The Truth | September 20, 2006 12:19 AM
I, like many others, will NEVER do business with AOL again. Take their socks Jake.
Posted by Darst | September 20, 2006 7:41 AM
I am glad we have so many spelling experts, I am glad AOL was'nt spelled wrong. AOL needs another lawsuit, it's the only way they listen. Here's one for the small guy! Please the excuse that company procedures were not followed by a employee does'nt work as courts have already ruled agianst that lame excuse.
Posted by Rochester | September 20, 2006 9:36 AM
I have a question for Major AOL hater. Why do you "hope BBJ ends up owning AOL"?
Posted by Curosity | September 20, 2006 10:47 AM
I kinda think it would be cool if there were no countries and people could just go anywhere they want to go and do whatever it is that makes them happy without being hassled by anyone. It sucks that there's so many laws and weird restrictive shit that makes it so we can't do what we want, within reason of course. That is to say, people should not rape, molest, mug or otherwise hurt each other. So, I guess pigs are a necessary evil, but they don't have to be pigs; they can be men appointed to the position, by something like a jury of their peers, and actually serve and protect. As far as career criminals, or repeat offenders, they should all be sent to Manhattan. And a giant wall should be erected around it. The dregs of society must somehow learn to live amongst themselves, with only Isaac Hayes to lead them. And Lee Van Cleef would be in charge of guarding the wall, or something. I don't know. I'm sure there's a lot of nuances to this sort of argument, and I'm not going to pretend to know about it.
Posted by mr. smith | September 21, 2006 8:45 PM
Gee, Steve thanks for an article that if it wasn't an AOL story would be considered bizarre. OK, it IS bizarre. The idea that a huge company's defense is essentially 'we have no control over the officers of our company' is past ludicrous. As others have noted, AOL is known for ahhhhhhh 'low business ethics'?. On another note, I suggest that eweek.com get one of those 'forum-spellchecker add-ins' to appease the 'spelling police' who can then rant about people who use the 'ignore' option too often.
Posted by mr jeex | September 22, 2006 11:46 AM
Many years ago AOL sent me an unordered guide book and fraudently charged my credit card, refusing to refund or take back the book. The present news is not surprising.
Posted by Defrauded | September 23, 2006 3:00 AM
I couldn't agree more with most of the comments posted above. I was glad that I had never ever tried one of those lame AOL offers, thanks to my experience with Sprint, another company with no ethical values with crappy products (pretty much bad reception anywhere with a PCS phone back in early 2000s). The funny thing was that they were supposed to have the best wireless reception in the area I was living at the time since they had their own towers there. Sprint also over charged me, in fact, they were billing me the same bill 3 times!!! I actually paid them twice before I found out about it. I’ll spare you from all the gruesome details but it took 8 calls and 2 faxes of my checking statements (which they claimed that they never received it, yeah right, give me a break!!) before I can get it straighten out. Trying to cancel is another royal pain on the butt. I ended up matching to a local store and made a scene before I can persuade the store rep to call in and cancel it for me. A word of advice to those who are current Sprint customers, watch closely on your bills because you don't want to go through the same thing I did!!! I think the first thing business school should teach these corporate hot shots the word "ethics" and the meaning behind it!! Personally, I wanted to see major boycott on companies like AOL and Sprints. These corrupted brands should cease to exist!!!
Posted by Spin | September 23, 2006 3:40 PM