Prosecutors provided additional details about Ed Rosenberg’s role in the Amazon bribery scheme to which he pleaded guilty in federal court on March 30th to one count of conspiracy, when he admitted he had bribed Amazon employees.
Rosenberg, a consultant who helped suspended Amazon sellers get reinstated on the platform through his company Effyzaz, Inc. and helped sellers through a group he founded called the Amazon Sellers Group (ASGTG), is scheduled to be sentenced next week. On Friday, the government and the defendant submitted their respective sentencing memoranda.
One surprising detail revealed in defendant Rosenberg’s filing was his pledge to perform an unusual form of “community service” after sentencing: mentoring new online sellers:
“Notably, Mr. Rosenberg also pledges to perform 260 hours of community service by providing five 30-minute mentoring sessions each week for two years to assist, guide, and mentor individuals starting e-commerce sales businesses.”
In 2020, the government charged six people with conspiracy and wire fraud in connection with the multi-million dollar scheme to bribe Amazon employees and contractors in order to get third-party sellers’ accounts reinstated, among other things. Prosecutors alleged the activity had secured an unfair competitive advantage worth over $100 million.
While two of the six defendants have been sentenced in the case to date with both receiving prison sentences, prosecutors joined Rosenberg’s defense and the Probation Office in recommending a sentence of two years of probation, including 12 months of home detention with electronic monitoring, a $100,000 fine, and a $100 special assessment.
The US Attorney’s Office for the Western District of Washington explained mitigating factors that it said distinguished Rosenberg from other defendants in the case:
“Rosenberg operates a legitimate consulting business that has served many seller clients through legal means, with the conduct charged in this case constituting a significant aberration from those legal business activities.
“Shortly before pleading guilty in this case, Rosenberg used his extensive Amazon seller network to disseminate a public apology urging others not to engage in such illegal tactics on the Amazon Marketplace.
“In addition, although Rosenberg participated in illegal tactics to bolster the business of his clients, there is no evidence that Rosenberg participated in co-conspirators’ direct negative attacks on competing seller businesses.
“Furthermore, unlike co-defendants Joseph Nilsen and Hadis Nuhanovic, Rosenberg has not been convicted of any additional tax offense.”
The government mentioned codefendant Joseph Nilsen throughout its July 7th sentencing memorandum for Rosenberg and cited an example of the alleged activity: “in one instance, Rosenberg and Nilsen discussed a $6,000 bribe to one of Nilsen’s contacts within Amazon to reinstate a suspended seller’s account” and, it wrote, “As planned, the bribed Amazon employee reinstated the seller.”
The government alleged Rosenberg also had his own contacts inside Amazon and paid bribes directly:
“For example, between about April 2018 and December 2018, Rosenberg made 33 different payments totaling $18,650 to an Amazon employee in Amazon’s Seattle office, in exchange for misappropriated and confidential information about various 3P seller accounts. PSR ¶ 34. Rosenberg made those payments using a PayPal account that he had set up in a fake name.”
(PSR is a reference to the presentence report prepared by the Probation Office to help the Court determine sentencing; PSRs are not made public.)
But while the defendant’s sentencing memorandum recognized that his conduct was against the law (“and he fully accepts responsibility for his actions”), it also painted him as an advocate for desperate sellers whom Amazon suspended without transparency or adequate means to appeal the suspensions:
“While Amazon did maintain a formal appeals process, its automated notices of suspension left many sellers without adequate information to determine what the alleged wrongdoing was, preventing sellers from effectively and directly responding to a suspension and appealing or correcting the alleged misconduct.”
Interestingly, the memorandum provides insight into how the defendant may have gotten started in the consulting business: Rosenberg had been selling motorcycle audio equipment on Amazon, “the only substantial source of income for his family,” when he found himself suspended by Amazon in 2015, leaving him unaware of how to get his account reinstated.
It went on to describe the role Amazon “annotations” played in helping suspended sellers to get reinstated:
“Given that these sellers were in the dark about their alleged wrongdoing, how to correct the problem, and when Amazon might recognize its error, sellers were frequently desperate and sometimes would resort to illegal means to obtain the information necessary to accomplish the goal of saving their businesses.
“The ‘information necessary’ was the annotations. Annotations were an internal record of the reasons a seller was suspended. Having the annotation—the written record of exactly why a seller’s account had been suspended—was very helpful in devising a plan of action to get the account reinstated or explain to Amazon why the account had been wrongly suspended.”
And the defendant pointed a finger at Amazon employees, alleging they had begun selling annotations on the sly:
“Recognizing the value of this information, Amazon employees began selling Amazon’s internal annotations, which were Amazon’s protected property, which then became available for purchase online via advertised services (on Google), creating, in effect, a sort of black market for annotations. Use of the illegally obtained annotations became ubiquitous. Consultants routinely used these black-market annotations to devise plans of action to address the violation to accomplish reinstatement, point out to Amazon that no violation had actually occurred and that the suspension was in error, or, in some cases, determine that a reinstatement was not possible and so inform the seller.”
Prosecutors alleged that defendants Rosenberg and Nilsen referred to the annotations using the code word “fruit” and included a screenshot of an email in which Nilsen allegedly wrote, “Fruit plants planted on acres of land with an abundance of daily pickings.”
Prosecutors also cited another activity allegedly used by the defendants to get Rosenberg’s clients reinstated on Amazon:
“Rosenberg also purchased forged invoices from Nilsen so that sellers could submit them to Amazon as proof that the products had been obtained from approved suppliers, in order to obtain approval to sell the products. PSR ¶ 35.
But while prosecutors alleged other codefendants had engaged in negative attacks against certain sellers, such as submitting false complaints, procuring negative reviews, or defacing product listings, they said there was no evidence that Rosenberg participated in negative attacks.
In their memorandum, prosecutors described harm the alleged behavior caused:
“Rosenberg and his co-conspirators caused harm to competing small business and consumers, as well as the integrity of the Amazon Marketplace, through their bribery and fraud. Using bribery to obtain reinstatement of sellers’ ability to sell on the Amazon Marketplace could result in the reinstatement of sellers facing complaints by consumers or intellectual-property holders, when those sellers would not have been reinstated if their application had been evaluated by a neutral Amazon employee. Submission of forged supplier invoices to obtain approval to sell restricted products could permit sellers to distribute counterfeit or even unsafe products. There is no evidence that Rosenberg facilitated the sale of any particular products that were unsafe, but that was a risk inherent in circumventing Amazon’s restrictions that were designed to protect the safety and integrity of products. Manipulating reviews further deprived consumers of information about the products they were buying. In addition to harming consumers, the bribery and fraud scheme unfairly disadvantaged competing small businesses that were following the rules.”
Rosenberg fought the charges for over 2 years and had been scheduled to go to trial on May 15, but he entered into a plea deal with federal prosecutors 2 months prior to the trial date. The government stated in Friday’s memorandum:
“While the indictment was pending, Rosenberg repeatedly attacked the indictment and proclaimed his innocence using social media. Rosenberg referred to the indictment as a hoax and a phony crockdictment, and he accused law enforcement of failing to do basic fact-checking.
“However, shortly before his guilty plea, Rosenberg circulated a public apology on Twitter and various other social media accounts that are viewed by a large number of individuals in the Amazon seller community. PSR ¶ 42. Rosenberg stated that he would be pleading guilty to a federal crime for bribing Amazon employees and discouraged others from paying bribes to Amazon employees. Id. He also admitted that he had made false statements about the indictment previously and disavowed those statements.”
The entire case paints a not-too-flattering picture of Amazon, from the descriptions of desperate sellers whose livelihoods were in jeopardy over allegedly unexplained suspensions to the allegations that its own employees had accepted bribes.
When the Department of Justice publicly filed the charges against the six defendants on September 18, 2020, Amazon released a statement, where it wrote in part:
“Amazon has systems in place to detect suspicious behavior by sellers or employees, and teams in place to investigate and stop prohibited activity. We are especially disappointed by the actions of this limited group of now former employees, and appreciate the collaboration and support from law enforcement to bring them and the bad actors they were entwined with to justice.”
Codefendant Nuhanovic was sentenced in February of this year, while Nilsen is scheduled to be sentenced in September. Codefendant Rohit Kadimisetty was sentenced last year, and Kristen Leccese is also scheduled to be sentenced in September. The sixth codefendant, Nishad Kunju of Hyderabad, India, has not been arraigned on the indictment, according to the government.
