4Chan Hacker Who Took P&G for $200K Arrested; Why This Hurts Your Mom

Last Updated May 18, 2011 10:53 AM EDT

The arrest of a 4chan hacker for allegedly creating counterfeit grocery coupons that ripped off Procter & Gamble (PG), among others, for hundreds of thousands of dollars underlines one of the stranger trends in marketing: The new dominance of the humble coupon. Groupon, Living Social and others have made coupons trendy. Once the province of... well, your mom, basically, coupons -- via email, Facebook or Google -- are advertising's hot new device.

Coupons were once controlled by newspapers. In some towns, the Sunday paper, heavy with coupon inserts, might represent the paper's entire profit margin. But the federal wire fraud and counterfeiting charges brought against Lucas Henderson (pictured below), 22, of Lubbock, Tex., are another nail in the print medium's coffin. We we all know instinctively that newspapers are doomed, but this case highlights the specific economic basis of their demise.

Henderson was caught because News America Marketing, the troubled coupon unit of Rupert Murdoch's News Corp. (NWS), began to notice unusual redemption patterns among the coupons it provides online at SmartSource.com. The only reason it is able to notice those patterns is because printing an online coupon at SmartSource requires users to download a special print widget that prevents users from "printing" a coupon to a PDF file -- which can be printed multiple times.

Henderson allegedly found a way around the software, allowing 4chan users -- many of whom are notorious hackers linked to the "Anonymous" movement, whose members wear masks to protests (pictured above) -- to print off multiple coupons for PowerBars, Campbell's Soup, SmartOnes TV Dinners, and Magic Hat Beer. Prosecutors allege:

For example, in or about December 2010, $200,000 worth of counterfeit coupons for Tide laundry detergent were redeemed by consumers over a two to three week period. Proctor & Gamble, which manufactures Tide and is the single largest coupon issuer in the United States, has never issued a single online print-at-home coupon.
Your mom's guilty past
Before online coupons became available, coupon "fraud" was rampant -- if trivial -- and committed largely by, well, your mom. The unspoken flaw in the newspaper coupon system is that if a consumer buys multiple Sunday newspapers, he or she can easily recoup the cost by using multiple sets of coupons. That's how extreme coupon clippers can get $800 worth of shopping for just $8.

What the SmartSource system does is produce data that newspapers don't. Thus when Henderson and his pals started allegedly redeeming multiple coupons for Tide and Magic Hat -- they like to party, but they keep it clean! -- News America knew instantly that something was wrong. Ten years ago, there would have been no way to know.

Now your mom will just have to obey the law like the rest of us, even if it means using fewer coupons.


Image by Flickr user gaelx, CC