Feb. 14 (Bloomberg) -- Benjamin Edelman knew his way around the Internet’s ethical thickets at an early age. He also knew how to make that knowledge pay.
As a 19-year-old Harvard sophomore, he earned $400 an hour as an expert witness for the National Football League against unauthorized Web broadcasting. By his senior year, the American Civil Liberties Union enlisted him, at $300 an hour, to oppose the government’s use of information filters in libraries.
Now on the faculty of Harvard Business School, Edelman epitomizes a new breed of sleuths for hire, enforcing norms of online behavior.
Edelman is “an astonishing scholar of the Internet,” said Alvin Roth, a Nobel-prize winning economist, who was a mentor and colleague at Harvard Business School. “It’s the Wild West out there, and Ben is the sheriff.”
Edelman, a 33-year-old associate professor, mixes scholarship, lucrative consulting and a digital version of the 1960s-style activism of his family, including his aunt, Marian Wright Edelman, the civil-rights and children’s advocate. While he ferrets out misdeeds on the Internet, his multiple roles have put his own work under scrutiny.
“The Internet is what we make of it,” said Edelman, who arrived at his Ivy League office in jeans and sneakers this week after commuting by bicycle through Boston’s snowy streets. “We can shape it through diligence, by exposing the folks who are making it less good than it ought to be, like the neighborhood watch, or the busybody neighbor who yells at you when you throw your cigarette butt on the street.”
Unlike bloggers who have long formed a volunteer police force on the Internet, Edelman embarks on paid crusades that raise questions about whether he can remain objective in his academic roles as scholar and teacher.
In a move that elevated his profile in the stock market and prompted a dispute about his financial disclosures, he published a blog on Jan. 28 that accused Internet video and advertising purveyor Blinkx Plc of using hidden software to inflate traffic counts. His posting caused Blinkx shares to fall the most in the company’s history.
Blinkx responded to Edelman’s broadside with a statement saying the company “strongly refutes” his assertions and conclusions. Harvard pressed Edelman to say more about his clients, prompting him to disclose that they included two U.S. investors. Their names still aren’t known.
While taking on some giants, such as Google Inc. and Facebook Inc., Edelman has worked for others, including Microsoft Corp. Google has said that he’s biased and hasn’t been forthright enough in disclosing that he’s a paid consultant to Microsoft.
Edelman earns more from his outside activities than from his salary as a professor, which isn’t unusual among business school faculty, he said. His work has influenced the Federal Trade Commission and New York Attorney General’s Office, among other regulators, in their crackdown on companies.
“He’s part academic and part cyber sleuth,” said Ken Dreifach, former chief of the Internet bureau of the New York Attorney General’s Office, whose prosecutors tracked Edelman’s blog posts as they filed cases against companies using malicious software.
Edelman is expected to come up for tenure, academia’s guarantee of job security, at the end of 2015. While his credentials include a law degree and economics doctorate, both from Harvard, his attacks on companies are unusual at the business school, an institution better known for case studies celebrating successes.
When he was considered for promotion to associate professor from assistant a few years ago, Edelman said an outside reviewer contacted by the school wrote a critical letter: “Ben seems not to like businesses. I thought this was a business school.” He was promoted anyway.
Edelman’s outside consulting work has been encouraged by Harvard and is helping make the Internet a better place, said Brian Kenny, Harvard Business School’s chief marketing and communications officer.
Since his Blinkx post, entitled “The Darker Side of Blinkx,” the shares have declined 37 percent. After its initial statement reacting on Jan. 30, the company has declined to comment.
Edelman initially wrote that he prepared the research for an unnamed client. Harvard Business School said that disclosure wasn’t enough under its conflict-of-interest rules, which require professors to disclose paid and unpaid outside activities related to work available to the public. Harvard asked Edelman to say more.
In his enhanced disclosure, Edelman said last week he was paid by two U.S. investors that jointly hired him. He didn’t name them, say how much he was paid or whether they were betting against, or shorting, the stock.
In interviews, Edelman said his contract prohibited him from disclosing that information. Harvard is satisfied with his revised disclosure, Kenny said.
Several investment firms either increased or established short positions in Blinkx before the blog was posted, according to European regulatory filings.
Jeffrey Cohan, a portfolio manager at Ohanesian/Lecours Investment & Advisory Services in West Hartford, Connecticut, said Edelman should disclose the names of the investors, whether they were shorting the stock and when. Cohan and some of his clients own what he called “a small position” in Blinkx.
“If you don’t disclose it, it certainly looks and smells like there’s something more devious going on,” Cohan said. “Right now, as an investor, that’s what bothers me.”
Any outside payments to scholars can tarnish their research, said Cary Nelson, a former president of the American Association of University Professors. Ideally, professors would be paid only by their college, said Nelson, co-author of an AAUP report on the influence of industry on academics, which is being released this year.
If professors do take outside money, the names of clients and amounts paid should be publicly disclosed, Nelson said. “Disclosure means the name of the company for whom you work and the amount of money you receive,” said Nelson, an English professor at the University of Illinois at Urbana-Champaign.
In a two-hour interview at his Harvard Business School office, Edelman acknowledged that his earlier disclosure was insufficient but said he has now revealed enough. The school’s requirement for public disclosure of outside activities makes an exception for professors who have signed confidentiality agreements, he said. They should “provide as much information as permissible,” according to the policy.
‘Bridge Too Far’
“I’m not prepared to push all the way,” Edelman said. Investors “have to disclose how many shares they own, what position they have, what color are their socks and underwear. It’s a bridge too far for me. I view it as material they can keep confidential.”
As Edelman sees it, if he insisted on complete disclosure, no one would be likely to hire him, depriving the public of in-depth investment research. He does insist clients allow him to make his finding public, so all investors can benefit, he said. He doesn’t take stock positions in companies that he writes about, he said.
The controversy over who paid him shouldn’t overshadow the quality of his work, he said.
“People who read my article thought it was so good that they didn’t want to own shares in this company anymore,” he said. “It must be that people were persuaded by my work and, at this point, the work should stand on its own merits.”
In his office, Edelman sat before four huge computer screens. Trim and intense, he runs seven or eight miles a day and even has instructions on his website about how to jog around airports while traveling.
About twice a month, Edelman talks by phone with investors looking for his input about companies. He has charged $800 an hour, and doesn’t ask whether they are betting for or against the company, he said.
He said his main outside work, not done for Wall Street, is a kind of automated fraud-detection service for advertisers. Edelman runs 150 computers 24 hours a day at 80 sites in nine countries. The computers look for malicious software, including the kind that makes his clients pay for inflated Web traffic. His system exposes such tricks as secretly bouncing a consumer around to multiple sites or showing them unsolicited pop-ups.
Edelman has 30 or 40 clients, who pay him each time his computers generate reports for them -- about 1,000 times a year. Edelman won’t disclose the fee for each report.
One of his clients, Microsoft Corp.’s digital-crimes unit, says his techniques have helped the company combat malicious software and alert law enforcement.
“He’s the Doogie Howser of online investigative work,” said Microsoft’s Richard Boscovich, referring to the fictional TV teenage physician. Boscovich, a former federal prosecutor, is assistant general counsel at the software company’s digital-crimes unit.
Edelman traces his entrepreneurial streak to middle school. He said that, at 13, he wrote a program that helped clients choose the right components when buying Gateway personal computers, whose online offerings came in a bewildering array of configurations. He would have each device shipped to his house, where he would show the clueless how to use it. His fee: $10 an hour.
He raised his price in high school, charging $25 an hour to help a bookstore and other businesses set up databases and websites. One of his key clients: Stand for Children, a nonprofit founded by his aunt, an advocate for preschool and early education.
His uncle Peter, a law professor, was an assistant secretary of the Health and Human Services Department in the Clinton administration before resigning to protest a law that required welfare recipients to work. His father, Daniel, is a civil rights attorney specializing in employment discrimination; his mother, Toby, is a lawyer who focuses on preventing abuse in nursing homes.
“There’s a spirit of righteous indignation” about Edelman, said Terence Ross, a partner at Crowell & Morning in Washington, who has hired the professor as an expert witness.
Edelman’s valedictory high school address in 1998 urged classmates “to embrace our technological future.” Fascinated by the Microsoft antitrust trial, he snagged a summer job before attending Harvard at its Berkman Center for Internet and Society, which ultimately led to his work as the NFL and ACLU expert witness.
William Iverson, outside counsel for the NFL, said Edelman helped win a court injunction stopping unauthorized Internet broadcasting of games just a week before the Super Bowl.
Edelman’s youth posed an unusual challenge for opposing counsel, Iverson said.
“How do you attack a 19-year-old whiz kid without looking like a bully or an idiot?” he asked.
At Harvard, Edelman graduated summa cum laude and Phi Beta Kappa, and wrote his senior thesis on how Amazon.com Inc.’s recommendations affect book sales. After earning his law degree and economics doctorate, he joined the business school faculty in 2007. He teaches a popular course called “The Online Economy: Strategy and Entrepreneurship.”
Along with scholarly research on subjects such as the scarcity of Internet addresses, Edelman has thrown many darts at businesses, large and small.
In various articles and blogs over the years, Edelman has said Google discourages advertisers from using competitors, favors its own services during searches and has tracked browsing even after users have sought to disable the feature.
In 2010, after Edelman criticized Google in an appearance at an Association of National Advertisers conference, the group’s head sent an e-mail to attendees, apologizing that his group didn’t disclose that the professor was a paid Microsoft consultant. The next year, Google publicly said Edelman had a bias because he was “a longtime paid consultant for Microsoft.”
Edelman’s “only bias is toward protecting consumers from cybercriminals and other shady characters online,” said Jack Evans, a Microsoft spokesman. Edelman is “certainly transparent” about having the company as a client, Evans said.
Edelman published a blog post yesterday called “Secret Ties in Google’s ‘Open’ Android.” Little-known contract restrictions show that, to obtain Google mobile phone applications, manufacturers “agree to install all the apps” that the company specifies, “with the prominence” that it requires, he wrote. At the top, his disclosure reads, “I serve as a consultant to various companies that compete with Google.”
Google spokeswoman Niki Christoff declined to comment.
Edelman has also taken Facebook to task, revealing in 2010 that the social network leaked user names and other personal details to advertisers. At the time, the company called it an “oversight” that it “quickly fixed.” A Facebook spokesman declined further comment.
Edelman’s greatest attention has come from fighting “adware” and “spyware” -- software planted stealthily on customers’ computers. He looks for companies that use it to generate fake Internet traffic, defrauding advertisers, as well as to generate pop-up ads, some pornographic.
In 2006, after Edelman wrote about Zango Inc., an Internet advertising outfit, the company agreed to pay $3 million to settle an FTC complaint that it used unfair and deceptive methods to put advertising software on consumers’ computers. Blinkx uses Zango’s software, Edelman said in his Jan. 28 blog post that led to the shares’ collapse.
David Vladeck, former director of the FTC’s consumer-protection bureau, said his agency also followed his work and sought out his advice. Now a Georgetown University law professor, Vladek groups Edelman with a small cohort of Internet activists and technical experts, including Ashkan Soltani and Stanford University’s Jonathan Mayer, both known for their crusades for consumer privacy.
To this list, Edelman would add his friend Aaron Swartz, the programmer and free-information activist who killed himself last year while facing charges that he broke into the Massachusetts Institute of Technology’s network to download millions of research articles. Edelman and Swartz worked at Harvard’s Berkman center and were protégés there of legal scholar Lawrence Lessig.
Edelman won’t temper his corporate investigations as his tenure case nears, he said.
“I am who I am,” he said. “I can’t stop being me.”
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