Chapter 43: Rancho Santa Fe

The following is an excerpt covering the epic fight Gary Kremen had with his nemesis Stephen Cohen over Cohen's stunning $3m mansion. If you enjoy this and other excerpts, please consider buying the whole book.

"Welcome to the house of Stephen Cohen!" exclaims Gary Kremen as he strolls out onto the veranda into the warm Californian sunshine more than two years after the $65 million judgment.

Stretching into the distance are the hills of one of the most exclusive neighborhoods in the world, Rancho Santa Fe in San Diego. Past the hills, out of sight, is San Diego itself, the first American city north of the Mexican border. Off to the west is Highway 5, stretching all the way up the American west coast – from Mexico to Canada past Los Angeles, San Francisco, Portland and Seattle. Just beyond that lies the Pacific Ocean.

"This is where he used to sit in the early hours of the morning, figuring out new scams, working out how to screw people," Kremen explains from his patio chair with a mixture of awe and disgust. Behind him, the hot tub lazily bubbles away, and from it steps lead down to a large, curved swimming pool. Beyond the pool lies an immaculate landscaped garden and a sand volleyball court, while off to the left there is a combined tennis and basketball court. The place is at the same time impressive and welcoming, qualities that are carried over into the huge Mexican-style villa behind. This was the house, the extremely exclusive residence, of Stephen Cohen, but now it belongs to Gary Kremen.

Rancho Santa Fe has a strict no-street-light policy. If you drive in the neighborhood after dark and turn the car lights off, the wall of trees lining the road and marking estate boundaries produce an unnerving darkness. Pitch black. This lack of artificial light, the quietness, the gentle cricket buzz and the soothing warmth creates an atmosphere of serenity that lets the mind wander untroubled. It is the perfect spot for recuperation and for clear, focused thinking.

It is all too easy to picture Stephen Cohen sitting here planning his next scheme to separate people from their hard-earned cash. And sitting here, you suddenly understand why he fought so hard and then exploded with such rage when Kremen managed to pull ownership away from him.

Cohen bought the six-bedroom, eight-bathroom bungalow at 17427 Los Morros for $3 million in November 1998. Four months earlier, Kremen had finally come good on his threat to sue over the theft of, so Cohen was looking for somewhere to invest and hide the money he had made from it. He settled, naturally enough, on property. Perhaps the name appealed to him: morro means "mouth" in Spanish – the tool of the con man's trade.

No sooner had he bought the house than he signed over ownership to a company called Montano Properties, a company that made no goods, offered no services, had no shareholders, employed not a single member of staff, produced no reports, and made not one single dollar in the course of its existence. It was just another Stephen Cohen shell company, which existed solely as a place to hide his ill-gotten gains.

But Kremen had found it. Figuratively at least. "I found out about it and pulled the title records, and realized he was associated with it and owned it, and I realized it was bought for like $3 million. So I realized it had to be worth something." Kremen decided to go and check out where the man who had stolen his domain lived. "But I didn't know Rancho Santa Fe. I was trying to find the house and I got lost, stuck on Black Mountain Road. I kept circling and circling and I couldn't find it, and it was like two in the morning so I went to sleep on the edge of the highway. I know the space where I slept. There was one bit of cover. I slept on the ground." Kremen's failure to find the house wasn't that ridiculous – the whole place is pitch black at night, and the road it is in – Los Morros – changes name several times along its length for no obvious reason.

It wasn't long before the house became the focus of all of Kremen's – and hence his legal team's – efforts. It was the one thing of Cohen's they were sure they could get, and, what's more, it was so personal to Cohen – it was his home after all – that Kremen wanted it all the more. Kremen wanted to inflict some pain.

The result was an extraordinary series of complex legal maneuvres and counter-attacks. Cohen tried several times to shift ownership of the house, but was caught each time. He then persuaded an old criminal friend, James Scott, a convicted counterfeiter, to pose as the president of Montano Properties, and persuaded another criminal associate, Jack Brownfield, to say he had been renting the mansion's guesthouse with a long-term non-cancellable lease. That was also picked apart and exposed as untrue. And finally, when all else failed, Cohen forced Montano Properties through the bankruptcy courts, calling Kremen the evening before to tell him what he was doing and assuring him he would never get the house.

But Kremen fought every inch of the way. Unlike his money, Cohen could not wire a six-bedroom mansion across the border. All he could do was put obstacles in Kremen's path, which Kremen would then pull out of the way and plough on. In the end, it took nine months of relentless legal pounding for Kremen to get his hands on the property. And it was then that Stephen Michael Cohen showed just how far he was willing to go to deny Kremen the pleasure of beating him. He may have lost his home, but he was damned if he was going to let Kremen enjoy it. Three truckloads of Mexicans turned up at the house, supervised by three of Cohen's henchmen, and proceeded to tear the place apart. Literally.

Photographs taken shortly afterwards of the subsequent devastation show that all the ornaments, furnishings and furniture have been taken, and all the handles, doors, units, lights and wiring torn out. The plumbing had been destroyed, the wooden panels in the study prised off the walls, the toilets removed, and the gutters pulled down. Water gushed through the house, destroying the carpets and floors, and all the doors were purposely left open, attracting wild animals. Even the trees in the garden had been uprooted and taken away. There was no kitchen sink. There was no kitchen.

Incredibly, it could have been worse. Kremen had hired a private detective to watch the house to see if anything was going on – particularly if Cohen decided to pop back for a quick visit. When the trucks arrived, the detective called Kremen, Kremen called his lawyer, and his lawyer called the court receiver's representative in San Diego. The representative turned up, with the police, and both were greeted by the president of Montano Properties claiming that he was within his rights to remove personal property from the mansion.

Even though the whole process only took a few hours, when the police chief asked for a look around the property, the receiver was stunned to see the damage that been caused. With the situation threatening to descend into violence, the chief shut the situation down, allowing the workers to drive off in their trucks, and taped the house off. It was a few days before Kremen flew down to find Cohen's multi-million-dollar message: you won't beat me. In defiance, Kremen moved in.

Or, more accurately, he moved into the guesthouse, which still had a functioning toilet and a floor that wasn't rotting and infested. Kremen was also paranoid that Cohen might send someone round to mete out some punishment. Once such a thought enters your head, it can be difficult to beat it, especially when you are sleeping in their house. He refused to succumb though and slept with a baseball bat by his side.

To make matters worse, the refitting of the house was a complete fiasco. Kremen had recovered one of the three trucks that had driven off loaded with the house's possessions, handing over a wad of cash to a Mexican in a car park, no questions asked. But his big mistake was to put an old junkie friend in charge of fixing the place up. The result was kitchen-cabinet doors used as shelving, blinds jammed into place, and holes and cracks in the walls as things didn't fit were smashed into place.

Even though it was a disaster, the move saved Kremen. The drug crowd he had been hanging out with wouldn't make the journey from San Francisco, and the tranquility of the place helped Kremen to settle down. "It was good for me," Kremen reflects. "I was doing a lot of drugs and to get down here was good. And I needed a chilling-out period because it was such an intense experience, the whole thing. I mean, it took up years of my life."

He threw occasional big parties for the adult industry, which at least one guest has confirmed were pretty wild, but Kremen didn't really enjoy them. "I felt that people felt I should be doing it. It was weak on my part – it was dumb. I never enjoy parties – I'm not a party enjoyer. Unless it's go out and have a party and drink. That I enjoy – some crazy bars."

It was the fact that it was Cohen's house that really pleased Kremen. "For a couple of months to a year, this was the biggest thing ever." But after more than five years in Stephen Cohen's house, the sense of victory has long since gone. The house is enormous, beautiful and calming. Kremen hates it. "If it had no maintenance I would keep it, but it costs two hundred and fifty thousand dollars a year just to run this place. How much do you think the pool guy costs? Six hundred dollars a month. You think this pool works all the time? It's four to five thousand dollars a year to repair. Take all the water out, repair the tiles."

He gestures at the stone patio: "To clean this thing – this is four thousand dollars a year right here. This is fifteen hundred bucks a month – this landscaping. These trees – I gotta remove these trees because they're breaking the foundation. Trees are like forty to fifty thousand dollars – palm trees. I gotta remove a bunch of them, I gotta get the permission, I gotta hire a certified arborist. And then propane: fifteen hundred dollars a month. Electricity: seventeen hundred dollars a month – and I don't even use the air-conditioner.

"Just add it all up. Property taxes: four thousand dollars a month. Just add it all up. And it stresses me out. For all that money, I could be investing in another company every month – which gives me more enjoyment than the house does. That's my logic. Yeah it's beautiful, but I don't see it like that any more. I just see a tennis court and I see, bugs – exterminator – seventeen hundred dollars. I see – oooh beautiful palm trellis – twenty-one hundred dollars. I'm over it."

When Kremen tells an old friend about his plans to rent the house and eventually sell up, the friend is relieved. "Thank God for that. Bad juju. Get rid of the last of that man."

The house wasn't the only property that Kremen prised from Cohen. But the Rancho Santa Fe mansion is far more impressive than the ramshackle and derelict house that overlooks the Mexican border and Tijuana. It was also owned by Montano Properties, having been expertly conned from its bondsman owner for just one dollar by Stephen Cohen, who had persuaded him the title deed was worthless. It was infested with vermin and lies in a confined zone – you had to drive past the US border police to gain access to it.

It still hurt Cohen to lose it. Perched above the border, the land presented a unique business opportunity – sending cheap bandwidth from the United States several hundred yards across the border into Mexico using satellite dishes where higher prices meant he could sell it at great profit. It was highly profitable before Gary Kremen won the house and the land and turned up with a pair of bolt cutters to cut the data link.

Cohen again forged an elaborate but entirely false paper trail to keep the property out of Kremen's hands – and again he failed. There was no point in Cohen trashing the border house, however – it was already no more than a dilapidated shack. It was only the data-link Cohen wanted, so the situation called for something a little more inventive. When Kremen arrived to cut the locks off the property, and with every intention of using the bolt cutters on Cohen's data-link too, he was sternly informed that the land on which the link stood did not belong to him. An eight-foot square steel cube, painted white and with Cohen's Pacnet company details stenciled on the side, was only ten feet from the house – but in between stood an old wire fence, which, Kremen was informed, represented the border of the property he had won from Cohen. He would be breaking the law if he cut the link.

Kremen smelt a rat and hired an experienced surveyor to review the land. A week later, the surveyor discovered the fence was in the wrong place. A careful study of the ground revealed old posts and the original border, which, surprise, surprise, did encompass the data-link. Traces of fresh sand were found in the links of the existing wire fence, confirming the surveyor's suspicions: Cohen had installed a new fence and then weathered it with a sand blaster. It looked as if it had been there for ten years.

As Kremen got off the drugs and settled down, the adult industry soon grew to appreciate the search technology that was now offering – technology that Kremen himself had masterminded. In many ways it was the same as his classified-ads business back in the early days of the Net. Back then people wanted to tell others what services they had to offer. Five years later, there were so many services that it had fallen to individuals to type what they wanted into so-called "search engines". Kremen was offering the sex version of Google. He still wasn't one of the boys, but people were happy to do business with him. Revenue hit $300,000 a month and kept rising, enabling Kremen to fund his ongoing legal battles without hurting his business.

Soon after, Judge Ware declared Cohen a fugitive from justice, and Kremen decide to put his newfound wealth to good use by offering $50,000 to anyone who could grab Stephen Cohen and pull him back across the border.