‘They were very aware’: Phoebe Gates’ startup faces federal fraud questions over cookie stuffing scheme

Bill Gates’ daughter Phoebe Gates and her co-founder Sophia Kianni allegedly knew for several months that their shopping company, Phia, had been collecting commissions on online purchases it shouldn’t have claimed.

“They’re trying to claim, ‘Oh, it was a mistake.’ And they’re refunding and doing the right thing,” KIRO host Ursula Reutin said on “The Gee and Ursula Show” on KIRO Newsradio. “But actually, there is this messaging now that shows, no, they were very aware of it.”

Bloomberg obtained internal Slack messages showing Gates asked in December whether a feature that automatically placed tracking cookies on shopping sites was active across all retailers. In a separate exchange, Kianni encouraged employees to keep the cookies active even after an engineer mentioned the practice was a violation of compliance rules, Bloomberg reported.

“Let’s say you have Nike or Nordstrom, and you’re using Phia to shop around, and when you go to checkout, basically Phia gets a commission from that company for referring,” KIRO fill-in host Angela Poe Russell said. “What you’re saying happened is that they were doing some technology wizardry so that they were getting credit for stuff they didn’t refer.”

The practice is known as cookie stuffing, which allowed Phia’s browser extension to place affiliate tracking cookies on shopping sites even when a customer had not clicked on a Phia link or coupon. That meant the company could claim a commission on purchases it played no role in driving.

Revenue plunged after the feature was shut off

Bloomberg reported that in June, more than half of the sales Phia claimed credit for came from cookie stuffing. After the company shut it off on July 7, the same day Bloomberg first contacted Phia for comment, Phia’s average daily revenue dropped from about $80,000 to between $10,000 and $28,000.

Ursula noted that while no charges have been filed, cookie stuffing can be prosecuted as federal wire fraud and carries a maximum 20-year prison sentence.

Gates’ public statements under scrutiny

The debacle adds context to a recent interview where Gates said she didn’t start the company to make money but was motivated to build “something generational” that doesn’t tie into the Gates family name.

“Honestly, for me, my primary motivation is, right, I have a chip on my shoulder to build something generational that has no ties to, you know, me, my privilege, or my last name,” Gates said in the Yahoo interview.

Angela explained why she found that part of the interview difficult to hear.

“It’s so sad when someone feels that pressure that they have to live up to what their parents did or prove that I’m enough or worthy,” Angela said. “I would imagine if you’re in that pursuit, you might, when you face an ethical challenge, you would hope you would do the right thing.”

Watch the full discussion in the video above.

Listen to Gee and Ursula on “The Gee and Ursula Show” weekday mornings from 9 am to 12 pm on KIRO Newsradio.