Fraudulent Activities, Illegal Listings - Why Was This Mega-host Not Banned Immediately?

[Super47]

Following a 7-month long deep dive into the alleged fraudulent and illegal activities of prolific mega-host Domio, and subsequent exposé by Paris Martineau of The Information, Airbnb last week "suspended the host for investigation"

The operative word here in this story is "suspended" - not "immediately banned" - despite Domio allegedly having a long and sordid history of operating illegal listings, running "party houses", engaging in fraudulent activities and various other shady business practices. (While Domio has indeed been restricted from taking new bookings at this time, there has been no statement from Airbnb to suggest that they haven't been permitted to continue taking guests whose bookings had already been in place at time of suspension) 

Yet, in stark contrast - as clearly evidenced from every second post on this forum, and others - regular hosts live in a state of constant fear, angst and paranoia about losing their Superhost status over a single bad review, and all too often, will allow their guests to walk all over them and treat them like doormats because they're petrified of a retaliatory review if they stand up for themselves.

And not without good reason too. We're all acutely aware that Airbnb can - and regularly do - delist small hosts if a guest reports that their host as much as farted in the wrong tone.. no questions asked, no explanation offered, and no opportunity given for the host to ever defend themselves. Not so for the likes of the big players like Domio, it would appear. 

Rumours are widely circulating that Airbnb's "relationship" with Domio (and with a number of other mega-host types operating on its site) may transcend somewhat beyond the normal "platform/host" parameters that one might consider appropriate under conflict of interest terms. 

@Airbnb @Catherine-Powell - given the weight of solid evidence against them, and the wealth of publicly available information pertaining to their nefarious practices and activities over the past 2-3 years, any comment on how/why this "host" hasn't been delisted yet please, and whether there is any truth in the above-mentioned rumours? 

Dennis Schaal's Skift article on the suspensions (original article from the Information beind a paywall, so no point in posting here) 

https://skift.com/2020/08/19/airbnb-suspends-domios-host-accounts-and-listings-following-fraud-alleg...

Podcast with Cory Weinberg and Paris Martineau from The Information, who broke the original story on Domio last week

https://open.spotify.com/episode/6m2iT82E2RTEU4IO6QcZP4?si=cC8SbGC2SwaqOen8oIptDw

Article from The Tennessean, which reported on Domio's illegal activities in 2019

https://www.tennessean.com/story/news/2019/09/18/nashville-says-domio-rental-operating-illegally/223...

And dodgy dealings going right back to January 2018, this time in Boston..

https://commonwealthmagazine.org/economy/everyone-knows-anthony-north-end-just-not-one/

Scrounging money from the PPP, despite having received $100 million in VC funding just months earlier.. 

https://www.nytimes.com/2020/04/27/technology/startups-sba-loans-backlash.html

And Domio's own employees have a lot of beans to spill.. (skip over the glowing 5 star reviews that they practically force their new employees to write, within a week of starting the job) .. 

https://www.glassdoor.ie/Reviews/Domio-Reviews-E1985109.htm

[Super47]

@Sharon1014 @Inna22 @Ian-And-Anne-Marie0

Airbnb's official 'justification' for the reinstatement of Domio below. Note the "past practices from a number of years ago" excuse (Domio is only a 4 year old company, and Paris Martineau's investigation covers right up to 2020). Then read her Sept 9th expose, to know exactly what was reported, and to learn the truth of the matter. 

“Airbnb’s thorough examination uncovered certain past practices by Domio from a number of years ago in violation of Airbnb’s Community Standards regarding authentic reviews.

As a result, we communicated to Domio our decision to remove their accounts.

“Domio requested reinstatement after its board removed all members of its leadership team present at the time of the unacceptable activity, and therefore Airbnb made the decision to reinstate Domio’s accounts, in addition to removing all prior suspicious reviews from Domio’s listings. We will not hesitate to permanently remove their associated accounts if there are future violations of our standards and policies,”

[Super47]

Credit: Paris Martineau, The Information, 9/9/2020 

Three years ago, an unusual real estate shopping spree among colleagues kicked off in Nashville, Tenn. 

Jay Roberts, the CEO and co-founder of a startup called Domio, purchased a newly constructed condo in the city’s North Nashville neighborhood with his then-girlfriend. A few days later, 24-year-old Adrian Lam, chief strategy officer and co-founder of Domio, bought the home directly across the street with his father.

Within a month, Domio—a business that converted apartments and homes across the country into accommodations for tourists—listed both of the properties for rent on Airbnb. 

Over the next year, three other Domio employees also bought homes in Nashville, and Domio listed them for rent on Airbnb as well.

There was a problem, though: All five of the Domio employees said in rental permit applications with the city of Nashville that the properties were their primary residences—one of the necessary conditions to list them legally on Airbnb—but all of them lived and worked in the New York area, according to court records and people who worked with them. 

Eventually, the Metropolitan Government of Nashville found that they were all violating local laws, and ordered four of the employees to cease renting the homes on Airbnb (the fifth stopped doing so after the others were served warrants). The arrangements also raised eyebrows among some Domio managers who worried about the possibility of conflicts of interest arising from executives renting properties through their employer.  

The meteoric rise of Airbnb over the past decade has spawned a cottage industry of businesses—from budding real estate investors to venture-backed startups—seeking to turn private homes into hotels at scale. Domio, along with better-known companies like Lyric and Sonder, is in the latter category. Since its founding in 2016, the company has raised nearly $70 million in venture capital, along with $50 million in debt, from well-known firms like GGV Capital and SBNY. It has hired upward of 160 employees and has offered short-term accommodations to more than 100,000 travelers in a dozen-plus cities, mostly through Airbnb.

But The Information has learned—through court records and interviews with nearly two dozen current and former employees—that Domio has a history of questionable business practices, which helped it flout short-term rental laws in cities around the country. Those practices include the listing of rental properties using a network of misleading Airbnb host accounts—some featuring fake names and stock photographs—which made it harder to tie them to Domio.

Several days after The Information contacted Airbnb about these practices, the company on Tuesday evening said it had taken action against Domio for violating its rules. 

“We have indefinitely suspended all of Domio’s associated host accounts and listings as we expand our investigation into their activity dating back to 2016,” Ben Breit, Americas Head of Trust and Safety Communications at Airbnb, said in a statement. “We will not hesitate to take aggressive action to remove suspicious content from our platform and, depending on the outcome of our investigation, we will determine the appropriate long-term action to take against these accounts.” 

Domio isn’t alone in using misleading Airbnb account networks and other tactics to sidestep short-term rental regulations. The city of New York sued a group of real estate brokers for upward of $20 million in 2019 for allegedly using a complex web of host accounts to illegally rent out apartments in 35 buildings in Manhattan to tourists using Airbnb. But it’s unusual for a startup with prominent VC backers, like Domio, to employ such tactics.

For Airbnb, the issue of moderation could become more delicate as it nears the filing of paperwork for an initial public offering, which could happen as early as this month, The Wall Street Journal has reported. In the past, the company has failed to take down similar groups of misleading accounts until alerted to the issue by authorities or journalists. Critics of Airbnb argue that it has few financial incentives to aggressively police listings that break local rental laws because of the revenue it makes from them. 

Like Airbnb itself, Domio has seen a sharp drop in revenues due to the coronavirus pandemic, which has had a devastating effect on the travel sector. Even before the outbreak, the company had started to cut the size of its staff. It has laid off more than half of its employees since January, a spokesperson confirmed. The number of current Domio employees could not be learned. 

Domio’s behavior is a stark contrast to the image cultivated by CEO Roberts. In interviews and public statements, he has portrayed Domio as a sophisticated tech platform reinventing travel. In December, he told TechCrunch that Domio used specialized “quant-style algorithms” that it had created to identify the most profitable regions to expand into. 

In interviews, five former Domio employees who worked on or with the company’s real estate teams between early 2017 and 2020 said they were not aware of Domio using its own algorithms to choose expansion targets. “There was no algorithm whatsoever on finding properties—it was us,” said Joshua Benson, referring to the Domio real estate development team he worked on until February 2019.

Benson, whom Domio let go due to issues related to a noncompete agreement he had signed with his previous employer, added that Domio is an “unethical, shady company.” 

A spokesperson for Domio said: “We analyze and model new opportunities through a number of factors including, supply, demand, rate, occupancy, seasonality, guest feedback, unit size, location and more in a data-driven approach to entering markets and signing new properties.”

Domio, the spokesperson said, “is committed to working collaboratively with local governments to provide safe and secure housing, and to complying with all applicable local laws.” The company declined to provide interviews with the company’s co-founders, Roberts and Lam.

Origin Story

When Roberts discussed the origin story behind Domio in interviews and at public events, he said he stumbled upon the idea for the company after listing his apartment in New York’s Times Square on Airbnb, and being overwhelmed with demand. “I realized travelers were seeking human connection and an authentic travel experience,” he wrote of the event on his personal website. 

The part he leaves out is that before he incorporated the company that became Domio, he had accepted a job as head of New York real estate for Flatbook, a company that was already an established player in the short-term rental business and would later change its name to Sonder, according to people with direct knowledge of the agreement and documents viewed by The Information. 

Over a roughly two-week onboarding period before he officially started the job in the summer of 2016, Sonder shared sensitive information with Roberts—including financial models, pitch decks and materials detailing Sonder’s operation strategies. Sonder CEO Francis Davidson and the company’s then-director of real estate, Brian Ehrlich, even flew to New York to train Roberts, according to documents viewed by The Information. Roberts already had a company email address, which he used to send and receive messages related to company business. 

But Roberts backed out of the Sonder job before his official start date and instead launched his own short-term rental startup, Domio, in late June 2016 with Lam, a recent business school graduate who had briefly worked as an analyst at Bank of America Merrill Lynch. 

Short-term rental companies like Domio typically lease homes and apartments—or in the case of some of the biggest players, an entire floor of apartments—from a property owner, and then turn around and rent that space nightly to tourists using platforms like Airbnb. For landlords, the prospect of signing a long-term lease with a company can seem like a safer bet than renting to individual tenants.

But it can also lead to regret. In August 2018, Nathalie Becker, who had leased a home she owned in Nashville to Domio the prior year, sued the company for misrepresentation and fraud. In a complaint filed in Davidson County Circuit Court, Becker said that Domio had promised to sublease the property mainly to long-term tenants, with occasional short-term rentals. Instead, Domio exclusively rented it for short terms, the complaint says. The case is still pending. 

And last year, Anne Segal, an Arizona attorney, filed a similar complaint against Domio last year after leasing her San Diego home to the company in December 2017. In the complaint, filed in San Diego Superior Court, Segal said she had discovered over $10,000 in damages and theft at the property after she visited it in 2019. Domio was ordered to pay $6,075 and forfeit its $3,500 damage deposit. Others have sued Domio for failing to pay rent on properties the company leased to rent online to tourists.

Domio declined to comment on specific lawsuits, instead providing a general statement: “Domio cannot speak for the entire short-term rental market and was clear with owners about the use of their homes. Domio offers a service to owners to rent out their properties. In Domio’s agreements with owners, Domio specifies that guests will range from corporate stays to travelers for under 30 days.”

New York State of Mind

Like other short-term rental startups, Domio faced legal hurdles to its growth, especially in lucrative markets like New York. 

Since 2010, it has been illegal in the city to convert most residential apartments and homes into temporary lodging for travelers, unless the owner of the property is present in the same unit as their guests. The rules became even stricter in October 2016 after Governor Andrew Cuomo signed a new law that banned the advertising of most short-term rentals of entire homes on sites like Airbnb, Vrbo and HomeAway. New York authorities hoped the rules would temper the growth of a phenomenon they worried was draining long-term rentals from the housing market, making the city less affordable for residents.  

But the rules were difficult to enforce without cooperation from platforms like Airbnb and HomeAway, which were opposed to sharing data on hosts with local officials. So the short-term rental industry boomed in New York, becoming Airbnb’s largest and most profitable market in the U.S. To combat the problem, New York Mayor Bill de Blasio’s Office of Special Enforcement waged a multiyear campaign to root out large-scale Airbnb empires—hosts with dozens of apartment listings. 

The rules put Domio’s effort to expand in New York on shaky ground. Using records from the company’s internal reservation system, The Information examined Airbnb listings between 2016 and early 2020 for a dozen Manhattan apartments under Domio management. 

In each case, the listings described the entirety of the apartments as available for rent; none of the units were licensed by the city as hotels, according to a review of city records. Last August, the city fined the landlord for two of the apartments—both in the same Murray Hill building—$8,750 for violating short-term rental laws, according to public records.

“I kept asking, ‘How are you guys licensing these units in Manhattan?’” said Grant Guinn, a former vice president in Domio’s real estate development department. “I never really got answers.

When new employees joined Domio, company executives or managers asked some of them to create Airbnb host accounts in their own names, instructing them to use their driver’s licenses to apply for verification with Airbnb, according to two former employees who went through the process personally. Verification generally fosters more trust from Airbnb customers, making it more likely they’ll book stays at the listings for these accounts.

Once Airbnb had verified their accounts, the employees transferred control of them to Domio, which would then change the identities on the host accounts to names like Barney, Leslie and Deniz, according to former employees and screenshots of the accounts viewed by The Information. Domio would also swap out the original profile photos on the accounts with stock portraits of people and other images they found through Google image search, according to two employees who worked on the teams responsible for such efforts and data reviewed by The Information. 

As far as Airbnb users could tell, the host accounts didn’t have any apparent connection to Domio. Airbnb’s rules prohibit hosts from providing false names and otherwise misrepresenting their identities.

The collection of Airbnb accounts Domio amassed in this way served multiple purposes. Domio used the accounts to leave positive guest reviews for most of its properties, including the ones listed under its official Domio-brand accounts, according to multiple employees who were involved in the process and an analysis of the accounts’ reviews. 

In some cases, employees would change a listing’s nightly booking rate to $1 or another nominal price, book a one-night stay at the property using one of Domio’s accounts, then use the account to leave a review of the listing after the “reservation” had concluded. This, too, was a violation of Airbnb rules. 

According to internal company data reviewed by The Information, Domio used more than 20 Airbnb accounts to covertly operate at least a dozen short-term rentals in New York, which generated at least $2.2 million in revenue from guest reservations at those listings between September 2016 and February 2020. 

Because New York prohibited most short-term rentals and Airbnb limited New York hosts to posting one listing each, to keep its listings online Domio needed to maintain a collection of Airbnb accounts that didn’t appear to be associated with Domio, the two former employees said they were told. If Airbnb’s Trust and Safety team were to catch wind of the fact that one person or group was covertly operating multiple accounts, it would cancel all reservations associated with those accounts. 

In a statement about its actions against Domio, Airbnb said the mass suspension of the Domio-controlled accounts on its site means the company won’t be able to accept new reservations until Airbnb concludes its investigation and comes to a “determination on their long-term status.” Airbnb added that it is “continually improving our product defenses to identify and remove fake reviews, as well as take appropriate actions on the accounts responsible for those reviews.”

In response to a detailed set of questions about its rental practices, a Domio spokesperson didn’t directly address whether the company’s New York listings violated local laws in recent years. “Rental activity and regulation in New York is complicated and has changed dramatically since 2016,” the spokesperson said in a statement. “Over the past four years, [Domio], like thousands of other hosts in NYC, has rented private rooms, single family homes and to tenants for months and years at a time.”

The company also didn’t respond directly to questions about whether its use of covert host accounts violated Airbnb rules. “During this period, Airbnb was going through its own growing pains of being able to handle professional property managers with hundreds of different properties,” the spokesperson said in the statement. “At the time, Airbnb’s platform was not set up for individual hosts to have multiple listings.”

Domio’s tactics weren’t foolproof. In June 2019, Airbnb abruptly canceled all reservations for New York properties associated with three of the covert Domio host accounts, according to company documents viewed by The Information. The properties had made Domio at least $1 million in revenue up to that point, according to the documents.

Eventually, an Airbnb employee informed a Domio representative that the accounts had been flagged because they were all associated with the same phone number, recalled one former employee. After Domio changed the phone numbers, Airbnb allowed those accounts to reinstate the reservations, the employee said.

Down South

To help Domio break into Nashville—a hot vacation spot for bachelor and bachelorette groups and young travelers looking to party—the company’s co-founders put their own skin in the game.  

In August 2017, Roberts and Lam signed deeds for two homes across the street from one another, which cost $490,000 each, according to property records. Weeks later, Domio’s official Airbnb account listed Roberts’ property as a four-bedroom, 3.5-bath home with a loft, deck and Ping-Pong table, while it described Lam’s places as a four-bedroom, four-bath home with a roof deck and grill. 

Soon after, the company began using Airbnb accounts under its control to submit positive guest reviews for the Nashville properties, according to three former employees and a review of Nashville listing data scraped by watchdog Inside Airbnb. 

Roberts and Lam listed the properties at a sensitive time. Local officials were in the midst of a high-profile crackdown on commercial short-term rentals in Nashville, which had gained a reputation among locals for turning neighborhoods into hotel districts for drunk and disorderly guests.

By late 2017, Nashville was in the midst of a heated debate—which had caught the attention of state legislators and industry lobbyists—over a set of proposed regulations that would ban most residential short-term rentals by companies or outside investors. One of the few types of listings that had largely escaped the city’s ire were so-called owner-occupied short-term rentals, in which the owner of a house lives on site while occasionally renting out part or all of the home for supplemental income. 

Lam and Roberts said they would play by those rules in notarized applications filed with the city. In his application, Lam said that the Nashville home was his primary residence—citing a Tennessee driver’s license he had obtained earlier that day—and that it would be owner occupied. Roberts made the same claim in his application.

Over the next year, three other early Domio employees, including its marketing director, Umer Usman, and revenue development director, Juan Miguel Rivera Pecunia, also bought homes in Nashville and filed rental applications with the city, saying the homes were their primary residences and would be owner occupied. Those properties, too, showed up for rent on Airbnb under Domio’s official account. 

But multiple former employees said that Lam, Roberts, Usman and Pecunia lived in the New York metropolitan area, not Nashville, and didn’t occupy the properties as their primary residences, despite submitting multiple documents to local authorities—including, in at least one case, tax forms viewed by The Information—that stated otherwise. 

In August 2018, the Metropolitan Government of Nashville and Davidson County served Lam a civil warrant to appear in court and accused him of violating local ordinances. Authorities pointed to the fact that Lam had repeatedly stated he lived in New York on social media and other sites, and, as evidence that Lam didn’t live in the home, noted that it was listed as a full-time, non–owner-occupied short-term rental on Domio’s website. A judge ruled in favor of local authorities, finding Lam guilty of violating Nashville laws. 

In October 2019, a judge fined Usman and Pecunia for violating short-term rental laws and ordered them to cease operations. A Domio spokesperson said the men no longer worked at the company. Usman and Pecunia declined to comment. Local authorities also accused Roberts, Domio’s CEO, of being in violation of local rental laws, but didn’t sue him after he didn’t seek to renew his rental permit for the property and stopped renting the home. 

While deals between businesses personally owned by executives and their corporate employers aren’t uncommon, they can create possible conflicts of interest—for example, if the business agrees to financial terms that are unusually generous toward the executives. As a result, public companies are required to disclose such arrangements, known as related-party transactions, to shareholders.     

Inside Domio though, it wasn’t widely known that the company’s leaders were renting their personal Nashville properties through the company’s Airbnb account, according to five former employees. Those employees who did eventually learn of the Domio connections to the properties said the secrecy surrounding the arrangements gave them pause. 

“It was very hush-hush,” said Benson, the former member of Domio’s real estate development team. “I found out accidentally talking to the city manager in Nashville and I was like, ‘Are you kidding me?’”

A Domio spokesperson said that the company managed the Nashville properties on behalf of its executives, but never made payments to the executives for the properties or had lease agreements with them. The spokesperson didn’t respond to a question about whether its executives received the same financial terms as people who didn’t work for the company.

[Yiwei3]

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