A $7.5 million "Whoops?"
That's what DreamHost had to say after it accidentally took $7.5 million from its customers, who have 600,000 websites hosted with it.
Apparently, the company was upgrading technology and was working out bugs in the billing system. Cash collections from credit cards and debit cards were lower than usual, and the company was working to make sure everyone was getting billed and payments were coming in. While attempting to bill customers who hadn't been billed (in error), the company made a mistake and ended up charging all customers for a full year of fees for 2008. In case you haven't noticed, 2008 just started.That resulted in about $7.5 million coming out of bank accounts and going onto credit cards, all of it unexpected by the customers. So a company representative writes on the trusty corporate blog... "Whoops." They explained the situation and (to their credit) offered to cover overdraft fees and late fees that may have come about because of the incorrect charges.
All the charges have been reversed, and a fix has been put in place so the company never bills like this again. I think the company did the right thing by explaining what happened and owning up to their error. It's just that something like this shouldn't have even been allowed to happen. Checks and balanced should have been put into place before they ticked off the administrators of 600,000 websites. That's a pretty difficult lesson to learn.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.