There are things that I don't understand about this story.

I don't understand why Calacanis' choice was between firing his trusted CTO and retaining a convicted computer felon.

I don't understand how Mahalo could have checked any reference, let alone 3-5, and not found out that Schiefer is one of the most famous computer felons in California.

I don't understand why Calacanis is characterizing something that Schiefer did in 2005, in his mid-20's, as the actions of a "stupid kid".

I don't understand how Calacanis arrives at his estimation that Schiefer did only 0.0000001% of the damage he could have with his botnet. Schiefer stole random Paypal accounts and used them to buy things, and passed stolen Paypal accounts on to his acquaintances. What's the "worse" thing you can do with a botnet? At least the DDoS extortion botnets target gambling sites, and not your mom.

For that matter, I don't understand how Calacanis can equate what Schiefer did to the dumb things lots of teenagers do on computer networks (and, for that matter, on conference room floors). Schiefer wasn't a "hacker". He's a carder.

(As a side-note to Calacanis: sniffing people's passwords at conferences? Also illegal!)

Calacanis says Schiefer was supervised in his work at Mahalo. Is there someone who isn't supervised there? I don't understand how Mahalo believes they had the capability to supervise someone who can manage a 250,000-host botnet.

Unfortunately, I do understand why Calacanis thinks he doesn't handle sensitive information. He doesn't see the link between tens of thousands of email-password pairs and those people's bank accounts. Just a wild guess, but I'm thinking the guy who steals the Paypal accounts out of bot-infected Windows boxes can make that leap.

This is just such a weird post. I guess I can understand not seeing "contrition". But Calacanis seems proud that this happened. It's just head-explody weird.

Calacanis' reaction is an interesting one. As he states himself it was the risky, not socially acceptable, decision to make. His telling of the story makes it seem that he made the right decision. I would agree. A little grace, which by definition can only be shown to someone completely unworthy of it, is encouraging. I am fascinated by my own reaction when I read stories like this. Why is it that justice waived produces such a positive response in me? I think it is because my experience shows that I too need grace more often than not. Whether its something as small as being allowed to turn in an assignment late, or a boss who overlooks a broken rule that they had every right to enforce, I need a measure of grace on an almost daily basis. So to Mr. Calacanis: Thank you for reminding us that there is grace out there when we need it.

I'm sad to think that they would have cut him out of the process if they had known.

I sort of hate our culture which demonizes anyone who has ever been prosecuted by the justice system and quickly shuffles them into a corner of "people who we can't legally round up and gas but are just as worthless". It's really unhealthy to think that decent, worthwhile people can't ever make mistakes in judgement (and learn from them!) and to presume that the law is always morally correct. It's really a great disservice to the idea that we are trying to rehabilitate people.

Turning a hiring mistake into linkbait -- you stay classy, JCal.

Actually, people with a criminal past (or general oddities that are looked down upon by corporate americal) are often a good choice for a small startup trying to save money. My company often would be someone's 'opportunity' to prove themselves after a major setback in life.

They are motivated, willing to work for cheap, and appreciate the opportunity so much more than someone 'willing to take a paycut' to join your startup. And when times get tough they will be your most loyal employees.

In a startup where cash is tight and the outlook is 'hazy', an employees loyalty is priceless.

Humorous that a search company doesn't run a search on their hires but still believes they have a "rigorous hiring process".

The whole story looks like it's been voted down to -2. The low contrast line needs to be drawn somewhere.

Not that I am against giving people a second chance (and hey, abused youth and all), but to explain it by saying we are all criminals anyway so it is no biggie doesn't really raise my level of trust.

I wonder if he feels differently about point #16 in his famous "How to save money running a startup" ( http://calacanis.com/2008/03/07/how-to-save-money-running-a-... ) from last year:

16) Don’t waste money on recruiters. Get inside of linkedin and Facebook and start looking for people -- it works better anyway.

Bravo Jason, I’m glad you let John keep his job; we need more understanding and forgiveness in this society. We’re all human we all make mistake.

Just one question, Why use John real name in your post? That is one more Google entry into poor John record book.

how can you skip doing a Google search when you are employing someone?

Knowingly having a hacker in an organization is a very difficult predicament. Yes people should be given a second chance, but is it worth all the possible negative press. I would not have kept him on. I don't know the guys though.

I know 'innocent until proven guilty' and all that, but I'm still pretty surprised that a judge would allow someone who is about to go on trial for computer fraud and hacking find work at a computer company and use the internet.

Not running a Google search on a job candidate is actually a reasonable thing to do. The fact that the name matches with a felon, or that people have posted nasty accusations, is no evidence of anything.

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Has this story hit TechCrunch yet? It's huge news everywhere else.