Scribd is one of the pirates. The others are Watchpad, Rapidshare, and Mediafire. That is not to say that there aren't also individuals out there, pirating fiction.
I read that they had that issue, and I'm not surprised. Like the whole Napster, et al, issue with music sharing, the technology is ahead of policing. That's not to say piracy will ever go away entirely. It won't.
I love Scribd. I have gained many new readers through the site and will continue to host my own work there. I just wish I could get through to put some of my writing for sale there. Their servers must be getting hammered.