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PRESS RELEASE FOR IMMEDIATE RELEASE August 8, 2000	U.S. Department of Justice U.S. Customs Service CRM (202) 514-2008 WWW.USDOJ.GOV TDD (202) 514-1888

UNDERCOVER CUSTOMS OPERATION RESULTS IN CHARGES AND PLEAS IN CONNECTION WITH STOLEN SATELLITE TELEVISION

WASHINGTON, DC - Following a 22-month nationwide investigation, four individuals in four cities have pleaded guilty and six others have been charged in connection with a scheme to steal satellite television, the Justice Department and the U.S. Customs Service announced today.

The investigation, known as Operation Smartcard.net, attempted to identify individuals who bought counterfeit satellite television access cards on the Internet in large quantities for resale and profit.  These cards allowed users to obtain satellite television programming at no monthly cost, resulting in an estimated loss of $6.2 million a year to the satellite TV industry.

"Buying and selling counterfeit products and services like satellite television access cost legitimate business and ultimately the consumer millions of dollars each year," said Attorney General Janet Reno. "There are many legitimate uses for the Internet, but carrying out schemes like this is not one of them, and we will continue to investigate and prosecute these cases."

"In Operation Smartcard.net, Customs agents used an undercover website and sophisticated electronic countermeasures to defeat a new breed of criminal," Customs Commissioner Raymond W. Kelly said.  "They thought they got away without paying for satellite TV.  Instead, these cyber-pirates will pay in a way they hadn't considered."

The following individuals have pleaded guilty in connection with Operation Smartcard.net,  Michael Poulsen of Mountain View, CA; Mohammad Walid of Yorktown Heights, NY; Linda Bauer of Hastings, MN; and Brian Angell of Warwick, RI. In addition, felony charges have been filed against the following individuals, Dale Luster of Dallas, TX; Kevin Greehey of Sarasota, FL, Tony Zielenski of Dallas, TX; Larry Thompson of Shingle Springs, CA; Richard McCarty of Benzonia, MI; and Ray Frost of Syracuse, IN.

The government alleges that these individuals profited at the expense of satellite TV company DirecTV, which provides specialized programming to customers for a periodic, flat fee.  When a customer signs a contract with DirecTV, a small plastic access card comes with the receiver that the customer inserts into a box on a television to activate the service and receive satellite programming.  The customer activates the card with DirectTV via the telephone and satellite, and the programming they receive is based on the price they pay per month.

Modified satellite television access cards illegally give users free access to all satellite television programming, including pay-per-view programming, which represents an additional loss to the movie and professional sports industries.  The use of these cards has resulted in millions of dollars of loss to industry in uncollected subscription fees.

In each of the cases announced today, the defendant purchased and resold pirated or counterfeit access cards in the U.S.  It is a felony to distribute electronic devices or equipment, knowing that the device or equipment is primarily of assistance in the unauthorized decryption of satellite programming.  Violations of this statute, 47 U.S.C. § 605(e)(4),  carry a maximum penalty of five years and $500,000.

The investigation began in Blaine, Wash., in September 1998 as a result of the  dramatic increase in seizures by the U.S. Customs Service of pirated or counterfeit satellite access cards being smuggled into the U.S. from Canada.  As part of the operation, undercover agents sold counterfeit access cards, called "Eurocards,"  through an Internet "business" created by Customs agents called TSS.  The TSS website warned that "unauthorized use of access cards is illegal in the U.S."

Undercover agents sold the access cards with the cooperation of DirecTV and NDS Americas, a supplier of "smart card" technology that contracted with DirecTV to provide access cards that unscramble the DirecTV signal.

By the time the Customs Service terminated the undercover portion of the operation in June 1999, agents had sold 3,195 illegal cards to dealers and 382 cards to individuals, generating proceeds of more than $516,000, which has been turned over to the U.S. Treasury.  The cost of the individual cards on the black market ranged from about $325 to $425.

On July 2 and 6, 1999, DirecTV used electronic countermeasures to shut down all the pirated cards sold through the government's website, as well as most other known pirated versions of satellite access cards.

During the week of July 13, 1999, agents from the U.S. Customs Service conducted coordinated operations around the country to execute search warrants and conduct interviews of more than 30 dealers who were targeted in this investigation.

The prosecution of these crimes is being coordinated by the Computer Crimes and Intellectual Property Section in the Criminal Division of the Justice Department working with U.S. Attorneys offices in the following districts: Middle District of Florida (Sarasota); District of Rhode Island (Providence); Eastern District of California (Sacramento); Central District of California (Los Angeles); Western District of Michigan (Grand Rapids); District of Minnesota (Minneapolis); Northern District of Texas (Dallas); Southern District of New York (New York City); and Northern District of Indiana (Dyer).  The joint endeavor is part of an ongoing effort to join together under the Intellectual Property Rights Initiative which is aimed at elevating the priority of domestic and criminal enforcement on intellectual property laws and developing a more coherent and vigorous international approach to Intellectual Property enforcement issues.

The investigation is continuing and additional charges are expected.

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