The United States Attorney’s Office for the Northern District of California and the Federal Bureau of Investigation announced that 27 people were arrested yesterday in a coordinated takedown of a large, loosely affiliated group of dealers in counterfeit software in the Bay Area. The arrests, following a two-year undercover operation, were based on 11 separate indictments which were returned by a federal grand jury in San Francisco and which name 26 defendants, and a criminal complaint filed against a 27th defendant. The arrests and indictments were announced today in a press conference held in San Jose and attended by FBI Director (and former U.S. Attorney) Robert S. Mueller, the U.S. Attorney’s Office, the Internal Revenue Service, the U.S. Customs Service, and the San Jose Police Department, all of whom participated in the investigation that led to today’s charges. In connection with the arrests, agents also served search warrants on 10 homes, businesses and a safe deposit box, primarily around the Fremont, California, area. These search warrants and arrests culminate a two-year undercover investigation of trafficking in counterfeit software and related crimes in the Bay Area including an undercover operation run by the FBI out of San Jose with the assistance of other federal and local law enforcement agencies. The 11 indictments and the criminal complaint were under seal until yesterday afternoon when the U.S. Attorney’s office moved to unseal them in San Jose federal court. The following individuals have been arrested: Malinda Chan, 46, of San Mateo, CA; Joanne Chao, 57, of Chino Hills, CA; James Chellberg, 43, of Fort Bragg, CA; William Jin, 41, of San Jose, CA; Perry Zheng, 38, of Cupertino, CA; Jimmy Kuo, 37, Simon Kuo, 39,
Jerry Kuo, unknown, all of Fremont, CA, and Taiwan; Li Jun Lei, 39, of Union City, CA; Alice Wang, 39, of Fremont, CA; Tim D. Ly, 27, of Oakland, CA; Xiaoyo Zhang, 42, of San Jose, CA; Tony Wu, 31, of Milpitas, CA; Ginger Hsu Yang, 49, of Fremont, CA; Charles Wang, 33, of Milpitas, CA; James Wu, 33, of Roland Heights, CA; Mirza Ali, 54, of Fremont, CA; Sameena Ali, 48, of Fremont, CA; Keith Griffen, 51, of Oregon City, OR; William Glushenko, 60, of Alameda, CA; Sheila Wu, 52, of Fremont, CA; Radu Traian Tomescu, 46, of Fremont, CA; Mohammed Yousef Chaudhry, 52, of Los Altos, CA; Leng S. Kouch, 37, of Fremont, CA; Adnan Torlak, 22, of Santa Clara, CA; Ali H. Khan, 55, of San Jose, CA; and Linda Wang, 42, of Union City, California. A copy the indictments; a summary of the charges and defendants in each of the indictments; a list of the maximum statutory penalties and a summary of the current status of each defendant arrested may all be found on the U.S. Attorney’s Office’s website: www.usdoj.gov/usao/can. Cyberstorm Undercover Operation: Indictments 1-8 Eight of the 11 indictments are a direct result of the undercover operation dubbed .Cyberstorm.. The undercover operation, which began in 2000, sought to identify dealers in counterfeit software. Each of the defendants listed in Indictments 1-8 are alleged to have sold counterfeit software to an undercover agent. The indictments charge that each of the defendants trafficked in counterfeit goods and committed criminal copyright infringement. In addition, some of the individuals are charged with conspiracy, money laundering or structuring cash transactions to evade reporting requirements.
Affidavits filed in the case allege that the defendants in Indictments 1 through 8 sold counterfeit software such as Microsoft Windows 98 or Microsoft Office 2000. Posing undercover, a police officer held himself out as a businessman engaged in buying and selling computer software and computer components. While legitimate copies of the software sold for between $200 and $600 in stores, the defendants sold the counterfeit software for between $7 and $70. Most of the transactions were done in cash and completed either at the defendants’ homes or in parking lots adjacent to shopping centers. Altogether, according to statements made in court, the total retail value of the software purchased from these defendants throughout the course of the undercover operation would have exceeded $5 million, if the software had been legitimate. Sheila Wu & Worldwide Sales, Inc.: Indictment No. 9 In addition to the undercover operation, Indictment No. 9 charges Sheila Wu, age 52, of Fremont, CA, and five other individuals. Ms. Wu is alleged to have operated a business known as Worldwide Sales, Inc. (.WWS.) in Fremont. Ms. Wu is charged with using WWS as a front for trafficking in counterfeit software, criminal copyright infringement, and conspiracy. She is also charged with money laundering for directing individuals to make out payments to an account in a false name (the name of her co-defendant’s, Radu Tomescu’s mother), and with moving those funds overseas to a numbered Swiss bank account. According to an affidavit, Ms. Wu instructed a witness in the case to make out checks to a false name so that the funds could not be traced back to her company. Furthermore, Ms. Wu and her co-defendants . Radu Tomescu, 46, of Fremont, Mohammed Yousef Chaudry, 52, of Los Altos, Leng S. Kouch, 37, of Fremont, CA, Adnan Torlak, 22, of Santa Clara, CA, and Ali H. Khan, 55, of San Jose, CA . are charged with conspiracy and structuring financial transactions to evade reporting requirements. An affidavit filed in support of a search warrant of Ms. Wu’s business states that these six defendants allegedly cashed more than $1.7 million worth of checks, all under $10,000, between March 1999 and November 2001. Mirza and Sameena Ali & Samtech Research, Inc.: Indictment No. 10 Agents also arrested a husband and wife, Mirza Ali, 54, and Sameena Ali, 48, of Fremont, the owners of a company called Samtech Research, Inc., in Fremont. The Alis, together with Keith Griffen, 51, of Oregon City, OR, and William Glushenko, 60, of Alameda, are accused of committing a fraud against Microsoft Corporation. They are alleged to have formed numerous nominee corporations and purchased others to participate in Microsoft’s Authorized Education Reseller (.AER.) program. This program provides Microsoft software at steeply discounted prices for resale only into academic institutions. According to an affidavit filed by an IRS agent, after the Alis were audited and removed from the program in January 1997, they quickly formed new corporations to disguise their identity from Microsoft and get back into the program. When that approach became less successful, they are alleged to have bought small, non-operational companies all over the United States that had AER status and used those components to purchase products. Using these nominee entities, the Alis and their co-conspirators were able to purchase over $29 million worth of AER software from Microsoft. The Alis then sold this software to non-academic entities, including Sheila Wu and several of the other dealers in counterfeit software arrested yesterday and today. The Alis and Keith Griffen are also charged with laundering the proceeds of this scheme. In particular, the affidavit notes that the Alis purchased real property in the name of their college age son and have wired over $300,000 to Pakistan. Microsoft estimates that it lost in excess of $100 million as a result of this scheme. Furthermore, the affidavit filed in support of the search warrant of the Alis’ home and business states that the Alis have been sending funds to the fugitive brother- and sister-in-law of Mirza Ali. In June 1996, Zahid Ali (brother of Mirza Ali) and his wife Riffat Ali were indicted by a federal grand jury for bank fraud, conspiring to traffic in counterfeit Microsoft software and international money laundering. Zahid and Riffat Ali fled the country after the charges were filed and are believed to be in Pakistan. Linda Wang dba Da Com, Agama and Gridtek & James Wu, dba Shiny Technology: Indictment No. 11 and Criminal Complaint In the Eleventh Indictment, James Wu, 33, of Roland Heights, CA (no known relation to Sheila Wu), is charged with conspiracy to traffic in counterfeit goods, and trafficking. His business was called Shiny Technology. Using this business, Mr. Wu is alleged to have received a box containing 200 units of counterfeit Microsoft End User License Agreements. He is also charged with trafficking in other Microsoft software such as Windows 98 and Windows NT Server.
The criminal complaint charges Linda Wang, 42, of Union City, California (no known family relation to Alice Wang or Charles Wang), with conspiring to traffic in counterfeit goods. The complaint alleges that Wang controlled three businesses, Agama, Gridtek International, and Da Com Dynamics, all located in Northern California, and that Wang, through these companies sold counterfeit software to James Wu, the defendant in the Eleventh Indictment. The complaint states that Wang controlled a number of bank accounts into which payments for counterfeit software were deposited. Bruce J. Gebhardt, Special Agent in Charge of the San Francisco Office of the FBI said, .The great success of this investigation is based on outstanding police cooperation. It is clear that continued success in combating future high tech crimes lies in cooperation by federal, state and local police.. In addition, United States Attorney David Shapiro said, .Counterfeiting software undermines our free enterprise system. The conduct charged here is alleged to have caused losses of hundreds of millions of dollars to people who created and sold their own intellectual property. The victims were the legitimate consumers of these products.. Dwight Sparlin, the Special Agent in charge of the IRS Criminal Investigation division in the Northern District of California, said, .The illegal trafficking in counterfeit software resulted in financial crimes including money laundering. We intend to follow the money trail.. The maximum statutory penalties for each count may be found on the U.S. Attorney’s Office’s website. However, any sentence following conviction would be dictated by the Federal Sentencing Guidelines, which take into account a number of factors, and would be imposed in the discretion of the Court. An indictment simply contains allegations against an individual and, as with all defendants, each of these defendants must be presumed innocent unless and until convicted. These prosecutions are the result of a lengthy investigation by agents of the Federal Bureau of Investigation, the Internal Revenue Service, Criminal Investigations division, the United States Custom Service, the R.E.A.C.T. Task Force, and the San Jose Police Department. Michael Malecek and Scott Frewing from the Computer Hacking and Intellectual Property Unit, are the Assistant U.S. Attorneys in the U.S. who are prosecuting the case with the assistance of Joe Keefe and Lori Gomez. All press inquiries to the U.S. Attorney’s Office should be directed to Assistant U.S. Attorney Matthew J. Jacobs at (415)436-7181.
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