SAN JOSE - United States Attorney Kevin V. Ryan announced that the first two defendants today pleaded guilty and admitted in open court to their involvement in what the recording industry is calling the largest music manufacturing piracy seizure in the United States to date. On October 6, 2005, law enforcement conducted searches of 13 locations in California and Texas in the undercover investigation called Operation Remaster. The FBI estimates that approximately 494,000 pirated music, software, and movie CDs, and DVDs, and more than 5,500 stampers were seized during those raids.
The defendants, YE TENG WEN, a.k.a. Michael Wen, 30, and HAO HE, a.k.a. Kevin He, 30, both of Union City, California, today admitted to participating in a conspiracy to mass-produce pirated music and software CDs. Nearly 200,000 pirated CDs were seized at locations associated with these two individuals. Many of the pirated CDs contained counterfeit FBI Anti‑Piracy Seals and silk screened artwork to make them appear legitimate. The defendants also admitted that they used a unique tracking system on the Inner Mirror Band portion of the CDs in order to identify the job and the unauthorized copyrighted work. The copyright and trademark violations largely involved Latin music titles and Norton anti-virus software.
Operation Remaster is an undercover law enforcement operation conducted by the Rapid Enforcement Allied Computer Team (REACT) Task Force and the FBI. The operation is targeting large-scale illegal replicators of copyrighted music and software. These two convictions are the first to result from Operation Remaster.
U.S. Attorney Kevin V. Ryan stated, "Operation Remaster has broken up a sophisticated CD piracy scheme that was distributing hundreds of thousands of CDs around the country. Investigators found pirated CDs in retail outlets as far away as Los Angeles and Chicago. The pirated CDs were made to look legitimate by incorporating artwork, printed inserts, and counterfeit FBI Anti-Piracy labels. Despite these sophisticated measures, our law enforcement partners at the local and federal levels were able to indict and convict these defendants."
On October 6, 2005, agents seized the following infringed items in connection with the two defendants who pleaded guilty today:
Stampers and masters are used to manufacture CDs and DVDs. A single stamper can potentially be used to manufacture 50,000 to 80,000 counterfeit CDs or DVDs of a single copyrighted work.
As part of their plea agreements, the defendants also agreed to forfeit their interest in equipment used to commit the violations, including a replication machine; a silk screening machine; a barcode printer, and DVD 6 Bay replicators, in addition to other items.
FBI Special Agent in Charge Joe Ford stated, "This case involved the large scale production and distribution of counterfeit software and music media, which violates federal criminal law, as well as the legal rights of software companies and music artists. Today's plea agreements further demonstrate the success the FBI and the REACT High Technology Task Force are having in attacking this growing problem."
In the plea agreement, the defendants admitted that, from September 2004 through October 6, 2005, they used replication and silk screening machines at Media Art Technology, Inc., in Hayward and Union City, California, for the mass reproduction of copyrighted software and music. This equipment allowed the defendants to quickly create tens of thousands of counterfeit CDs or DVDs. All the counterfeited works at issue are copyrighted in the United States.
Brad Buckles, Chief of Anti-piracy for the Recording Industry Association of America (RIAA) stated, "The value of this prosecution to the entire music community cannot be overstated. This case involves mass quantities of commercially manufactured counterfeits that closely resemble authentic CDs. This kind of illegal product has the greatest potential for deceiving the consumer and displacing legitimate sales. The illegal profits generated by these highly sophisticated operations come at the expense of the artists, songwriters, retailers, record labels and many others whose creative energies make music possible. These pleas - stemming from the largest U.S. manufacturing raid on record - should leave no doubt that the consequences for theft of this kind are real. We commend the U.S. Attorney's Office - and the numerous agents and officers who have worked this case along the way - for demonstrating such a solid commitment to the protection of intellectual property.”
Each defendant pleaded guilty to the following five counts:
(1) Conspiracy to commit criminal copyright infringement and to traffic in counterfeit labels;
(2) Criminal copyright infringement and aiding and abetting;
(3) Trafficking in counterfeit labels and aiding and abetting;
(4) Criminal trademark violations and aiding and abetting; and
(5) Counterfeiting a Department seal (FBI anti-piracy seal used on pirated music CDs).
As part of their plea agreements, the defendants admitted to serving as manufacturers in the conspiracy. Replicator conspiracies often involve geographically separate businesses that secretly handle different stages of the process of pirating intellectual property. Brokers, replicators, assemblers, packagers, printers, distributors and retailers play distinct roles in the conspiracy. Brokers solicit the orders of copyrighted works, while the replicators have the equipment to manufacture hundreds of thousands of CDs. Printers and packagers are responsible for assembling the CD case, booklet and artwork into a completed CD/DVD package that make the infringed work appear legitimate.
Mr. Ryan continued, "Operation Remaster has been particularly significant because we were able to strike at the source of the supply of pirated goods. Because pirating schemes are difficult to penetrate, law enforcement often works from the bottom of the distribution chain to the top. Here, we were able to identify the people supplying retailers with infringed products and seize a substantial amount of the pirated works before they could be distributed."
"On behalf of Symantec and its customers, we'd like to extend our thanks to all of the law enforcement agencies at the federal and local level belonging to the REACT Task Force that worked so hard to bring about these convictions," said William Plante, senior director, Global Security and Brand Protection, Symantec. "Software piracy continues to be a serious matter that poses a tremendous security threat to the average user. We appreciate U.S. Attorney Kevin Ryan's office for devoting the resources and time necessary to bring this case to a successful conclusion."
Defendants Wen and He are scheduled to be sentenced before U.S. District Court Judge Ronald M. Whyte on October 16, 2006 at 9:00 a.m. The next court appearance for a third defendant separately indicted in the case, Yaobin Zhai, a/k/a Ben Zhai, 33, of Fremont, California, is scheduled for May 22, 2006 at 1:30 p.m.
Anyone with information about illegal piracy can contact the local FBI office at 415-553-7400, or the REACT Crime tip line at 408-494-7165.
The maximum statutory penalty for each of the following counts of conviction is five years imprisonment, a $250,000 fine, three years supervised release, and a $100 special assessment for each violation.
In addition, the defendants' infringing items and counterfeiting equipment are subject to criminal forfeiture and destruction, pursuant to 17 U.S.C. §§ 506(b) and 509(a). However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Mark L. Krotoski and Matthew A. Lamberti are the Assistant United States Attorneys from the CHIP Unit in the Northern District of California who are prosecuting the cases. The operation is the result of a joint investigation led by the Rapid Enforcement Allied Computer Team High Tech Crimes Task Force (REACT) in San Jose, and the Federal Bureau of Investigation. The Recording Industry Association of American, Symantec Corporation, and the Motion Picture Association of America have also assisted in this investigation.
U.S. Attorney Kevin V. Ryan concluded, "I would like to thank the REACT Task Force and FBI agents who worked on the investigation for their excellent work. I would also like to acknowledge the outstanding cooperation we received from the Recording Industry Association of America as well as Symantec, which manufactures the Norton anti-virus software. The investigation is ongoing."
A copy of this press release and related court filings may be found on the U.S. Attorney's Office's website at www.usdoj.gov/usao/can.
Electronic court filings and further procedural and docket information are available at https://ecf.cand.uscourts.gov/cgi-bin/login.pl.
Judges= calendars with schedules for upcoming court hearings can be viewed on the court's website at www.cand.uscourts.gov.
All press inquiries to the U.S. Attorney=s Office should be directed to Luke Macaulay at (415) 436-6757 or Luke.Macaulay@usdoj.gov.
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