SAN JOSE, Calif., April 19 (UPI) -- The FBI announced Friday it had broken up a cluster of software pirates operating in the San Francisco Bay Area who allegedly cost Microsoft more than $100 million in lost sales.
Police and FBI agents capped a 2-year undercover investigation by fanning out in San Jose, Fremont and other communities located not far from Silicon Valley where they rounded up 27 suspects, most of whom allegedly duplicated various Microsoft programs in Taiwan and sold them in the United States.
"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," United States Attorney David Shapiro said at a Friday afternoon news conference. "The victims were the legitimate consumers of these products."
The defendants were primarily Taiwanese and Pakistani nationals described by the U.S. Attorney's office as a "large, loosely affiliated group of dealers in counterfeit software."
One of the 11 indictments in the cases that were unsealed said thousands of copies of Windows NT, Microsoft Office and other programs were delivered from Taiwan to post office boxes and then sold to customers, usually on a cash-only basis.
Some of the software, which retails for several hundred dollars per copy, was sold at a fraction of the cost with the transactions allegedly taking place in shopping center parking lots or at the particular defendant's home.
"The illegal trafficking in counterfeit software resulted in financial crimes including money laundering, and we intend to follow the money trail," said IRS Special Agent Dwight Sparlin.
Some of the money wound up being deposited in a Swiss bank account, but funds also were wired to Pakistan; there was no evidence that any of the money was going to terrorists or political extremists.
Mirza and Sameena Ali ran a company called Samtech Research, which allegedly fraudulently enrolled in Microsoft's Authorized Education Reseller program in order to obtain genuine Microsoft software at steep discounts for resale to schools. The goods, however, were sold to non-academics, including Shelia Wu, a defendant in one of the other indictments.
Microsoft cancelled the Alis out of the program in 1997, but the Fremont couple allegedly began buying up small, software dealerships that had ceased operations, but still had valid AER certification.
"The Ali's purchased real property in the name of their college-aged son and have wired over $300,000 to Pakistan," the U.S. Attorney's office said in a release Friday. "Microsoft estimates that it lost in excess of $100 million as a result of the various schemes."
The couple also allegedly sent money to Mizra Ali's brother and wife, Zahid and Riffat Ali, who are believed to have fled to Pakistan in 1996 when they were indicted for money-laundering and pirating Microsoft software.
The San Jose Mercury News said Friday that the Ali family gained a degree of notoriety in 1991 when they proposed to build a 16,000-square-foot mansion in Fremont that would have featured a 4,400-square-foot master bedroom. The Fremont City Council blocked the plan because they considered it to be far too large for the neighborhood.
(Reported by Hil Anderson in Los Angeles)
