Friday, December 8, 2006

Operation Cyberstorm Convictions

The U.S. Attorney's Office for the Northern District of California announced the conviction of three defendants for defrauding Microsoft by purchasing software from the company at the academic discount rate and then reselling it in violation of their agreement with the company.  According to a press release (here):

Mirza Ali, 59 and Sameena Ali, 52, of Fremont, the former owners of Samtech Research Inc., were convicted on 30 counts of conspiracy, mail fraud, wire fraud, and money laundering.  Keith Griffen, 55, of Oregon City, Oregon, was convicted on nine counts of conspiracy, mail fraud and wire fraud.  According to the evidence, from January 1997 through January 2001, the Alis and Mr. Griffen formed several nominee corporations and purchased existing corporations holding Microsoft licensing agreements for the purpose of participating in Microsoft’s Authorized Education Reseller (AER) program, a program that provides Microsoft software at steeply discounted prices for resale to academic institutions only.

In 1996, after the Alis were audited by Microsoft and removed from the AER program for failure to comply with the terms of the licensing agreement, the Alis formed new corporations in the names of others to disguise their identity from Microsoft and reenter the AER program.  In 1999, when Microsoft stopped accepting AER applications from new corporations, the Alis and Mr. Griffen, in the names of others, bought small companies throughout the United States that held Microsoft AER licensing agreements and thereafter continued to purchase academic software products. Using these nominee entities, the Alis and their co-conspirators purchased more than $29 million worth of AER software from Microsoft and sold this software to non-academic entities, in violation of the Microsoft agreement. The Alis were also convicted of laundering the proceeds of this scheme, including purchasing real property in the name of their college age son and wiring more than $300,000 of the proceeds from the illegal sales of the Microsoft educational software to Pakistan.

Microsoft estimates that it lost over $60 million from the the defendants' scheme.  “Operation Cyberstorm” is an undercover operation to investigate software piracy. (ph) 

http://lawprofessors.typepad.com/whitecollarcrime_blog/2006/12/operation_cyber.html

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