The Software Sopranos
Organized crime targets the booming high-tech black market
CITY OF INDUSTRY, CALIF.--Out on narcotics patrol last spring, Los Angeles County Sheriff's Deputy Murray Simpkins drove up to a suspected "stash pad." The window blinds were drawn tight. A white van backed up to the front door of the house at the end of a suburban cul-de-sac. Parked next to the curb were "rice rockets," souped-up Hondas and Nissans--a telltale sign of Asian gang activity. Inside the house, Simpkins found not dope but a software packaging and labeling facility. Fake Microsoft Office 97 packages were scattered on the floor in various stages of completion; CDs, cases, and bogus labels lay on tables and in closets.
By the time they finished counting, the police had recovered $8.5 million in counterfeit Microsoft software. They had also nabbed four alleged gang members, including Paul Karsing Tam, 24, described as a rising lieutenant in the Wah Ching ("Chinese Youth"), one of the West Coast's oldest Asian organized crime groups. "It's a whole new wave of crime, and it's a lot harder for law enforcement to track," says Simpkins. "How many cops can pick out [software] counterfeits?"
The bust provided another sign of a troubling new trend: Organized crime is getting into the high-tech black market--big time. Law enforcement officials say software piracy, chip re-marking, hardware theft, and counterfeiting have exploded into a $16 billion global business increasingly controlled by criminal syndicates. A major reason: Digital dons, primarily Asian and Russian gang members, can make the same profit margins that they do trafficking narcotics--with considerably less risk of serious jail time.
But the feds are starting to wake up to the problem. The U.S. Customs Service this week is set to open a multijurisdictional coordination center in Washington, D.C., to target intellectual property crimes. Last July, the Justice Department asked U.S. attorneys around the country to bring more cases involving computer offenses. And earlier this month, Attorney General Janet Reno proposed a national crime-fighting network called "Lawnet" to tangle with technology's dark side. "We've got to take on these organizations at all ends to try to dismantle them," says Mark Robinson, customs' director of fraud investigations.
Digital dons. In Southern California, the major Asian gangs involved in counterfeiting include the Black Dragons, Snakeheads, and the Wah Ching. Like their Italian and Irish predecessors, the groups extort, rob, kidnap, and even murder. In 1995, for example, police found suspected Wah Ching member Ming Ching Jin with more than $2.5 million in phony Microsoft software, C-4 explosives, TNT, and an assortment of guns.
The specter of violence from computer bandits looms over other parts of the country as well. In Ohio, a Russian computer dealer, Igor Abramovsky, threatened to kill a man who created a Web site warning consumers about his shoddy knockoff computer parts. A judge sent Abramovsky, who claimed to be in the Russian mob, to jail for 15 months. And in Silicon Valley, the FBI took down a Vietnamese gang called "The Company" that had committed 30 armed robberies of electronics firms.
But Southern California remains the hot spot for high-tech counterfeiting and smuggling. Last May, for instance, authorities in Los Angeles were surprised to find Asian red lobster insignias rather than Intel Inside on chips. The crooks made Pentium processors act like faster chips and sold them at higher prices. In June, a joint federal-local task force based in Westminster discovered $56 million in fake Microsoft products, the largest high-tech software seizure in U.S. history. During the day, Atul Dhurandhar, an Indian immigrant who had filed for bankruptcy in 1995, ran a legitimate printing business. At night, he allegedly used a $1.5 million replicator--provided by a convicted Chinese counterfeiter--to churn out tens of thousands of bogus music and software CDs. Dhurandhar purchased nearly $5 million worth of property, including six houses, with his alleged profits. Dhurandhar's attorney, Frank Ragen, says the government overstated the value of the confiscated CDs "by tens of millions." Law enforcement sources say the Dhurandhar ring has ties to organized crime, a charge his lawyer denies. The sources would not specify which gangs are involved because the investigation is ongoing.
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