Congressional panel: File trading may fund terrorism

John G. Malcolm, deputy assistant attorney general in the criminal division of the U.S. Department of Justice did say there seems to be some connection between illegal copying and organized crime, in that many of the groups profiting from illegal copies are highly organized and can have international distribution networks. Organized crime often supports terrorism, he suggested.

"These groups will not hesitate to threaten or injure those who tend to interfere with their operations," Malcolm said.

But when subcommittee chairman Lamar Smith, a Texas Republican, asked Malcolm for examples of cases where file trading was connected to terrorism, Malcolm said he couldn't give concrete examples. "It would surprise me greatly if the number were not large," Malcolm added. "This is an easy enterprise to get into; the barriers of entry are very small, and the profits are huge."

Smith and several others at the hearing noted that selling illegally copied materials can be more lucrative than selling illegal drugs, and several at the hearing compared the copyrighted materials trade to the drug trade. Illegally copied materials can have markups of 900 percent, Smith noted.

Malcolm told the representatives of the indictment in Virginia Wednesday of Hew Raymond Griffiths, of Bateau Bay, Australia, for his role as an alleged kingpin in Drink Or Die, a software piracy group founded in Russia in 1993. The U.S. Department of Justice (DOJ) is working to get Griffiths extradited to the United States, Malcolm said, and the indictment is part of the DOJ's "Operation Buccaneer," in which 20 U.S. defendants have been convicted of felony copyright offenses since December 2001.

"For too long, people engaged in piracy believed that if they were outside the borders of the United States, they could violate our intellectual property laws with impunity," Malcolm added. "They were wrong. This indictment and the extradition sends a clear and unequivocal message to everybody involved in illegal piracy that regardless of where you are, the Justice Department will find you, investigate you, arrest you, prosecute you, and incarcerate you."

Malcolm also called the creators of "warez" file-trading organized criminals, although he admitted warez fans aren't motivated by money. Many warez groups, who distribute pirated commercial software over the Internet, operate in a very organized fashion, Malcolm said, with a hierarchy based on how much individual members contribute to the group. Much of the pirated material on the Internet comes from warez groups, Malcolm suggested.

"They are nonetheless responsible for a massive number of pirated movies, music, games and software in circulation each year, and represent a significant and growing threat to intellectual property rights around the globe," he said.

Representative Robert Wexler, a Florida Democrat, praised the hearing for highlighting the "disastrous connection" between copyright piracy and organized crime. "I can't help but sit here and wonder ... if parents fully understand the ramifications of what it is to steal a movie or pirate a song," he said. "If more American parents understood the connection between the pirating of intellectual property and organized crime, I think then there'd be a much more effective public relations response in our own country to better appreciate the disastrous ramifications."

Wexler suggested public service commercials should highlight that alleged connection between piracy and organized crime, much like anti-drug commercials highlight the connection between the sale of illegal drugs and funding terrorism.

Part of the hearing rehashed complaints about file-trading by college students over P-to-P networks, covered in previous hearings and statements from the Motion Picture Association of America (MPAA). No one at the hearing connected P-to-P trading with the financing of terrorism or organized crime.

Jack Valenti, president and chief executive officer of the MPAA, described a couple examples of copying operations that had been raided outside the U.S., and he said 26 copying factories in Russia can copy 300 million DVDs and CDs a year. He claimed his industry is losing billions of dollars a year to piracy, although a couple of representatives also pointed out the motion picture industry had record box-office receipts in 2002.

Valenti predicted investors would stop investing in the movie industry if piracy is allowed to continue. He repeated earlier requests for Congress to pass new anti-copying laws.

Valenti also complained about P-to-P trading. "It's low risk. Nobody does anything about it," he said.

Representative John Carter, a Texas Republican, suggested that college students would stop downloading if some were prosecuted and received sentences of 33 months or longer, like the defendants in the DOJ's Operation Buccaneer. "I think it'd be a good idea to go out and actually bust a couple of these college kids," Carter said. "If you want to see college kids duck and run, you let them read the papers and somebody's got a 33-month sentence in the federal penitentiary for downloading copyrighted materials."

The committee also spent a significant amount of the hearing listening to the testimony of Joan Borsten Vidov, president of Films by Jove Inc., a small Los Angeles film distributor. In 1992, Vidov's company purchased the rights to restore and distribute a number of old Russian animated films, but Vidov accused the Russian Ministry of Culture of trying to redistribute the films without her company's permission.

"What fits the definition of organized crime more than a foreign government deciding to steal the property of a small U.S. business?" Vidov asked. "That is the worst kind of organized crime by the most powerful possible organization."

The Russian embassy in Washington didn't have an immediate comment on Vidov's or Valenti's testimony.