Nine charged in FBI cable piracy sting

Published Jun. 28, 1996|Updated Sep. 16, 2005

Nine people, including six Floridians, face federal charges after a three-year undercover FBI investigation of a nationwide ring of cable pirates.

Five others have pleaded guilty in the case, which began in 1992 when the FBI launched a business in Union County, N.J., to infiltrate pirate groups.

The case is the largest cable piracy ring ever uncovered, U.S. Attorney Faith S. Hochberg said.

"It demonstrates how technology in the wrong hands can result in a multimillion-dollar crime," Hochberg said.

Through plants in Florida and California, the conspirators manufactured "black boxes" _ modified devices that allow consumers to get free cable service, and sold about 100,000 of them annually to distributors at huge profits, authorities said.

When modified with illegal circuit boards, the boxes allow viewers to get premium cable shows and pay-per-view events, depriving the cable company of revenues and reducing the amount of fees that cable operators pay to municipalities.

Honest consumers also paid more than necessary for cable service, Hochberg said.

Among the allegations in a 92-count indictment unsealed Thursday as most of the nine suspects were arrested:

+ A cable industry security agent working undercover on the case received bribes totaling $100,000 and a $40,000 Porsche.

+ A Texan who is chairman of a bank in the Cayman Islands laundered tens of thousands of dollars of those bribes.

+ The ring trafficked in more than 16,000 stolen legitimate cable converter boxes, of which 3,500, worth $250,000, were stolen from an evidence locker of the Los Angeles Police Department in July 1994.

+ The other stolen boxes included 3,000 taken from a truck en route from California to an Arizona warehouse maintained by the Scientific-Atlanta Corp., and 10,000 stolen from cable operators in the Baltimore area.

Among those pleading guilty was a Wrightstown computer expert whose company, Digitek, designed, manufactured and sold about 64,000 pirate circuit boards worth more than $800,000.

A legitimate box costs about $125, but with the $12.50 circuit board, is sold by pirates to retailers for about $300, who in turn sell the box to consumers for up to $500, authorities said. Many consumers learn of the pirate boxes in magazine ads.

In more than 40 related raids since March, authorities have seized $1.5-million in computer and electronic equipment, $1.4-million in cash, 50,000 modified cable boxes and descrambling boxes, as well as some boats and vehicles.

The undercover business, Prime Electronics and Security Inc. of Kenilworth, posed as a distributor of legitimate cable converter boxes.

While the FBI undercover probe, "Operation Cable Trap," targeted wholesalers at the top of the scheme, cable operators typically will contact consumers who are using illegally modified cable boxes, whose names are found in the business records of the pirates, Allen said.

Operators once offered to let bygones be bygones and have the consumer begin paying for service, but now are taking a harder line, he said. Consumers who use "black boxes" may now be asked to make back payments and penalties, and in some cases could face charges brought by the operator, Allen said.

The indictment charged:

+ Francis Joseph Russo, 47, of North Miami Beach, owner of Leasing Ventures Inc. in Hollywood, Fla., with operating a company that made and sold modified cable boxes. He faces 71 counts, as does his wife, Joann Russo, 40, including conspiracy, wire fraud, interstate transportation of stolen property, theft of cable television signals and money laundering. Francis Russo paid the bribes to the security official working undercover.

+ Their son, Frank Russo Jr., 26, of Aventura, who worked for Leasing Ventures, faces 69 counts, including conspiracy, wire fraud, interstate transportation of stolen property, and theft of cable television signals.

+ Joseph Russo (no relation), 50, of Miami, was a co-owner of Leasing Ventures and faces the same 71 counts as Francis and Joann Russo.

+ Joseph Olkowski, 46, of Hollywood, an employee of Leasing Ventures, faces the same 69 counts as Russo Jr.

+ Daniel R. Zielinski, 50, of Port St. Lucie, operator of Cable Box Services Inc., a company created by Leasing Ventures, faces the same 69 counts.

+ William S. Prevost III, 29, of Studio City, Calif., owner and operator of Novaplex Inc. and Gage Systems Group Inc., piracy operations in Sun Valley California. He faces 22 counts, including conspiracy and distributing devices that assist in cable signal theft.

+ Anthony Lee Marinaccio, 42, of Princeville, Hawaii, chief financial officer of Novaplex. He faces the same 22 counts as Prevost.

+ John M. Mathewson, 68, of San Antonio, Texas, chairman of the Guardian Bank and Trust Ltd., Grand Cayman, British West Indies. He faces one conspiracy count and two money laundering charges.

Each count carries a maximum penalty of at least five years in prison and a $250,000 fine. Authorities are seeking to recover $10-million from the suspects accused of money laundering.