That little security hologram on your software package? It works - as this LA gang of counterfeiters found out.
They didn't set out to commit the most serious counterfeiting crime in recent history. All they wanted was a piece of the American dream - even
if they had to manufacture it themselves. And they came awfully close to pulling it off.
Working out of clandestine factories in Los Angeles County, six men in their 20s, some of whom still lived with Mom and Dad, assembled the biggest software counterfeiting operation the United States had seen so far. By the time they were caught last year, the counterfeiters had duplicated enough MS-DOS and Windows to defraud corporate giant Microsoft of up to US$4.7 million. That's enough to keep the Redmond, Washington, headquarters afloat on Starbucks coffee and Jolt cola for at least a week. Bill Gates might have seen the sum as pocket change, but for these young Asian immigrants who dreamed of the good things in life, it must have seemed like a mind-boggling amount of money, and counterfeiting seemed an easy way to earn it.
Computer software counterfeiting doesn't require the bent genius of a dark-side hacker or the turbocharge of massively parallel supercomputers. As these determined youngsters proved, it can be done with office copiers, disk-duplicating machines, and peel-and-stick labels. Throw in a small nest egg, fifth-grade computer skills, and contacts in the printing world, and presto, our boys were in business. Or so they thought.
But with crime, as with many things, well-thought-out plans can be scuttled by the tiniest details. While the counterfeiters displayed canny sophistication and came tantalizingly near to making a fast fortune, they bumbled on a key front. At the 11th hour, they were undone by a shiny, round, multicolored object the size of a half-dollar.
The Achilles' heel of this little enterprise was a hologram. Real Microsoft software has a holographic seal, and these guys needed one to match. But when they tried to procure the 3-D images, the scam began to unravel. Meanwhile, the hologram did just what it was supposed to - protect Microsoft's software from being counterfeited. The hologram even helped police catch the bad guys. A corporate good luck amulet for the 21st century, the mini-image triumphed.
Holograms are deceptive little things. You'll see them in novelty stores - those kitschy, laser-produced images that seem to flicker and move as you hold them to the light. But don't dismiss them as nothing more than a pretty picture. Holograms are one of the best security devices ever invented. Their laser images are extremely difficult to duplicate, requiring expensive equipment, technical know-how, and artistic skill. That's why companies are commissioning them like hotcakes these days and slapping them onto everything from credit cards to new CDs. And, of course, computer software.
Yet for every proprietary hologram, there's a high-tech artist out there who'll try to copy it. These are the forgers of the new millennium. Many live in Asia, where counterfeiting is epidemic. But the recent trade heat over Chinese counterfeiting could be pulling the industry to this side of the Pacific Rim.
"A monkey could probably duplicate a computer disk," muses Larry Morrison, the deputy district attorney who prosecuted the Microsoft case. "And almost anyone can have some documents printed. But the key security devices are these hologram seals. That's what really makes it a true product."
Is there a moment in history each of us would live differently if given a second chance? An instant when we crossed a clearly marked line, knowing that nothing would ever be the same on the other side?
For Kim Fee Chean, a 27-year-old Burmese immigrant who lived with his parents and six siblings in a gritty neighborhood just five miles from the neon towers of downtown Los Angeles, that moment came one day in June 1994. That was when Chean first picked up the phone and called James Armstrong. (At his request, his name has been changed for his protection.)
Armstrong is a hologram maker whose name Chean had plucked out of the phone book. A tall, rambling guy who sports cowboy boots and a ponytail, he's a fixture in the hologram industry. Some of his more rarefied pieces hang in high-tech art galleries. He is especially proud of a moving holographic business card he once designed for the Prince of Brunei.
But in the summer of 1994, Armstrong got a more unusual request. He received a call from a young man named John Chen. In fact, the call was from Kim Fee Chean, who had already crossed over into dangerous territory and assumed a new persona. Chean, now Chen, wanted to know if Armstrong could duplicate a hologram. Depending on the quality of Armstrong's work, Chen reckoned he might need up to 30,000 of the complex designs per month. He offered to pay good money.
Armstrong, who has been in the business 20 years, smelled a rat. For one, he says, Chen was promising dollars for something that costs pennies to make.
On top of that, "what he described sounded suspiciously like a security hologram," Armstrong says, while kicking back recently in the ramshackle office of one of his legitimate clients, near Hollywood Boulevard and Vine.
After a few more conversations, Chen finally came clean: he wanted Armstrong to copy the holograms affixed to Microsoft software. Stalling for time, Armstrong explained he was only a middleman; he'd talk to a friend and get back to Chen. Then he picked up the phone and called the security department at Microsoft.
Despite Cypress Park's run-down appearance and abundance of graffiti, you can tell it was once desirable in a film noir sort of way, with its tidy Spanish tile-roofed houses, palm trees, and California bungalows with wraparound porches. Now most everybody has security doors and mean-looking guard dogs. The Cheans, who bought their home here 18 years ago, have two rottweilers. When I bang on the wrought-iron door, the Cheans agree to tell their side of the story. Two of their sons were ensnared in the Microsoft caper. Kim Fee Chean is serving three years in prison. Younger brother Kim Fong Chean, 25, got off with probation.
James Chean, 34, the oldest son and a filmmaker, does most of the talking as his parents listen in. They are ethnic Chinese who emigrated 20 years ago from Burma, where the family patriarch had a thriving construction business. In America, the elder Chean could only find work making custom furniture. But the trade-off was worth it. The father wanted his kids to get an education.
Close-knit and religious, the Cheans hewed to Buddhist tradition in the City of Angels, setting up a red and gold altar to their ancestors in the front room. During festivals at the local temple, Kim Fee and Kim Fong Chean cooked huge platters of Burmese food. When plainclothes police arrived with guns drawn to search the Chean house in February 1995, the mother was so terrified she ran out back, jumped a five-foot fence into her neighbor's yard, and called 911 to report a home invasion.
Beginning in their teens, the siblings all worked to help support the family. "Since we've come to this country we have never been on welfare," James Chean says. "We'd rather be poor but honest. If you don't have money, you just don't buy things."
Unlike the older children, who remember Southeast Asia, Kim Fee and Kim Fong Chean started school in the United States. They hung out with friends who were westernized. They ate cheeseburgers and ran in marathons. Kim Fee Chean went to trade school and did odd jobs at home, fixing up the family cars, includ-
ing his prized 1977 BMW 633i. Kim Fong Chean worked and took classes at the local state university. He aimed for a career in business and studied until 4 a.m. Now on probation, Kim Fong Chean is back in school. He doesn't want to meet with me.
"He just wants to forget," James Chean says. "He studies hard and doesn't want to let our parents down."
As for Kim Fee Chean in prison, he doesn't want to talk either. But James Chean says his industrious sibling isn't sitting still. He's learning Lotus 1-2-3.
We part at the gate, with the vicious guard dogs licking my hands. I'm impressed with the dignity of the family. But their earnest words paint a picture of young men torn between Old World traditions and New World fast bucks. "My brothers are not criminals," James Chean says. "I don't know how they got involved. But Kim Fee deserved a better deal. They were just trying to make a little money."
After Armstrong's suspicions moved him to act, he was eventually put in touch with Detective Jess Bembry of the Los Angeles Sheriff's Asian Organized Crime Unit. To Bembry, Armstrong's story sounded familiar. For several months, the unit had heard reports that a young Asian male was trying to buy security holograms. Now, with Armstrong and another hologram maker's cooperation, they just might catch him. Bembry got permission to tap Armstrong's phone so he could trace John Chen's calls. When things heated up, Bembry planned to go undercover as a fellow hologram maker. Once money changed hands, the crime unit could move in for arrests.
By October 1994, Microsoft's extensive antipiracy unit was also getting word that someone was sniffing around the edges of the empire, inquiring about counterfeit holograms. Bogus software had surfaced in Europe, Israel, and Canada. Soon Microsoft and the police were exchanging information and planning strategy. The company had big reasons for stopping the counterfeiting. The $40 billion US software industry loses more than $2.8 billion annually to illegal copying, much of it to counterfeiting. Piracy - when you copy US Navy Fighters for your brother-in-law so he, too, can shoot down Russkies - is illegal but not always practical for companies to fight. Counterfeiting is when you copy software en masse for profit, and that's when software firms hit back hard.
In early 1995, Microsoft flew Bembry up to its headquarters, where he attended a company-run school that teaches law enforcement officers how to detect counterfeits of Microsoft products. The course showed Bembry how the firm copies, packages, and ships its diskettes. It also went into security measures, including its most sophisticated weapon against counterfeiting - the holographic seal. Security officials showed Bembry how Microsoft affixes its proprietary hologram onto certificates of authenticity, which are printed on special bond paper, in a process similar to the printing of US currency. Bembry also learned how to distinguish authentic holograms from counterfeits. For instance, some counterfeit holograms are .05 of an inch smaller in diameter than real ones. Later, Microsoft passed on to Bembry a powerful crime-fighting tool, one that would eventually crack the computer-counterfeiting case open. Security officials gave him 7,500 specially altered holograms to use in a police sting.
As 1994 waned, the authorities were not the only ones getting their act together. Since none of those arrested is talking, the story must be pieced together from court documents, evidence seized during raids, and conversations with authorities. But this much is clear:
In the San Gabriel Valley, 10 miles east of downtown Los Angeles, a 25 year-old man named Chew Ping Kwan rented a single-story, yellow stucco house with white trim. With a population of 1.3 million, the San Gabriel Valley is a bubbling brew of new immigrants and Waspy old-timers, small industrial firms, mom-and-pop restaurants, and multimillion-dollar shopping centers. It's also a hub for Asian immigration, particularly Chinese. All the big Pacific Rim cities are morphing into 21st-century polyglot capitals, but in the San Gabriel Valley, the future is already here. It's the ideal place for Asian suburbanites and investors to plunk down cash for legitimate purchases, as well as for criminals who want to melt undetected into the large immigrant community.
In his new rental house, Kwan installed a large copy machine. Three of the defendants rented another house in the San Gabriel Valley from a young man named Joseph On Lee, whom they met at a local billiards hall. Lee, 27, is a naturalized US citizen who managed the rental property for his brother, the owner.
Somehow Kwan, his younger brother Gin, Lee, and Long Sheng Yang, another accomplice, had made the acquaintance of the Cheans. None of these young men were known as criminal types. Several worked part-time jobs and attended college. But unbeknownst to their families and friends, they now set about turning the rented properties into software duplicating and packaging factories. Soon, the houses hummed like electronic hives. In addition to the industrial copier that ran off instruction booklets, there were five high-speed disk duplicating machines that worked in shifts. Against the wall, stacked four feet high, were boxes with 25,000 blank computer disks, stick-on Microsoft labels, software license agreements, and more than 50,000 fake certificates of authenticity. A shrink-wrapping machine stood nearby.
Lee kept records of how much was produced each day. A November 26 entry read "2,000 DOS." The handwritten logs, which police found in Lee's wallet, continued until February 14, 1995, shortly before police shut down the operation.
Not all the action took place in the house. Kwan paid a small San Gabriel Valley firm more than $200,000 to print about 83,000 instruction manuals for MS-DOS and Windows. Chean paid another Valley printer more than $87,000 for similar work. The printers' connections to the sextet are still being probed. Could they have guessed that Chean & Co. weren't authorized representatives of Microsoft? Well, times are tough all over. They took the jobs and didn't ask questions.
By early 1995, the group was almost ready. But there was one missing link. If they wanted to get top dollar on the black market for their bogus software, they needed Microsoft holograms. The counterfeit software would find avid buyers even without the 3-D seals, but with the holograms their software could also be sold to unsuspecting legitimate dealers.
So Chean went hunting for holograms. Did the counterfeiters take this extra risk because they relished the challenge of producing almost undetectable copies? Were they motivated by simple greed? Perhaps it was both. In any event, after months of silence, Chean, apparently spooked by Armstrong, left a message for another hologram maker, who tipped off the Sheriff's Department. Fresh from his Microsoft training, Bembry went undercover, assuming the identity of the hologram maker.
The two met at a Denny's restaurant off state Highway 60 in the eastern San Gabriel Valley. They must have made a funny pair in that place of chicken-fried steaks, breakfast specials, and vinyl booths. You could picture a domestic argument erupting here on a bad day, but hardly a high tech computer-crime transaction.
Perhaps after all their cloak-and-dagger conversations, Bembry and his co-workers expected to come face-to-face with a John Woo-style villain. But Kim Fee Chean proved clean-cut, polite, and exceedingly nervous in person. He had two beepers, a cell phone, and preppy casual clothes. Magnanimously, he insisted on paying for lunch. At subsequent meetings, Chean and Bembry hammered out their deal. Chean grew chatty, pulling out samples of the Microsoft hologram he wanted copied. Most of his software was going outside the United States, Chean confided. He sold it for $11 per package, while the authentic Microsoft software retailed for $40 to $50. Chean also displayed shrewd instincts: he told Bembry he needed 10,000 holograms for MS-DOS 6.2 by February 22 because another counterfeiter was making the same product and Chean wanted to beat him to it.
After agreeing on a price of $1.25 per hologram, Chean forked over a $1,000 deposit. In exchange, Bembry parceled out samples of the altered holograms that Microsoft had given him. Unaware he was being tailed by undercover detectives, Chean left the Denny's parking lot and picked up two accomplices. They drove to a computer store and bought an authentic Microsoft package to compare the holograms. The altered holograms must have passed muster. "These guys were showing them around and jumping up and down, they were so good," one law enforcement official recalls. Now the police had only
to trail them quietly and wait for the big purchase to take place.
Eager to cinch the deal, Chean called Bembry to set up another meeting, and in the Denny's parking lot on February 17, Bembry delivered 5,000 holograms to Chean. Chean gave him $6,250. Kim Fee Chean then handed the rolls of holograms to his brother, Kim Fong Chean, who put them in the BMW. Plainclothes detectives watching the scene moved in for the arrests. Over the next several days, the police raided the rental houses, commercial printing facilities, and residences that Chean had unwittingly led them to.
At other locations that were searched, authorities found 200 packages of counterfeit software, printing plates for the Microsoft instruction manuals, $64,000 in cash, three handguns, and an assault rifle. In Yang's apartment, they found $420,000. When they visited Lee's rental property, Lee himself swung the door open and said, "Come on in; look at what my tenants have done."
Lee told police he had rented out the house to three young Asians but evicted them for not paying rent. He also denied knowing anything about counterfeiting. But detectives found evidence to the contrary. For one, there was the large-scale computer laboratory, with machines still running. Police also found a note Lee wrote to Kim Fee Chean giving specific instructions such as: "Wrap 400 DOS with holograms and registration card." He had signed it, "Thanks, Joe." Later, police also found photographic plates used to make Microsoft labels for computer disks in Lee's car. They believe Lee was one of the masterminds of the operation.
Four of the suspects were held on $1 million bail while a grand jury returned a multicount indictment. Rather than face trial, Lee and Kim Fee Chean pled guilty to computer counterfeiting and were sentenced to four and three years, respectively, in prison. The others pled guilty and got probation. Microsoft, which had provided key help in nailing the bad guys, knew it had broadcast a serious message.
Back in Redmond, the corporate spooks must have loved bringing this scheme down. A bust of this scope carries a good deal of meaning: The software cops have no small interest in providing an example for others in the racket when it's so easy to counterfeit Microsoft software. So easy that six bumbling amateurs from the San Gabriel Valley almost made off with their college tuition - 100 times over.
Almost, but not quite. Thanks to the hologram. The inert little 3-D image that glints prettily from packages of Microsoft software proved a committed adversary. When the counterfeiters tried to use proprietary holograms, they unwittingly set into motion a chain of events that led to their ultimate downfall.
In Cypress Park, the story of how close they came to pulling it off provides little solace to the Chean family. "My brother's a good guy," James Chean says. His parents nod in agreement. "This isn't something we're proud of. But it happened, and we just want to get beyond it."
And while Kim Fee Chean pays the piper, James has some advice for his incarcerated brother. "I tell him he should write a screenplay. If he sells it, maybe something good will come out of this."-
