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Feds launch Internet crime crackdown

From Terry Frieden

Justice Department
Federal Bureau of Investigation (FBI)

WASHINGTON (CNN) -- Federal agents armed with search warrants conducted raids in three states Wednesday as part of a nationwide crackdown on the theft of copyrighted materials through the Internet, the Justice Department announced.

Individuals were being questioned after six searches by investigators in Texas, New York and Wisconsin, authorities said. No immediate arrests were expected, but charges stemming from the investigation were likely to be filed later, they said.

In a separate federal operation aimed at combating Internet fraud and curbing junk e-mails or spam, agents were concluding "Operation Slam Spam," which officials could announce as early as Thursday.

In a written statement, the Direct Marketing Association, which assisted FBI agents with that yearlong investigation, said "several arrests and indictments of alleged spammers will be announced."

One federal law enforcement source said the investigation covered 111 cases in which there were more than 332,500 alleged victims resulting in nearly $145 million in losses. More than 260 people were under investigation and so far 51 people have been arrested, the source said.

In the crackdown on theft of copyrighted materials, authorities said the search warrants Wednesday were executed against an Internet service provider in Dallas and five residences in San Antonio and Bellaire, Texas; Johnson City and Fulton, New York; and Waukesha, Wisconsin.

A government lawyer involved in the probe said the ISP, Planet Internet Service, was not a target but had information about those under investigation.

Federal officials said the target of the crackdown was a peer-to-peer network of about 7,000 members operated by an organization that calls itself the "Underground Network." Officials allege that network engages in the unauthorized distribution and reproduction of music, movies, software and other protected material.

Although federal agents have previously targeted peer-to-peer groups for the distribution of pornography, Justice Department officials said this marked the first time those using the technology have been investigated for violating laws against the theft of intellectual property.

Targeting hubs

Attorney General John Ashcroft announced the results of the investigation at a Justice Department news conference Wednesday, vowing prosecutors will continue to pursue groups that violate copyright laws.

"P2P, or peer-to-peer, does not stand for permission to pilfer," Ashcroft said. "You can pay the fair value for movies, music, sotfware and games like every other consumer, or you can pay a much higher price when you are caught committing online theft."

Federal authorities said the Underground Network, commonly referred to as "Direct Connect" after the software that enables the file sharing, consists of hundreds of servers, or "hubs," each controlled by an "operator." The current investigation is targeting hub operators, officials said.

"The investigation used both online covert operations and traditional investigative techniques to identify the leadership and organizational structure of the U.S.-based hubs on the Underground Network," according to an FBI affidavit supporting the search warrants. The document said investigators had used a "covert computer" configured to allow all traffic from the targeted hubs to pass through a networking device in Washington, where the FBI was tracking the computer traffic.

Ashcroft said the industries that produce the protected material lose an estimated $19 billion worldwide every year from illegal distribution through the Internet. Ashcroft said authorities were determined to send a message but acknowledged the current operation disrupts only a small fraction of the illegal distribution.

"This is a very substantial problem," the attorney general said. "This does not solve the problem."

Government experts say the motives of those involved in such operations are often to enhance personal reputations rather than benefit financially, but it is too early to know whether any targets of the current probe sought to profit.

"The motivations are as different as the individuals involved," said a Justice Department lawyer involved in the probe, who asked not be identified. "In the online piracy world doing this for profit is frowned on."

Government and industry sources said the separate operation to be announced as early as Thursday is aimed at spammers who flood computer users with junk e-mails and scam operators who use the Internet to commit credit card fraud and other financial crimes.

The effort is aided by a law passed by Congress last year which calls for fines and prison sentences of up to five years for sending fraudulent e-mail.

One government official said several different scams are expected to be detailed. Some of the cases will deal with "phishing," which involves e-mails that appear to be from financial institutions but are actually attempts to steal confidential information.

Cases dealing with other types of spam as well as identity theft will also be highlighted. The cases to be discussed cover several months, the source said.

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