Crimes of the Net

Software: Hackers call it sharing.  But theft on the Internet is costing companies billions, 
and the high-tech industry is struggling to stop it.


	Ray Curci is an earnest, diligent guy.  He spends days off with his wife, but works from 
home every weekend.  One recent Saturday he settle himself in front of the computer in his den -- 
and noticed something odd.  Dozens of people were logging on a seldom-used computer that Curci, 
a systems administrator, runs at Florida State University.  More puzzling was that most of the 
users were from abroad.  And, once logged in, they seemed to just . . . disappear.
	Hackers, Curci realized. Quickly, he tracked the intruders to their destination -- a 
so-called invisible directory, or data bank lacking any identifiable name or listing.  He was 
astonished by what he found:  a vast cache of proprietary software, including test versions of 
Windows 95 and OS/2, the new operating systems being developed by Microsoft Corp. and IBM.  He 
has no idea who secreted it within the universitys computers.  But it was obviously a pirates 
treasure trove.  There were games and word-processing programs, even tools to help hackers 
break passwords and conceal their digital trespasses.  Curci scrambled the purloined programs 
to make them unusable, even as a dozen hackers swarmed to download copies.  But, he guesses, 
hundreds of cybersurfers beat him to the punch.  Many more are still trying.
	Such is the dark side of the Internet, the ubiquitous electronic web linking as many as 
40 million computers worldwide.  As anyone not wholly techno-literate knows by now, the Net is 
growing gangbusters.  Its our new frontier, a digital Wild West.  As befits such a rough-and-
ready place, its populated by a lot of bad guys.  Want the latest computer games from Broderbund 
or 3DO?  Interested in previewing Microsofts vaunted Windows 95, nine months before it hits a 
store near you?  Tap into the Net, find the right bulletin board, and you can probably secure a 
free copy.  Telephone credit cards, copyrighted music, even digital Playboy centerfolds are 
being electronically pilfered, too.  Hackers call it sharing.  Others consider it theft, pure 
and simple.  Its like shoplifting, says Bruce Lehman, U.S. Commissioner of patents and 
trademarks, no different than letting your fingers do the walking at your local CD store.
	Its hard to gauge the scope of the phenomenon or its economic impact.  But numbers tell 
part of the story.  By some estimates, roughly $2 billion worth of software was stolen over 
the Internet last year, a growing portion of the total $7.4 billion the Software Publishers 
Association reckons was lost to piracy in 1993.  Just last month the leaders of an international 
piracy ring operating out of Majorca, Spain, pleaded guilty to a brand of fraud destined to 
become commonplace.  According to U.S. investigators, the racketeers stole 140,000 telephone 
credit card numbers, then sold them to computer bulletin boards in the United States and Europe.  
Hackers used the numbers to make a whopping $140 million worth of long-distance phone calls -- 
sometimes merely to pay for their time online, other times to tap into remote computers and 
download hijacked software.  Who ate the loss?  GTE Corp., AT&T, Bell Atlantic and MCI, among 
others.
	Phone Stud: It was not an isolated incident.  Police have arrested half a dozen 
bulletin-board operators in recent months on charges of illegally distributing software over 
the Internet.  This is only the tip of the iceberg, says Sandra Sellers of the Software 
Publishers Association.  The association has identified 1,600 bulletin boards carrying bootleg 
software, she claims.  Last week authorities in North Carolina indicted nine alleged members of 
a nationwide piracy ring, know digitally by code names like Phone Stud, Major Theft, and 
Killerette.  Like the hackers of the Majorca network, they have been charged with stealing 
as many as 100,000 telephone credit-card numbers -- as well as pirating an array of software.  
The cost to the phone company has been estimated at $50 million.
	The thievery isnt likely to stop with software and phone cards.  Not so far in the 
future, the Internet will become a well-traveled avenue of commerce.  Already retailers are 
using it to hawk everything from computer parts to flowers and teddy bears.  Since anyone with 
a modem and a computer can go into business, the possibilities for abuse are almost endless.  
Playboy magazine, for instance, has sued over half a dozen bulletin boards over the past two 
years for baring its Bunny pix.  CompuServe, the major online information service, has been 
sued by 140 music publishers for allegedly permitting subscribers to download popular songs.  
Cybertheft as yet accounts for an indiscernible share of the $400 million lost annually to 
record piracy, but thats partly because of technical difficulties.  Taping a popular single 
only takes minutes; pirating a digital version can require anywhere from 30 minutes to several 
hours., depending on your equipment.  But that will change as digital transmission technology 
improves.  Before long, says David Liebowitz at the Recording Industry Association of America, 
you will be able to download an entire album in seconds.  Then, watch out.
	Businesses are moving to protect themselves.  Perhaps because its so obviously part 
of a trend, the Florida break-in provoked an unusually tough response.  Microsoft posted a 
$10,000 bounty for information leading to the arrest and conviction of the perpetrators.  
DeScribe Inc., a computer-software company whose new word-processing program was found among 
the pirated software, offered a $20,000 reward.  IBM is investigating, in cooperation with 
federal authorities.  But tracking the cybercrooks wont be easy.  The Internet is a chaotic 
place.  Hackers go from computer to computer, vaulting borders and leaving few traces.  Before 
entering a computer at Florida State University, they might pass through another in Finland, 
say, that strips any names or addresses from their communications.  Even when uncovered, pirates 
can disavow wrongdoing.  For instance, many of the Florida intruders hailed from Asia, where 
piracy is not always considered a crime.
	Legality collides with practicality when battling cybertheft.  As part of its plan for 
a national information infrastructure, the Clinton administration proposes tightening the 
federal Copyright Act to explicitly cover transmissions over the Internet.  New laws would also 
make it clear that electronic property rights are as sacrosanct as any others.  But to what 
effect?  The rules of commerce and fair play that govern real-world business are alien to the 
anarchic Wild West culture of the Internet.  There, the prevailing ethic is shareware.  
Knowledge is to be disseminated.  Anything found in etherspace is widely considered to be 
mine as well as yours -- ours, in other words.  Digital socialism rules the Net, not 
copyrightable capitalism.  Few Interneters would disagree that stealing and reselling software 
or credit cards is wrong.  But fewer still would feel guilty about copying the latest game 
version of Doom, or some such, rather than forking out $39.95.  Unfortunately, that often 
admirable ethos makes it easier for genuine crooks to perpetrate -- and justify -- their crimes.

THEFT ON THE INFOHIGHWAY

OCTOBER 1994  Hackers bust into computers at Florida State University and upload 
pirated versions of a dozen new programs, including Windows 95.

SEPTEMBER 1994  Max Louarn, 22, is arrested for masterminding a plot to sell 140,000 
pilfered phone-card numbers in the United States and abroad via computer bulletin boards.  
He later pleads guilty.

AUGUST 1994  Richard D. Kenadek, 43, is indicted for reportedly allowing pirated 
programs to be traded on his bulletin board, Davey Jones Locker.

APRIL 1994  David LaMaccia, 20 and a student at MIT, is indicted for conspiracy to commit 
wire fraud, after allegedly permitting the distribution of more the $1 million worth of 
copyrighted software over the Internet.

DECEMBER 1993  Playboy wins its suit against George Frena, who allowed copyright nude 
photos to be distributed on his computer billboard.

NOVEMBER 1993  Frank Music Corp. files a class-action suit against CompuServe 
for allegedly permitting subscribers to post more than 400 copyrighted songs, 
including Franks Unchained Melody.


from Newsweek -- Nov. 14, 1994  pp. 46-47    by Michael Meyer with Anne Underwood in New York


