Nashville, Tennessee - February 20 , 2003 - James K. Vines, United States Attorney for the Middle District of Tennessee, announced that J. Jason Tolleson, 30, of Smyrna, Tennessee, entered a plea of guilty in federal court today to charges that he conspired with others to commit mail fraud and to manufacture and sell unauthorized satellite television decryption devices, and that he structured monetary transactions to avoid currency transaction reporting requirements.
Tolleson faces up to five years imprisonment on each charge, a possible fine of as much as $6.9 million, restitution of up to $3.2 million, and the forfeiture of property with a value of as much as $3.2 million, including, among other things, his interest in a 2001 Porsche Boxster, a 1999 Malibu Response LX boat and boat trailer and a residence in Smyrna, Tennessee. Tolleson is also facing a possible period of supervised release of at least three years following his imprisonment.
According to testimony at the guilty plea hearing, Tolleson and several employees of JT Technology LLC manufactured or sold various devices designed or intended to assist others in the unauthorized decryption of satellite television programming without payment of subscription fees or pay-per-view fees to DirecTV. JT Technology LLC received approximately $3.2 million from the sale of such devices between October 1999 and March 30, 2001.
DirecTV, Inc. is engaged in the business of delivering satellite television programming to its subscribers. DirecTV has invested more than one billion dollars to develop its direct broadcast satellite television system. DirecTV delivers television programming to the homes and businesses of its subscribers in the United States equipped with DirecTV satellite signal receiving equipment. That equipment includes a satellite dish, an integrated receiver/decoder and a DirecTV access card, which is necessary to operate the receiver/decoder.
Consumers who purchased DirecTV equipment subscribe to various packages of DirecTV programming for which the subscriber pays a monthly fee. A subscriber also can order pay-per-view events and movies. DirecTV contracts with and pays program providers such as cable networks, motion picture distributors, sports leagues, event promoters, and other programming rights holders, for the right to distribute their programming to its subscribers. All programming distributed by DirecTV is delivered to its broadcast centers in Castle Rock, Colorado, and Los Angeles, California, where it is then digitized and compressed. The resulting signal is encrypted, or electronically scrambled, by DirecTV to prevent its unauthorized reception. DirecTV then transmits these signals to five satellites located in stationary orbit approximately 22,300 miles above the equator.
The satellites relay the encrypted signal back to earth where it can be received by DirecTV’s subscribers. The satellite signal is received by each subscriber’s dish and transmitted by wire to the receiver/decoder. The receiver/decoder acts like a computer to process the incoming signal using information from the credit card-sized access card. Each access card contains a computer chip with copyrighted software and a unique electronic identifying number. The access card controls which DirecTV programming the subscriber can receive unscrambled based on the programming package purchased by the subscriber. The access card also captures and transmits to DirecTV the subscriber’s pay-per-view orders. The receiver/decoder contains a computer microprocessor and proprietary verification software. This proprietary verification software makes a comparison approximately every eight seconds between a unique code transmitted continuously with each DirecTV program and an authorization code generated using each subscriber’s access card to confirm that the subscriber is authorized to receive that program. Beginning in about November 1995, various illicit devices were produced and sold to allow the unscrambling of DirecTV programming without authorization from or the payment of subscription fees to DirecTV. These devices sometimes were created by inserting unauthorized or “pirate” software into the computer chip in the access card. The pirate software provides false information to the proprietary verification software contained in the receiver/decoder when the proprietary verification software queries the access card to verify that the subscriber is authorized to receive certain programming. The false information provided by the pirate software causes the proprietary verification software to decrypt all channels without authorization from or payment of subscription fees to DirecTV.
To combat the use of these illicit devices, DirecTV began to periodically disseminate so-called “electronic counter measures” (ECMs). ECMs were electronic messages sent through the satellite data stream to deactivate the illicit access cards. Some of the ECMs corrupted or “looped” the pirate software in the illicit access cards to make them inoperable. The pirate community developed “unlooper” devices, which could restore the software in the “looped” access cards to its original condition and could allow those access cards to again be illicitly programmed to decrypt all DirecTV’s satellite signals. To further combat the use of these illicit access cards, DirecTV initiated a replacement of its original access cards. A new, more secure, access card, sometimes known as an “H card” or “Period 2 card” was sent to all DirecTV subscribers in 1997. However, by August of 1997 the H card also had been compromised.
Beginning in February 1999, DirecTV provided another new access card, sometimes known as the “HU card” or “Period 3 card,” to its hardware manufacturers for use in new satellite television equipment. The HU card remained secure until November 2000 when a number of Internet web-sites announced that they were selling illicitly modified HU cards.
The devices manufactured and sold by JT Technology LLC included “unloopers” and “HU loaders.” The unloopers were devices designed to modify DirecTV H Cards that previously had been deactivated by DirecTV’s electronic counter measures in order that those access cards could be restored to their original condition or could be reprogrammed to enable viewing of all DirecTV channels without payment of the required subscription fees or pay-per-view fees to DirecTV. The HU loaders were devices designed to modify DirecTV HU Cards to enable viewing of all DirecTV channels without payment of the required subscription fees or pay-per-view fees to DirecTV. The HU loaders sold for as much as $10,000 each when they were first offered for sale by JT Technology LLC in January of 2001. They were selling for $999 by the end of March 2001. Many of the HU loaders and other devices shipped by JT Technology LLC were to fulfill orders placed for those devices with satellite television piracy web-sites based in Canada.
JT Technology LLC employees converted several cashier’s checks made payable in amounts just under $10,000 into cash to avoid currency transaction reporting requirements. JT Technology LLC used cash proceeds from those checks to acquire HU loaders or related software.
This investigation of this case was conducted by U.S. Customs Service and the Internal Revenue Service, Criminal Investigation.
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