A New Jersey man pleaded guilty today in the Western District of Oklahoma to participating in a massive international scheme to make millions of dollars by selling pirated business telephone system software licenses. The entire scheme allegedly resulted in the sale of software licenses with a retail value of over $88 million.
According to court documents, Jason M. Hines, aka Joe Brown, aka Chad Johnson, aka Justin Albaum, 43, of Caldwell, conspired with co-defendants Brad Pearce and Dusti Pearce – who jointly used the identity “Terri Jenkins” – to commit wire fraud. The scheme involved generating and then selling unauthorized Avaya Direct International (ADI) software licenses, which were used to unlock features of a popular telephone system used by thousands of companies around the globe. The ADI software licensing system has since been decommissioned.
Avaya Holdings Corporation, a multinational business communications company headquartered in California, sold a product called IP Office, a telephone system used by many midsize and small businesses in the United States and abroad. To enable additional functionality of IP Office, such as voicemail or telephones, customers had to purchase software licenses – which Avaya generated – from an authorized Avaya distributor or reseller. Avaya used software license keys to control access to Avaya’s copyright-protected software and to ensure that only customers who paid for the software could use it. In addition, Avaya required that each software license on an IP Office system be associated with the system’s Avaya Secure Digital (SD) card – a small flash memory card with a unique serial number that plugged into the IP Office manager computer – which the end user had to keep in its possession to use the licenses.
Hines operated Direct Business Services International (DBSI), formerly known as Dedicated Business Systems International, a New Jersey-based business communications systems provider and a de-authorized Avaya reseller. He bought ADI software license keys from Brad and Dusti Pearce under his own name and also using an alias, Joe Brown, and then sold them to resellers and end users around the globe. Brad Pearce, a long-time customer service employee at Avaya, allegedly used his system administrator privileges to generate those keys without authorization, creating tens of thousands of them that he sold to Hines and other customers. Brad Pearce’s wife, Dusti Pearce, is alleged to have handled accounting for the illegal business. Hines was by far the Pearces’ largest customer, buying over 55% of the stolen licenses, and significantly influenced how the scheme operated. In fact, Hines was one of the biggest users of the ADI license system in the world. As a result, Hines reaped millions of dollars from the fraud.
Hines pleaded guilty to conspiracy to commit wire fraud. As part of the plea agreement, the United States has agreed not to advocate for more than five years in prison. The court has not yet set a sentencing date. Pursuant to the plea agreement, Hines must forfeit a money judgment of at least $2 million as well as make full restitution to his victims. A federal district court judge will determine any sentence after consideration of the U.S. Sentencing Guidelines and other statutory factors.
Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division, U.S. Attorney Robert J. Troester for the Western District of Oklahoma, and Special Agent in Charge Edward J. Gray of the FBI Oklahoma City Field Office made the announcement.
The FBI is investigating the case.
Senior Counsel Matthew A. Lamberti of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorneys Julia E. Barry and William Farrior for the Western District of Oklahoma are prosecuting the case.