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OKLAHOMA CITY– A computer system administrator and his spouse pleaded guilty today 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, Raymond Bradley Pearce, aka Brad Pearce, 48, and Dusti O. Pearce, 45, both of Tuttle, Oklahoma, conspired with Jason M. Hines, aka Joe Brown, Chad Johnson, and Justin Albaum, 43, of Caldwell, New Jersey to commit wire fraud in a scheme that involved generating and then selling unauthorized Avaya Direct International (ADI) software licenses. The ADI software licenses were then 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.
Brad Pearce, a long-time customer service employee at Avaya, used his system administrator privileges to generate tens of thousands of ADI software license keys that he sold to Hines and other customers, who in turn sold them to resellers and end users around the globe. The retail value of each Avaya software license ranged from under $100 to thousands of dollars. Dusti Pearce 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. Hines operated Direct Business Services International (DBSI), a de-authorized Avaya reseller, in New Jersey.
Brad Pearce also employed his system administrator privileges to hijack the accounts of former Avaya employees to generate additional ADI software license keys. Furthermore, he used these privileges to alter information about the accounts to conceal the fact that he was generating ADI license keys, preventing Avaya from discovering the fraud scheme for many years.
The Pearces’ and Hines’ operation not only prevented Avaya from making any money on its stolen intellectual property but also undercut the global market in Avaya ADI software licenses because the Pearces and Hines were selling licenses for significantly below the wholesale price. In fact, Brad Pearce told Hines that the Pearces’ customers could not obtain same-day ADI software licenses from anyone else for anything even close to the Pearces’ prices, and Hines suggested that he and Brad Pearce work together to “corner” the market in licenses. Altogether, the Pearces and Hines reaped millions of dollars from the fraud. To hide the nature and source of the money, the Pearces funneled their illegal gains through a PayPal account created under a false name to multiple bank accounts, and then transferred the money to numerous other investment and bank accounts. They also purchased large quantities of gold bullion and other valuable items.
Brad Pearce and Dusti Pearce pleaded guilty to conspiracy to commit wire fraud. They both face a maximum penalty of 20 years in prison. Pursuant to the plea agreement, Brad Pearce and Dusti Pearce must forfeit a money judgment of at least $4 million as well as cash, gold, silver, collectible coins, cryptocurrency, and a vehicle. They must also make full restitution to their victims. A federal district court judge will determine any sentence after consideration of the U.S. Sentencing Guidelines and other statutory factors.
In July, Hines pleaded guilty to conspiring with the Pearces.
Acting Assistant Attorney General Nicole M. Argentieri 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.
Assistant U.S. Attorneys Julia E. Barry and William Farrior for the Western District of Oklahoma and Senior Counsel Matthew A. Lamberti of the Criminal Division’s Computer Crime and Intellectual Property Section are prosecuting the case.