Software Thief Admits To Crimes

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By Jerry Markon
Washington Post Staff Writer
Wednesday, December 14, 2005

Nathan Peterson took on some of the world's largest computer software companies, and for a while, he won.

Selling their copyrighted products at a huge discount on his Web site, Peterson caused companies such as Microsoft Corp. and Adobe Systems Inc. to lose nearly $20 million, prosecutors said. He evaded law enforcement and frustrated the industry by moving his Internet servers around the country, and he spent much of his $5.4 million profit on homes, boats and cars, including a Lamborghini, a Mercedes and a restored 1949 Mercury Coupe purchased for his wife.

Yesterday, the man who once advertised his services on Google admitted that it had all been a fraud. Peterson, 26, pleaded guilty in U.S. District Court in Alexandria to two counts of copyright infringement. Justice Department and industry officials called it one of the largest cases of Internet software piracy ever prosecuted.

"This guy was a serious player,'' said John Wolfe of the Business Software Alliance, one of several trade associations that began investigating Peterson in 2003 before referring the case to the FBI. "Here was a single individual doing enormous damage. As far as I know, this is the largest case in terms of the loss suffered by the companies and the amount of money he was making."

Peterson, of Antelope Acres, Calif., stood at a lectern and calmly told Judge T.S. Ellis III that he was intoxicated by the whirl of his success. "I got caught up in everything. There was a lot of money involved,'' he said. "It was a very unique and powerful experience I went through, from not having much to having millions of dollars coming in."

He added, "I started trying to make believe it was okay, but I came to understand it was wrong."

Peterson faces as much as 10 years in prison when he is sentenced April 14. He agreed to pay $5.4 million in restitution to Symantec Corp., Computer Associates International Inc., Yahoo Inc. and more than 15 other companies.

The victims included a school district that purchased copyrighted software from Peterson's site for its students. "The defendant's Web site was a very professional Web site,'' Justice Department trial attorney Jay Prabhu told Ellis. "It was not clear, based on e-mails I've seen from the school district, that it was not legitimate.''

Officials called the case the latest step in a Justice Department campaign against Internet pirates who distribute such copyrighted property as movies, games and software.

Yesterday's plea "clearly demonstrates our resolve to prosecute thieves who sell other people's property on the Internet,'' said U.S. Attorney Paul J. McNulty, who added that Peterson's Web site was the largest for-profit software piracy site shut down by the government.

The case was prosecuted in Alexandria because the FBI's Washington Field Office, which covers Northern Virginia, started the investigation.

Software trade organizations began investigating Peterson in 2003 after receiving complaints about his site. Initially, Peterson used domain names such as "dopesickrecords.com," Wolfe said, but he then settled on "ibackups.net."

The site offered copyrighted computer software at prices substantially below retail prices. One Adobe product that provided different type fonts, for example, was available for $79.95, as opposed to $8,999 in stores. Purchasers could download the products or receive them through the mail.

When software companies sent telling Peterson to stop the illicit sales, "he would just tell them to go away,'' said one law enforcement official, who spoke on condition of anonymity because the information was not in public court documents.

The official added that law enforcement "lost his trail a couple of times because he was moving things around. His servers were in Texas for a while, then California, then Los Angeles at the end."

FBI agents, who made 13 undercover purchases of software products from Peterson, caught up with him in February and shut down his site. Yesterday, it contained only federal law enforcement logos set against a stark red background.

"This site has been permanently shut down by the Federal Bureau of Investigation and the Department of Justice," a government announcement read.


© 2005 The Washington Post Company

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