Hell’s Angels, mafia enter counterfeit software market

MARKHAM, Ont. — Microsoft Canada and RCMP officials have linked the notorious Hell’s Angels biker gang — along with Asian triads and other ethnic organized crime outfits in Canada — to software and other computer products counterfeiting.

At the 11th annual Anti-Counterfeiting Conference, held here, officials from law enforcement, concerned community groups and the IT industry exposed all sorts of counterfeit products from aircraft parts, soccer jerseys, perfume, luxury hand bags, Adidas running shoes, Viagra pills, condoms, Timberland work boots, baby formula, heart medication, toy action figures and glue. IT items ranged from Dell laptop computers, Xbox console systems, software, ink toner cartridges, cell and laptop batteries, optical disk drives, and PC cables.

In the past, software piracy has been linked to “Mom and Pop” shops or resellers trying to make a fast buck

Ken Hansen, superintendent and director of the federal enforcement branch of the RCMP, said 15 year’s ago intellectual property crime was not considered to be a serious problem. Today, it is very different.

“Every major organized crime gang is doing this. This is a lucrative way of making money with low risk,” Hansen said.

For example, if the RCMP nabs someone with 40 kg of cocaine, they are going to jail. That same person with 100 kg of counterfeit pharmaceutical drugs gets a fine, Hansen said.

“Organized crime are making huge profits with low risk. Even if they get caught the penalties are too low,” he said.

The RCMP has evidence from the more than 400 investigations done this year that link biker gangs, oriental triads and the Italian mafia in Canada to counterfeiting. He added that the financial gains from counterfeiting are then funneled into other illegal activities such as the drug trade and prostitution.

“They are now infiltrating major retailers,” Hansen said.

This leads to innocent consumers buying non-authentic merchandise and not even knowing it. Even the retailers are unaware that the counterfeit products are in their stores.

According to Lorne Lipkus, a founding member of the Canadian Anti-Counterfeiting Network and partner in the Toronto law firm Kestenberg Siegal Lipkus LLP, said counterfeiting is the largest growing crime in North America.

Lipkus stated that in 2005 counterfeit products was between five to seven per cent of the world economy. Today, that figure has grown to 18 per cent of the world economy, the vast majority of which is sold at flea markets.

“We just can’t keep up with counterfeiter wholesalers and manufacturers, so how can we keep up with the flea markets?” Lipkus said.

Of real concern are the phony batteries and printer cartridges that blow up equipment, Lipkus said.

“There are three to four year old children working in factories in China mixing chemicals for these counterfeit toner and batteries. Some of these (kids) are being poisoned,” Lipkus said.

He added that one of the easiest ways to put a dent into counterfeiting is by amending the Customs Act to enable officers at the border to search for and detain potential counterfeit products for the RCMP.

“I wish I had an answer as to why it is taking the government so long to simply amend this Act. I’ve been holding this conference for 11 years and I have been fighting counterfeiting for 20 years. It is about applying the right amount of pressure the government for them to respond,” Lipkus said.

There is an environmental as well as an economic fallout from counterfeiting, Lipkus said. The knock-off batteries cannot be destroyed because of the mercury in them.

Sue Harper, anti-piracy manager for Microsoft Canada, said the Canadian Alliance Against Software Theft (CAAST) has estimated the losses to the software industry in Canada to be at just under $950 million because of counterfeiting.

Harper added that she wasn’t surprised to learn that biker gangs and other organized crime groups are behind this.

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