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Feds Indict 17 as Satellite Card Hackers

2/16/2003 7:00 PM Eastern

In what is described as the largest satellite signal-theft case in U.S. history, 17 men were indicted for writing software and hardware to defeat the "smart card" technology utilized by the nation's two direct-broadcast satellite providers.

The U.S. Attorney's Office for the Central District of California announced the result of a yearlong investigation on Feb. 11, when five of the men were taken into custody.

U.S. Attorney Debra W. Yang said the men who were charged worked in concert, as part of an "underground, online community," to develop hacking technology. They were caught by an investigation dubbed "Operation Decrypt."

Warrants in seven states were served against the men last October. A grand jury was shown evidence that was taken during raids.

Six defendants are charged with violations of the Digital Millenium Copyright Act. It's only the second time a grand jury has cited that statute in a prosecution, according to the U.S. Attorney's Office.

$15M for one man

To cite an example of the damage caused by the pirates, investigators said one man, Randyl Walter of West Los Angeles, has already pleaded guilty to manufacturing decryption devices. He admitted his activities caused nearly $15 million in damages to DirecTV Inc. and EchoStar Communications Corp., according to the government.

Eight other defendants have already agreed to plead guilty, the attorney said.

Another defendant, 26-year-old Chad Fontenot of Richmond, Ky., is accused of designing and manufacturing hardware, which he marketed using the Internet aliases "FreeTV" and "FreeTV2."

"In terms of our own longstanding and vigorous campaign against signal thieves, we believe this case will help mitigate the spread of piracy now and weaken efforts to hack our conditional access system in the future," DirecTV executives said in a prepared statement.

DirecTV spokesman Robert Mercer added that the hackers compromised his company's P2 and P3 generation smart cards.

The P2 cards are no longer in use and DirecTV is now swapping out the P3 for the latest smart card incarnation. There is no sign the P4 encryption has been broken, he said.

Raids of the hackers generated two 24-foot truckloads of customer records and other data. For the last year, DirecTV has been demanding restitution from individual consumers known to have purchased the pirated smart cards, Mercer said.

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