Three Defendants Indicted in Software License Piracy Scheme

Today, the Western District of Oklahoma unsealed an indictment charging three individuals with violating federal wire fraud and money laundering statutes in connection with an operation to sell over $88 million of stolen 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 grand jury charged the following defendants with conspiracy to commit wire fraud and 13 counts of wire fraud:  Raymond Bradley Pearce, aka Brad Pearce, 46, of Tuttle, Oklahoma; Dusti O. Pearce, 44, of Tuttle, Oklahoma; and Jason M. Hines, aka Joe Brown, aka Chad Johnson, aka Justin Albaum, 42, of Caldwell, New Jersey. In addition, the grand jury charged both Brad Pearce and Dusti Pearce with one count of conspiracy to commit money laundering and money laundering.

According to the indictment, 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 more 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 in order to use the licenses.

According to the indictment, Brad Pearce, a long-time customer service employee at Avaya, allegedly used his system administrator privileges to generate tens of millions of dollars 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.

As set forth in the indictment, Brad Pearce also allegedly employed his system administrator privileges to hijack the accounts of former Avaya employees to generate additional ADI software license keys. Furthermore, he allegedly 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. Brad Pearce’s wife, Dusti Pearce, is alleged to have handled accounting and helped run the financial side of the illegal business. Hines operated Direct Business Services International (DBSI), a de-authorized Avaya reseller, in New Jersey. He allegedly bought software licenses from the Pearces under his own name and also using an alias, Joe Brown. Hines was the Pearces’ largest customer and significantly influenced how the scheme operated. Hines also received help from Brad Pearce to resell the stolen software licenses. Hines was allegedly one of the biggest users of the ADI license system in the world.

According to the indictment, 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 allegedly 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 allegedly reaped millions of dollars from the fraud. Moreover, to hide the nature and source of the money, the Pearces allegedly 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 allegedly purchased large quantities of gold bullion and other valuable items. The indictment lists numerous assets subject to forfeiture including cash, gold, silver, collectible coins, cryptocurrency, and real property.

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’s Oklahoma City Field Office made the announcement.

The FBI conducted the investigation.

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.

An indictment is merely an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Bussines Service