Chinese man pleads guilty in $122.6m stolen software sting

WILMINGTON (REUTERS) - In a case which US officials say is the first of its kind, a Chinese businessman pleaded guilty to selling stolen American software used in defence, space technology and engineering - programmes that prosecutors said held a retail value of more than US$100 million (S$122.6 million).

The sophisticated software was stolen from an estimated 200 American manufacturers and sold to 325 black market buyers in 61 countries from 2008 to 2011, prosecutors said in court filings.

US buyers in 28 states included a Nasa engineer and the chief scientist for a defence and law enforcement contractor, prosecutors said.

Corporate victims in the case included Microsoft, Oracle, Rockwell Automation, Agilent Technolgoies, Siemens, Delcam, Altera Corp and SAP, a government spokesman said.

US officials and the Chinese man's lawyer, Mr Chen Mingli, said the case was the first in which a businessman involved in pirating industrial software was lured from China by undercover agents and arrested.

The businessman, Li Xiang, of Chengdu, China, was arrested in June 2011, during an undercover sting by US Department of Homeland Security agents on the Pacific island of Saipan, an American territory near Guam.

Video from the undercover meeting in Saipan, filed as evidence in court, is expected to be made public during a press conference on Tuesday by Mr John Morton, director of US Immigration and Customs Enforcement, and Mr Charles M. Oberly III, the US Attorney for Delaware.

Li, 36, originally charged in a 46-count indictment, pleaded guilty late on Monday to single counts of conspiracy to commit criminal copyright violations and wire fraud.

"I want to tell the court that what I did was wrong and illegal and I want to say I'm sorry," Li told US District Judge Leonard P. Stark during a 90-minute hearing in federal court. The Chinese citizen spoke through a translator.

In a court filing, prosecutors David Hall and Edward McAndrew said the retail value of the programmss Li sold on the black market exceeded US$100 million. But during the hearing, Li disputed that figure.

After the hearing, his lawyer said Li did not realise the retail value of what he was selling until he was caught and plans to present his own estimate at sentencing, which is set for May 3, he said.

The case involves sophisticated business software, not entertainment software, and thus small quantities of higher-priced products. The retail value of the products Li pirated ranged from several hundred dollars to more than US$1 million apiece. He sold them online for as little as US$20 to US$1,200, according to government court filings.

At one point, and Li's other sites offered more than 2,000 pirated software titles, prosecutors said.

Li trolled black market Internet forums in search of hacked software, and people with the know-how to crack the passwords needed to run the programme. Then he advertised them for sale on his websites. He transferred the pirated programmes to customers by sending compressed files via Gmail, or sent them hyperlinks to download servers, officials said.

"He was pretty proud of himself," his lawyer said. "He did not realise it was such a big crime."

Agents from Immigration and Customs Enforcement/Homeland Security Investigations learned of Li's enterprise after an unidentified US manufacturer noticed his company's software for sale on

Working undercover for 18 months beginning in early 2010, the US agents made at least five purchases from Li. These included pirated versions of "Satellite Tool Kit" by Analytical Graphics Inc., a product prosecutors said is "designed to assist the military, aerospace and intelligence industries through scenario-based modules that simulate real-world situations, such as missile launches, warfare simulations and flight trajectories". Agents bought software worth US$150,000 retail for several thousand dollars.

The agents lured Li from China to the US territory of Saipan under the premise of discussing a joint illicit business venture. At a hotel, Li delivered counterfeit packaging and "twenty gigabytes of proprietary data obtained unlawfully from an American software company".