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Cisco acquisition NDS accused of pay TV piracy, hacking, sabotage, fabricated legal actions and obtaining telephone records illegally

"Documents uncovered by the Financial Review reveal that NDS encouraged and facilitated piracy by hackers... sabotaged business rivals, fabricated legal actions and obtained telephone records illegally."

Wed, 3/28/12 - 8:27pm    View comments

CiscoNDSAs of January 28, 2012 according to its most recent Form 10-Q (page 28) filed with the U.S. Securities and Exchange Commission, Cisco potentially owes $3.664 billion in claims, interest and penaltes for allegedly evading import taxes in Brazil.

NDS Timeline     There's no question that Cisco has a well documented history of evading taxes on a worldwide basis, view Bloomberg's scathing report:

"Why should we reward firms for successfully gaming the tax system when we in turn are called on to make up the missing tax revenues?

"Much of these earnings overseas are reaped from an enormous shell game: Firms move their taxable income from the U.S. and other major economies -- where their customers and key employees are in reality located -- to tax havens."

Cisco CEO John Chambers and his personal financial adviser, Harvey L. Armstrong, were key players in myCFO which sold bogus tax shelters that helped clients shield hundreds of millions of dollars from taxes:

Cisco CEO John Chambers and the mysterious Harvey L. Armstrong

On March 15, 2012 Cisco announced it was using $5 billion of its profits sheltered from U.S. taxes to acquire Bermuda tax haven incorporated NDS Group.

Cisco's Bermuda subsidiary (a shell company registered at the offices of Conyers Dill & Pearman, a law firm in Hamilton, Bermuda) receives the profits from roughly $20 billion in annual Cisco sales and according to Bloomberg:

"For U.S. tax purposes, profits from the Swiss and Dutch units flow to this shell company, one of hundreds the law firm handles on Bermuda, which has no corporate income tax."

4-days after Cisco announced it would purchase Bermuda tax haven incorporated NDS, Cisco's soon to be new Senior Vice President and Chief Strategist for Cisco's Video and Collaboration Group (SPVTG) - Abe Peled, bragged in an NDS press release:

"This brings an end to this long drawn-out process in which we vehemently denied all allegations of piracy which were made against us over a decade ago."

Perhaps Cisco's soon to be new Senior Vice President and Chief Strategist for Cisco's Video and Collaboration Group (SPVTG) - Abe Peled, spoke a little too soon.

How so?

Well today on March 28, Cisco acquisition NDS issued the following statement:

"NDS completely rejects the allegations made by the Australian Financial Review. NDS uses industry contacts to track and catch both hackers and pirates. This is neither illegal nor unethical. And, to ensure that all activity remains completely within legal bounds, NDS staff and their contacts operate under a clear code of conduct for operating undercover."

So why would Cisco acquisition NDS issue a press release today denying that NDS was responsible for TV piracy and/or distributing codes to facilitate piracy?

Especially when only 9-days earlier Cisco's soon to be new Senior Vice President and Chief Strategist for Cisco's Video and Collaboration Group (SPVTG) - Abe Peled, bragged that allegations of TV piracy against NDS had come to an end.

The simple answer?

Business and finance newspaper The Australian Financial Review (AFR).

AFR is owned by Australian based Fairfax Media and is NOT OWNED by Rupert Murdoch, the selling 49% owner of Cisco acquisition NDS.

I mean, today on March 28, AFR revealed that it has 14,400 emails which contradict court testimony by NDS executives that NDS did not foster Pay TV Piracy:

Pay TV piracy hits News

Regarding the NDS press release today:

AFR Editor-in-chief Michael Stutchbury said:

"The AFR fully stands by Neil Chenoweth's extraordinary report of pay TV piracy involving News Corp subsidiary NDS.

"Anyone who reads Chenoweth's extraordinary report will be struck by the complexity and murkiness of the relationships, actions and motives involved in the NDS story. The AFR welcomes any further independent investigation of the serious matters he has brought to light."

This is what the AFR revealed today:

"Documents uncovered by the Financial Review reveal that NDS encouraged and facilitated piracy by hackers not only of its competitors but also of companies, such as Foxtel, for whom NDS provided pay TV smart cards. The documents show NDS sabotaged business rivals, fabricated legal actions and obtained telephone records illegally."

The AFR email archive has exposed that NDS had a "dirty tricks/covert operations unit" called Operational Security that employed Ray Adams and Avigail Gutman, who paid hackers and informants on behalf of NDS to write and distribute pirate programs.

With regard to an NDS competitor, AFR reports:

"Irdeto enjoyed a market niche in Australia that would be worth tens of millions of dollars if NDS could take it over. But to break that stranglehold, NDS had to be able to show that Irdeto had been pirated and was no longer secure."

In the below email AFR concludes:

"Joyce was a codename for an informant Gutman used, and she was concerned that nothing could link back to him in the software 'so that we do not expose Joyce in the process of exposing Irdeto.'

"Adams proposed that one of his hackers rewrite the software into a new pirate program. Gutman said the new pirate cards by Adams' contact could 'be to our benefit if these came out on the market first.' She was proposing to sell the Operational Security pirate card before the real pirate card could be distributed."

View email full size

View email full size

Today on March 28, the lawyers for Cisco acquisition NDS, Allen & Overy, demanded that all internal NDS emails be removed from The Australian Financial Review website.

  1. Internal NDS emails featured on DocumentCloud
  2. Download internal NDS emails from BradReese.Com (Zip File 1.44MB)
  3. Download internal NDS emails from BradReese.Com (Zip File 6.12MB)
I found the following statement made today by Cisco acquisition NDS to be of great interest:

"NDS is a global leader in the fight against pay-TV piracy, having repeatedly and successfully assisted law enforcement in that important effort."


Because in the following email, NDS scandalously states:

"Chris TAY has been around the piracy scene since piracy began. He was heavily involved in the days of the old SYSTER decoder hack. He dabbled in SKY piracy and others. He is not a technical person. He was well connected to the piracy scene. He backed off about two years ago for several reasons. The more recently he was prosecuted by canal + in France for matters going back 4 years. I saved him from Jail - hence our relationship...

"It's not only the sensativity, but also the fact that it is delicate, could potentialy put NDS in big embarrasement and even in legal complexity. I see that Chris plans do it in a very sysrematic way though heavy and involving many external aspects, Now, add to it the big budget we need for it."

Cisco acquisition NDS is now telling the world its fighting against pay TV piracy by helping law enforcement.

Yet previously, Cisco acquisition NDS scandalously stated in an internal email, that it saved a high profile Pay-TV Pirate from going to jail and sought a big budget in order to support the efforts of the Pay-TV Pirate on its behalf, because it recognized the potential for big embarrassment and legal complexity.

I mean, how much more twisted can ANY company be, let alone a company that's an upcoming $5 billion cash acquisition being made by Cisco?

Alarmingly earlier this week, the BBC News reported that Cisco acquisition NDS used a computer hacker to sabotage the Pay-TV Service, ONdigital / ITV Digital:

"NDS - which was owned by Rupert Murdoch's News Corporation - secretly hired German hacker Oliver Kommerling to unlock the secrets of Sky's competitors' smart cards.

"Once he had uncovered the system, the codes - needed to create counterfeit smart cards - ended up online.

"Panorama said NDS had also employed another hacker, called Lee Gibling, who had set up a website in the late 90s, which was known as The House of Ill-Compute, or Thoic.

"Mr Gibling has claimed that he was to paid publish stolen codes online, allowing pirates to produce counterfeit smart cards.

"Thoic eventually started to attract hundreds of thousands of hits a day."

Today on March 28th, AFR reported that Cisco acquisition NDS engaged in a:

"Sham multimillion-dollar lawsuit in the United States to silence a whistleblower (Jan Saggiori) whose evidence threatened to expose a dirty tricks campaign...

"It would emerge later that Saggiori had key records linking NDS Operational Security to the leak of source codes for both Nagra and Canal Plus, which made the Seca card."

An internal NDS email reveals:

"Just to recap, we included Jan in the law suit in hopes it would give you leverage to impact Jan's relationship with Nagra and/or slanderous comments he apparently has made towards NDS, you, Mike, Alex, et al.

We (NDS-US and DIRECTV) have no case against Jan although the law suit certainly impacted him somewhat. I think the biggest impact was the concerns his family has on their good name."

Today March 28th, Stephen Conroy, the Australian Minister for Broadband, Communications and the Digital Economy, Deputy Leader of the Australian Government in the Senate and Minister Assisting the Australian Prime Minister on Digital Productivity, DEMANDED a police investigation of NDS according to a report in The Telegraph:

"NDS operatives engaging in a range of illegal practices including sabotaging rivals, unlawfully obtaining telephone records and fabricating legal actions."

Today March 28th, AFR reported:

"NDS operated one of the biggest pay TV piracy operations on record in North America in partnership with the US government, in an undercover operation that went spectacularly wrong.

"NDS ran the operation in 1998 with US Customs without telling its biggest client, the US satellite broadcaster DirecTV. The operation cost the broadcaster millions in lost revenue."

According to a Form F-1 filed by NDS on February 15, 2012 (pages 107-108) with the U.S. Securities and Exchange Commission:

"DIRECTV contributed approximately 18% to our revenue for the six months ended December 31, 2011...

"The DIRECTV Agreement expires on June 30, 2013..."

  NDS Hackers

NDS Executives

That means 18% of Cisco's revenue from NDS is expected to expire within a year of Cisco completing its acquisition of NDS.

Today March 28th, AFR published details and internal NDS emails documenting that Cisco acquisition NDS was financially and administratively supporting Pay-TV Piracy websites for the purpose of creating and distributing Pay-TV Piracy.

Today March 28th, an AFR report revealed that Cisco acquisition NDS purposely stalled in providing a fix it had developed to stop Pay-TV Piracy at its largest North American client:

"It was 15 months before NDS, which was being paid more than $90 million a year to provide security for the DirecTV system, moved to kill off the pirate cards... A decision which cost their client, DirecTV, an estimated $120 million in lost revenue."

Amazingly in my opinion, Cisco's soon to be new Senior Vice President and Chief Strategist for Cisco's Video and Collaboration Group (SPVTG) - Abe Peled, has been the CEO of NDS from 1995 to 2003, its Chairman and CEO from 2003 to 2011 and its Executive Chairman from 2011 to present.

So naturally, Peled is mentioned in the internal NDS email archive and as the long-time leader of NDS, I've got to ask:

What is Cisco CEO John Chambers' thinking with regard to the leadership qualities of Abe Peled, especially given the scandals that internal NDS emails are now revealing?

Related stories:

Cisco acquisition NDS Pay-TV Piracy resource center

Cisco tunes into $5bn of execution and reputational risk with NDS buy

NDS appears to be another BS acquisition by Cisco

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