A Hollywood happy ending? Hardly. Despite the film industry’s 21-year war on video piracy, such crimes are flourishing on U.S. soil, even more so than in theft-plagued China. Yesterday’s mom-and-pop operators are giving way to organized gangs, which siphon off $250 million a year from movie studios. Increasingly, they control vertically integrated enterprises engaged in everything from manufacturing blank tapes to distributing millions of finished counterfeits. Authorities are aggressively counterattacking, hitting the pirates as if they were the mob. Last month, for the first time ever in a piracy case, a New York grand jury indicted the Israeli ring on organized-crime charges. The case won’t go to trial until 1997, so it’s not known whether the tougher tactics will prove effective. But Hollywood hopes they catch on elsewhere.
Piracy has surged since the advent of the videocassette recorder, two decades ago. As home video swelled into a $16 billion market, pirates followed. At first, they copied videos already released by studios and resold them on the sidewalks. Then along came camcorders. Pirates could stealthily tape a film right off the theater screen, mass-reproduce it and hit the market well ahead of Hollywood’s own video release of the movie. Ever entrepreneurial, pirates have now moved into all phases of the illicit trade. Says Ed Pistey, the antipiracy chief for the Motion Picture Association of America: these gangs ““dominate the markets.''
Terrorists: The MPAA has fought back. It fields its own video-piracy force, including several former FBI agents. It pays a $2,500 bounty to anyone who busts a lab and invites tips (1-800-NO-COPYS). From 1988 to 1995, 1,047 pirates were convicted. Yet the gangs have simply burrowed deeper underground. Surprisingly, traditional organized-crime groups such as the Mafia don’t appear to be involved. According to police and MPAA’s agents, foreign nationals predominate. In New York, Israeli and Arab nationals vie with Dominicans for ascendancy in the illicit trade. In some cases, the Middle East connection has been especially worrisome. Officials suspect that some gangs may be channeling piracy proceeds to Middle Eastern terrorists, according to a May 1994 memo in FBI files (a copy was provided to NEWSWEEK). During a 1991 probe, a special FBI antiterrorist task force busted a 40-VCR lab run by four Arabs in Brooklyn. They pleaded guilty to copyright violations. In 1994 customs agents arrested two Jordanians at Kennedy international airport returning home with $117,000 hidden in money girdles. Found on them was a business card naming a known video pirate. Both were deported.
The raid on the Israeli ring yielded no such stash of cash, surprisingly. Only $40,000 from a half-million-a-week operation? The MPAA estimates the alleged operation represented an $87 million annual loss of revenue to Hollywood. Officials say the group spent lavishly, pouring its money into real estate, including three Manhattan apartment buildings and a small fleet of luxury cars. In addition to the bootleg videos and 800 VCRs, police seized 100 million feet of film and machines for making blank cassettes and shrink-wrapping videos. Police say the operation had set up distribution channels along the East Coast and in California.
In all, police arrested 35 people, including 30 or so who allegedly duplicated videos around the clock in shifts. The alleged ringleaders were members of two Israeli families, the Halalis and the Sudrys. Their op- erations included a small empire of companies, counterfeiting ““factories’’ and storage space. One, Amerson Video in Manhattan, made and sold counterfeit movies, forged labels and boxes, and gear to shrink-wrapped finished videos, authorities say. Another, Globe Video, produced blank videotapes. Various sons handled distribution, production and sales, as if the business were any family proprietorship.
The defendants have pleaded or–according to their lawyers–will plead not guilty. An attorney for the Halalis, James Roth, denies they were part of an organized ring. ““These are freewheeling groups,’’ he says, speaking generally. ““I don’t think [New York’s police] got Mr. Big.''
The Halalis launched into business innocently enough. After arriving in the United States beginning in 1991, they opened two electronics stores, which evolved into Amerson Video, says Andrew Varga, a New York police organized-crime detective. According to Varga, the Halali-Sudry operation charged wholesalers $5 or $6 for each bootleg tape; retailers paid $7 apiece and customers $10. The enterprise also ““franchised’’ illegal labs owned by other freelancing pirates. Amerson would allegedly supply them with blank videotape, forged packaging, VCRs and, for $10 each, master videos of recent releases. Its many customers could fax in orders. The Kentucky Fried Chicken of the video underground.
Tipsters: Maybe, in part, that’s what brought the gang down. Those so-called franchisers, potential rivals all, became tipsters. In 1992 the FBI received an anonymous letter, written in Spanish, that unmasked a video-piracy ring and its leaders–““Joshua,’’ ““Moshe’’ and ““Asher,’’ according to one agent for the MPAA, Douglas Corrigan. The mysterious ““Moshe,’’ bagged in 1994, turned out to be Moshe Peretz, a hapless twice-caught pirate who had risen from selling videos on the street to running his own show. During its bust, the FBI seized 139 VCRs and 9,300 bootleg copies of such movies as ““Aladdin,’’ ““Sleeping Beauty’’ and ““Wyatt Earp.’’ Peretz pled guilty to federal copyright charges and is awaiting sentencing.
Peretz helped lead authorities to his alleged suppliers, the Halali-Sudrys. Independently, New York police had also crossed their paths during a crackdown of Harlem video stores. Last January the police launched Operation Copy Cat, which culminated in the June arrests. If there’s a lesson in the tale, it’s this. The Israelis may have been the biggest players as yet charged in the unending catch-as-catch-can competition between police and pirates. But they’re not alone. In the end they may not even be the biggest, perhaps not by a long shot. Other alleged pirates are doing a booming business elsewhere in the country. It’s just that finding them isn’t always as easy as checking out your neighbor’s air conditioning.
