Industry News

Tax investigation into satellite scheme nets jail time for former Sundridge man

Sudbury, Ontario, May 6, 2011… Davin Omeir, formerly of Sundridge, Ontario, pleaded guilty in the Ontario Court of Justice in Parry Sound on March 15, 2011 to two counts of income tax evasion under the Income Tax Act and to one count of fraud over $5,000, one count of money laundering and one count of possession of proceeds of crime under the Criminal Code. On April 1, 2011, in the Ontario Court of Justice in Sudbury, Justice Glaude sentenced Omeir to one year in prison for each count of tax evasion, to be served concurrently. Mr. Omeir was also sentenced to two years in prison for each count under the Criminal Code, to be served concurrently. The prison sentences for the Criminal Code counts are consecutive to the tax evasion sentence, making the total jail sentence three years. In addition to the jail sentence, the Judge levied a fine of $223,849, representing an amount equal to 100% of the total federal taxes sought to be evaded. The fine must be paid within three years.

Omeir, the sole shareholder and director of Cantopia.Com Inc., provided a tax preparer with financial information for his personal and corporate tax returns. The Canada Revenue Agency (CRA) investigation revealed that Omeir understated the corporation’s income by $626,331 during the taxation years 2003 to 2007 and, as a result, the corporation failed to remit $81,423 in federal taxes. In addition, Omeir appropriated funds from the corporation and did not report these funds as income on his personal income tax returns for the years 2002 to 2007. In doing so, Omeir attempted to evade personal federal taxes of $142,426.

Cantopia.Com Inc. was an internet-based business that sold equipment and services enabling persons to decode encrypted satellite television programming signals without paying a subscription fee. The CRA investigation revealed that the business activity used by Omeir to evade taxes also defrauded the lawful distributors of encrypted subscription programming signals in Canada and the United States. The scheme allowed Omeir to participate in money laundering activities in the amount of $300,000. On-line merchant accounts were used to process payments for the sale of the illegal products and services and proceeds were sent to bank accounts located in Switzerland, Malta and the Turks and Caicos. As a result of the illegal scheme, Omeir was able to use some of these funds to pay for personal living and travel expenditures, the maintenance of a home in Sundridge, the rental of a home in Mississauga, and the purchase of a home in Turks and Caicos.

The preceding information was obtained from the court records.

“Canadian taxpayers must have confidence in the fairness of the tax system,” said Vince Pranjivan, the Acting Assistant Commissioner of the Canada Revenue Agency for the Ontario Region. “To maintain that confidence, the CRA is determined to hold tax evaders accountable for their actions.”

Individuals who have not filed returns for previous years, or who have not reported all of their income, can still voluntarily correct their tax affairs. They will not be penalized or prosecuted if they make a valid disclosure before they become aware of any compliance action being initiated by the Canada Revenue Agency (CRA) against them. These individuals may only have to pay the taxes owing, plus interest. More information on the Voluntary Disclosures Program (VDP) can be found on the CRA’s website at www.cra.gc.ca/voluntarydisclosures.

Further information on convictions can also be found in the Media Room on the CRA website at www.cra.gc.ca/convictions.

New public service announcement launched to raise intellectual property theft awareness


65 seized websites now feature PSA

WASHINGTON – To coincide with World Intellectual Property (IP) Day, U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) has launched a new public service announcement (PSA) that aims to raise awareness of the economic impact of IP theft.

In June 2010, the HSI-led National Intellectual Property Rights Coordination Center (IPR Center) began “Operation In Our Sites,” a sustained initiative targeting websites used to sell counterfeit goods and illegally distribute copyrighted materials. Since the launch of this operation, the IPR Center has seized 120 domain names and redirected those domain names to a seizure banner. 65 of the 120 domain names have been administratively forfeited. The PSA is available on each of the forfeited domain names.

Through the administrative forfeiture process, individuals who have an interest in the seized domain names are provided a period of time after the “Notice of Seizure” to file a petition with a federal court and additional time after the “Notice of Forfeiture” to contest the forfeiture. If no petitions or claims are filed, the domain names become property of the U.S. government. Since “Operation In Our Sites” began, 65 domain names have been forfeited using this process. Other domain names are still in the administrative forfeiture process.

Since “Operation In Our Sites” was launched, there have been over 45 million hits to the seizure banner that notifies visitors that a federal court order has been issued for the domain name and educates them that willful copyright infringement is a federal crime. The resulting public education about pirating is a significant benefit of this enforcement operation as it deters future crimes and helps raise awareness. With the amount of traffic to these seized sites, the new PSA will continue to assist in educating the general public on the true impact of IP theft, including the loss of American jobs.

“The public service announcement launched today will help raise awareness that American businesses, and American jobs, are threatened by those who pirate copyrighted material and produce counterfeit trademarked goods,” said ICE Director John Morton. “Intellectual property rights and the ability to enforce those rights encourage American companies to continue the tradition of American innovation and develop products, ideas and merchandise. That is why we will continue to educate the general public about the real consequences of IP theft.”

For example, visitors to www.dvdcollects.com, a domain name seized in November 2009, will now redirect to the PSA hosted on ICE’s official YouTube page. The PSA is also available by visiting the IPR Center website or YouTube.com.

World IP Day was instituted by the World IP Organization to raise awareness of the threat posed globally by the theft of trademark and intellectual property rights and the dangers posed by counterfeit and substandard products.

Since the launch of “Operation In Our Sites,” the IPR Center and HSI have conducted four enforcement phases:

  • In February 2011, the IPR Center seized 18 domain names of commercial websites engaged in the illegal sale and distribution of counterfeit goods.
  • In February 2011, HSI seized 10 websites that illegally streamed live sporting telecasts and pay-per-view events over the Internet were seized.
  • In November 2010, 83 domain names of commercial websites engaged in the illegal sale and distribution of counterfeit goods and copyrighted works were seized.
  • In June 2010, investigators executed seizure warrants against nine domain names of websites offering pirated copies of first-run movies, music and software.

“Operation In Our Sites,” has been coordinated with the Department of Justice’s Computer Crime & Intellectual Property Section and U.S. Attorneys’ Offices across the country including the Southern District of New York, District of Columbia, Middle District of Florida, District of Colorado, Southern District of Texas, Central District of California, Northern District of Ohio, District of New Jersey and the Western District of Washington.

Intellectual property rights violators unfairly devalue America’s contributions, compromise American jobs, and put consumers, families, and communities at risk. They also protect the actor, director, writer, musician, artist, and countless others who labor in and around America’s entertainment industry from having a movie, manuscript, song or design illegally sold by someone who had no part in the artistry of creating it.

Intellectual property rights are intended to discourage thieves from selling cheap imitations of products that are often far less safe or reliable than the original products. More importantly, intellectual property rights protect public safety by preventing the proliferation of counterfeit pharmaceuticals and other materials that are potentially harmful.

The IPR Center is one of the U.S. government’s key weapons in the fight against criminal counterfeiting and piracy. The IPR Center is led by ICE’s HSI and includes partners from U.S. Customs and Border Protection; FBI; Food and Drug Administration, Office of Criminal Investigations; Postal Inspection Service; Department of Commerce, International Trade Administration; Patent and Trademark Office; Naval Criminal Investigative Service; Defense Criminal Investigative Service; Army Criminal Investigative Command, Major Procurement Fraud Unit; General Services Administration, Office of Inspector General; Consumer Product Safety Commission; Defense Logistics Agency, Investigations Division; Department of State, Office of International Intellectual Property Enforcement; INTERPOL; Government of Mexico, Tax Administration Service; and Royal Canadian Mounted Police.

As a task force, the IPR Center uses the expertise of its member agencies to share information, develop initiatives, coordinate enforcement actions, and conduct investigations related to IP theft. Through this strategic interagency partnership, the IPR Center protects the public’s health and safety, the U.S. economy and the war fighters.

To report IP theft, click here.

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DirecTV seeking damages for grey-market satellite operation in Windsor

American satellite provider DirecTV is seeking damages and a permanent injunction against a Canadian “grey market” reseller in a case that could send a strong message to grey market operators.

“We have an interlocutory injunction and the action is for a permanent injunction and for damages,” Christopher Bredt, a senior partner with Borden Ladner Gervais LLP, representing DirecTV, told The Wire Report in an interview.

“Unless the matter settles, we would pursue [it] to obtain a permanent injunction.”

The grey market consists of Canadian resellers who misrepresent themselves to DirecTV by providing U.S. addresses to get satellite receivers and set-top boxes. The resellers then sell the receivers to customers who can watch DirecTV’s American programming in Canada.

“What they are doing is falsely representing to DirecTV that the receiver is in the United States,” Bredt said.

In July, DirecTV obtained a temporary, or interlocutory injunction from the Ontario Superior Court against Kent Haskell.

The court decision on the injunction, issued July 16, said Haskell operated two storefronts and several websites out of Windsor, Ont., and sold DirecTV subscriptions on the so-called grey market.

Haskell previously worked with Paul Donaldson at a company owned by Haskell called Can-Am Satellites. Their business relationship ended in 2004-2005, the court injunction said.

On Sept. 29, 2008, DirecTV obtained an order against Donaldson to prevent him from “distributing, providing, offering for sale, importing, leasing, installing, operating or possessing any Grey Market Technology and engaging in any activation fraud,” the injunction said.

The injunction cited another interim court order involving Haskell, issued July 2, 2009 by Ontario Superior Court Justice Herman Wilton-Siegel, who said the court needed to determine whether Haskell acted contrary to sections 9(1)(c) and 10(1)(b) of the Radiocommunication Act.

“Mr. Haskell has admitted that he has sold and has for sale DirecTV receivers … The evidence is that Canadian residents use DirecTV receivers by establishing false addresses in the United States to obtain DirecTV programming in contravention of the Radio Communication Act,” Wilton-Siegel wrote in the interim order decision.

Section 9(1)(c) of the act says that no person shall decode an encrypted signal without the permission from the signal’s distributor.

Section 10(1)(b) states that any person who manufactures, leases, sells or installs radio communications equipment against its intended purpose can be subject to fines up to $5,000 and a year in jail. A corporation can be fined up to $25,000.

The lawsuit against Haskell is still before the court. Parties in the case have yet to determine the costs associated with the injunction, and as of Wednesday no hearing date had been set.

David Canton, counsel with Harrison Pensa in London, Ont., said the Ontario Superior Court’s decision to issue an interlocutory injunction against Haskell should send a strong message to grey market operators.

“To the extent that people are still working the grey market industry, it certainly sends a definitive message to them that people will go after them,” Canton said.

To obtain the injunction DirecTV argued that it suffered irreparable harm through grey market activities.

“We have potential liability to programming rights holders in Canada and in the U.S.,” Robert Mercer, a spokesman for DirecTV, told The Wire Report in an interview.

He said DirecTV is licensed to broadcast only its own content in the U.S. and that the company can be held liable by broadcasters and content owners if its programming is made available elsewhere.

In 1997, WIC Western International Communications Ltd., formerly a satellite distributor now owned by Shaw Communications Inc., filed a suit against DirecTV for not going far enough to stop grey market resellers and ensure that its signals could not be received in Canada.

DirecTV argues that grey market activities have incurred costs through enforcement initiatives and lost equipment.

“We’ve spent millions in Canada taking actions, like the [Ontario Superior Court] suit in question, to keep individuals in Canada from illegally receiving our signal,” Mercer said.

DirecTV leases the set-top boxes its customers use to receive satellite programming.

“If the [set-top] boxes are shipped outside of the country, the idea is that the boxes are supposed to be returned at the end of the lease period or when the agreements are ended,” Bredt said.

“That is difficult if not impossible to enforce once the set-top boxes have been exported from the United States up to Canada.”

Daphne Johnston, a lawyer representing Haskell, declined to comment for this story, but the court injunction said Haskell argues there are four legal uses of DirecTV equipment in Canada.

Haskell argues the equipment can be legally used to receive satellite radio, connect with Dish Network programming, use as a “free-to-air satellite,” or record digital video.

DirecTV argues that its equipment cannot be legally used for the first three functions and can only be used as a digital video recorder if a user has a valid subscription to its service.

Sgt. Julie Gagnon, a spokeswoman for the RCMP, could not comment on the scope of the grey market for satellite television in Canada, but told The Wire Report that the police force works closely with telecom providers to “investigate satellite piracy throughout Canada.”

Prior to 2005, DirecTV was largely focused on stopping the black market for satellite television in Canada, under which individuals sold devices allowing Canadians to receive DirecTV signals without paying.

DirecTV does not have a licence to broadcast its signals into Canada, and because the company serves the continental United States, its satellite footprints spill over the border, making it possible for Canadians to receive their programming illegally.

Mercer said the black market was solved by improved encryption for their television signals.

“We were laser-focused on the black market,” Mercer said.

“That was the big problem in Canada and the U.S., a problem that we ultimately solved through technology when we built a bulletproof conditional access card; that is to say that it cannot be hacked, and has not been hacked to date.”

In April 2002, the Supreme Court of Canada ruled that it is illegal for Canadians to decode encrypted satellite signals unless they have the permission of the distributor—which has the rights to transmit the signal.

Bell Canada and Shaw, Canada’s incumbent satellite television providers, declined to comment for this story.

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