News with Dramatic Repercussions ?

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#1
This just fell into my intray

NDS in dock over £700m smart card fraud

French pay-TV giant Canal Plus has launched a lawsuit against News Corp
subsidiary NDS, claiming the London-based company is guilty of software
piracy which has cost the company more than £700 million, writes Luke
Satchell

Canal Plus, part of the Vivendi media empire, has alleged that NDS spent
massive sums trying to crack the code on its smart cards, and once
successful, gave the codes to a website used by counterfeiters. The company
said the codes were then distributed via the site leading to thousands of
people being able to receive pay-TV services for free.

'After the code was published on the internet, criminal organisations
flooded the market with counterfeit cards,' Canal Plus said in a statement.
'NDS engaged in a conspiracy to harm Canal Plus' competitive position in the
digital television market.'

The distribution of the codes is also understood to have cost struggling UK
pay-TV company ITV Digital dearly, with counterfeiters in the UK using the
information to produce fraudulent cards giving access to the service.

It is estimated that nearly ten per cent of ITV Digital viewers are either
buying set top boxes or subscribing to basic packages and using the
bootlegged cards to access premium services for free. The Federation Against
Copyright Theft (Fact) has estimated that up to 100,000 counterfeit
smartcards are in circulation.

NDS is expected to make a statement this afternoon (Tuesday 12).
 

2old4this

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#2
Yep, this was announced today.
Full story, press releases, etc here:
http://www.actiononecanalplus.com/

It's now reported on several sat boards across Europe.

Indeed dramatic news.
But as an old cynical bugger, nothing big business does surprises me any more.

2ols
 

2old4this

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#3
News now also at BBC
http://news.bbc.co.uk/hi/english/business/newsid_1868000/1868140.stm

2old
 

BarMoo

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#5
Dear All,

I wouldn't put anything past Canal+ either. They are alledgely pissed that their own hacks couldn't crack the NDS codes.

Good for NDS. Let's hope that someone at Canal+ can get their act together - so that we can all benefit from some cracked NDS stuff ;-)

Have fun,

Mark.

Isn't BBC 6music(GLR) marvellous.
 

2old4this

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#6
More background, and NDS' initial response now at CNet's News.com...
http://news.com.com/2100-1023-858047.html


Digital TV provider sues rival for piracy
-----------------------------------------
French digital TV software provider Canal+ Group filed a suit Monday alleging British rival NDS employed a high-tech lab to break Canal+ Group's smart-card security and posted the information online.
Filed in a U.S. court in the Northern District of California, the suit claims the action caused damage in excess of $1 billion to Canal+ Group, a division of entertainment giant Vivendi Universal, when pirates used the information to flood the market with counterfeit smart cards that allowed digital TV subscribers to garner free services.

"This is way beyond competitive intelligence," Francois Carayol, CEO of Canal+ Technologies, the Cupertino, Calif.-based subsidiary of Canal+ Group, said in a conference call Tuesday. "We are talking about an organized activity aimed to hurt our business."

Canal+ Group and NDS, a subsidiary of media behemoth News Corp., create the software and security that enable digital TV providers to charge subscribers for access to special programming, such as pay-per-view movies and premium services. The security of their systems is extremely important as it helps customers prevent subscriber piracy.

In a statement, NDS called the lawsuit "outrageous and baseless." It stressed the company's commitment to eradicating piracy that hurts the digital cable and satellite industries.

"That problem is due solely to the inferior nature of Canal+'s conditional access technology, the failure of its business plan to contain measures to protect against piracy, and its failure to deal with piracy once it began," Abe Peled, CEO of the U.K. company, said in a statement. "The clear evidence is that the pirate community targeted Canal+ early in 1998 and succeeded without any help from anyone, particularly NDS."

Canal+ Group tells a different story.

In late 1998, the company alleges, NDS obtained copies of the company's smart cards and sent them to a lab in Israel, where hardware and software engineers used advanced machinery to strip away the physical security and reveal the programming and circuitry of the devices.

"They used chemical washes and focused ion-beam etching to expose the circuits," Carayol alleged.

Normally, such machinery is used in the research and manufacture of semiconductor chips. By essentially reversing the manufacturing process, engineers could then figure out how to build a system that mimicked the security of Canal+ Group's smart cards.

In March 1999, detailed information about the French company's cards appeared on the Internet, enabling established pirate organizations to more easily create counterfeit cards, Carayol alleges. As a direct result of the posting of the information to the Internet, counterfeit cards "flooded the market" in 2000, he added.

For Canal+ Group, it has been a running battle to keep ahead of the pirates.

"On the ground, we collect counterfeit cards and we analyze them," he said. "We have developed a new generation of smart cards, which we intend to start deploying...in the next month. That's why it is so important that the illegal activities are stopped."

Carayol said the fight against pirates--teamed with potential lost revenue--has cost the company at least $1 billion.

In a statement, NDS said it hadn't yet seen the complaint. The company plans to file a counterclaim after it studies the details of Canal+ Group's suit.

Rather than the victim of underhanded competition, Canal+ Group is suing to gain a competitive advantage, NDS said in a statement, adding that the French company has admitted to reverse engineering its competitors' cards as well.

"All smart cards can be hacked if left in the field long enough, which is why NDS's business plan calls for periodic replacement of cards," said NDS's Peled. "NDS also designs its system to permit electronic counter measures to be sent over the air to disable counterfeit cards. Canal+'s card has not provided effective counter measures."

The suit, by a relatively minor player in the U.S. market, may not make it to court, said Richard Doherty, director of research for technology assessment firm Envisioneering Group.

"Is it designed to go to court, or it is designed to bring someone to the table?" he asked. "We believe they might want to have a dialogue with NDS and reach some concessions." NDS is the primary provider of conditional technology to almost 10 million DirecTV set-top boxes.

Doherty added that it didn't come as a surprise that the French company sued in a U.S. court rather than in European one.

"The U.S. has the Digital Millennium Copyright Act and Europe does not," he said, referring to a federal law that has become Hollywood's primary cudgel against digital piracy. "And it's easier to bring a lawsuit here."
 

w hole

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#7
From the Gruniaud:

The process was complex, time-consuming, and very expensive. This was not about a lone hacker sitting at a computer screen trying to guess passwords. Instead, it was an attempt to split the foundation stone supporting an entire industry - the technology protecting pay TV.

The challenge handed in the autumn of 1997 to a team of scientists working quietly at a laboratory in Haifa, northern Israel, was to crack the encryption technique used to unscramble TV signals delivered to many paying customers through cable and satellite across Europe and the US.

The so-called "smart" or "conditional access" cards used to access Sky, ITV Digital, and other premium channels contain wafer-thin computer chips holding complex codes to make sure viewers see only what they have paid to see.

The Haifa team knew all about this. They worked for NDS, a Murdoch company which had begun life as a start-up firm, News Datacom, in Israel eight years earlier. Rupert Murdoch's News Corporation had backed the venture in the belief that the coming digital age required a quantum leap in areas such as data security and the encryption of communications.

NDS was to go on and design the encryption process that would be used on the smart cards handed out with every Murdoch pay TV package in the world. With 27m viewers using its cards in 40% of the world's satellite receivers, it would become a company valued at well over $1bn in its own right.

But NDS had one important rival, an encryption technology developed in France by the local broadcaster Canal Plus which had been adopted by just about all News Corporation's rival broadcasters.

The NDS team in Haifi, according to a lawsuit filed in the US district court for the Nothern District of California, set out to "sabotage Canal Plus technological security measures engineered into its smart cards."

Breaking the encryption alone would cost up to $5m. The process demanded the use of ultra-expensive electron-scanning microscopes, with the team probing wafer-thin chips no bigger than a thumbnail. Each chip contained up to 50 layers, with each layer in turn carrying up to 1,000 transistors, every one of which had to be pulled apart and analysed.

Unlimited funding


Even with access to the most sophisticated equipment and seemingly unlimited funding, it took the Haifa team six months to unravel a code which was supposed to be impossible to decipher.

From there, according to Canal Plus's $1bn claim for damages, it was a relatively straightforward matter of releasing the information and then waiting for the world's counterfeiters to undermine every rival broadcaster using the French encryption system.

In early 1999, the NDS team isolated a piece of the encryption software known as the UserROM, a portion of computer memory on a smart card which controls access to the rest of the digital data. This information was dropped into a downloadable internet file called Secarom.zip, which, according to the Canal Plus claim, was then sent to the Haifa team's colleagues in California at NDS Americas with instructions that it be published on the internet so that anyone wanting to produce pirate Canal Plus cards could do so.

Canal Plus claims that the file was then transferred to a web operator called Al Menart, who ran a website known as DR7.com, a geekish internet service which promptly published the Canal Plus code for all to see.

By late 1999 the first counterfeit cards had begun to appear and, according to Canal Plus, by September 2000 the Italian market was flooded. Proliferation across Europe was in full swing.

The cards have become commonplace in Britain, with ITV Digital complaining recently that more than 100,000 pirate cards are in circulation here.

Executives at ITV Digital, which has struggled to build a strong base of subscribers and which continues to haemorrhage cash, were apparently appalled recently by comments made by Sky's chief executive, Tony Ball, during an address to the company's US investors. "ITV Digital/DTT is completely pirated, a joke. For $7 you can buy a card for all channels," he is reported to have said.

Canal Plus faces the exhaustive process of renewing the technology in the 12 million cards issued worldwide. ITV Digital customers can expect completely new plastic by the end of the year.

François Carayol, chairman and chief executive of Canal Plus Technologies, said: "When it emerged that the most secure part of our smart card system had been invaded we immediately launched an investigation into why and how it happened.

"We certainly didn't expect our investigations to lead us to NDS. It is not the type of action we would have expected from such a well-established firm."

For its part, NDS says the whole piracy claim is an outlandish fabrication. A statement from Abe Peled, the company's president and chief executive, last night said the counterfeiters had simply targeted an inferior technology and succeeded without any help from anyone.

He suggested that Canal Plus is in commercial trouble and revealed that the French firm had approached NDS before Christmas suggesting a merger, adding that the French had been trying to poach the NDS employee accused of leaking Canal Plus's code.

Corporate battle


In a pointer to the corporate battle that is unfolding, Mr Peled also drew attention to news reports over recent weeks suggesting disagreement within Canal Plus's parent company, Vivendi Universal, over what direction the French media business should take.

Vivendi, in its current form as a media and communications giant with interests ranging from Hollywood movies to third-generation mobile phones, has been built in double-quick speed by a former investment banker called Jean Marie Messier. He is known as Jean 2M and considered a messianic figure in French business circles, having burst out of the confines of the French national market to create a real threat to Mr Murdoch.

But he built Vivendi with a furious round of acquisitions just as the internet boom was hitting its peak.

Last week he was forced to take a write-down in Vivendi's accounts to cover the value which has been destroyed as dotcom and technology companies have imploded.

The battle with NDS is likely to test his mettle even further.

As for News Corporation, executives there will be well aware that this is not the first time that its 80% owned associate NDS has polluted the group's public image.

One morning in October 1996, Israeli tax officials, apparently acting on a tip-off from a former employee, raided the company's Jerusalem offices and also the site in Haifa. They were looking for evidence that NDS had evaded £100m in tax oversix years; 70 tax officers removed more than 50 cartons of papers from the NDS offices.

In the event, the allegations never stuck. But the mud did.

Regards

W.H.
 

2old4this

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#8
links to above article and more

http://media.guardian.co.uk/news/story/0,7541,666448,00.html
http://media.guardian.co.uk/news/story/0,7541,666457,00.html

2old
 

w hole

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#9
Even a TV Report : Quite Good..

_1869768_digital22_higham_vi.ram

pnm://rm.bbc.net.uk/news/olmedia/1865000/video/_1869768_digital22_higham_vi.rm?title="The BBC's Nick Higham"&author="http://news.bbc.co.uk/"&copyright="(C) British Broadcasting Corporation"

W.H.
 

w hole

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#10
Further update from the Grauniad:

Analysts have reacted negatively to the NDS scandal, warning that the legal battle looming over the Rupert Murdoch-owned technology firm could turn investors against the company.

Analysts at Morgan Stanley said a £700m lawsuit brought against NDS by the French pay-TV group Canal Plus posed questions about the company's integrity.

"The Canal Plus claims are serious as they question NDS's integrity and business practices. We anticipate prolonged legal procedures before being able to assess the potential impact (if any) on NDS," Morgan Stanley said.

NDS, which is controlled by Mr Murdoch's News Corporation, has been accused of breaking the viewer access codes used by rival pay-TV operators and then handing the information to counterfeiters through a website.

ITV Digital claims it has lost £100m as a result, with 100,000 fake smart cards flooding the market.

Morgan Stanley said there was no sign of an immediate impact on NDS's business, but the sheer weight of bad publicity from the scandal could affect the UK-based company.

"We think the lawsuit will limit upside for investors. We do not foresee any impact on NDS's ongoing business for the time being but we are, at this stage, more concerned about the sentiment impact," he said.

Morgan Stanley downgraded NDS to "neutral" from "outperform".

The Canal Plus allegations, which have been denied by NDS, have already hit the technology company's share price, which tumbled 26% in New York yesterday.

A News Corporation spokesman dismissed fears that the NDS furore will affect Rupert Murdoch's media group.

"This will be shown to be a load of bunk, so I don't think it will affect us at all," he said.

Regards

W.H.
 

2old4this

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#11
NDS official response, posted on their main website:
http://www.nds.com/newspdfs/NDSStatement_120302.pdf

It includes the following interesting text:

- Recognizing the inferiority of their own conditional access technology, Canal Plus approached NDS in December 2001 with the idea of merging the two companies, and attempted to use these baseless allegations to gain leverage in the negotiations.

- Canal Plus acknowledges that it has reversed engineered its competitors’ cards.

- For the past year, Canal Plus has been trying (without success) to hire away the very employee they claim gave their code to DR7. In fact, their own lawyer has been involved in this poaching process, despite the fact that the employee is under contract with NDS. Why would Canal Plus want to hire a person they claim was involved in such activity? NDS intends to counterclaim against Canal Plus for this tortious conduct as well as tortious interference with other employment and contractual relationships of NDS'.

-------------------------------------------

Incidentally, "tortious" (from the Law of Torts) is legalese which means "wrongful interference (in business relationship)"
2old
 

w hole

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#12
Hello All

Just picked this up:

"Canal+ now plans to issue new smart cards that are more resistant to hacking to many of its 12.5 million set-top box deployments throughout 2002, starting its own territories in Spain, where according to Carayol, piracy is most widespread, followed by Poland and Italy and ITV Digital in the UK. The company will conclude its smart card swap with its French and Benelux regions towards the end of 2002.

However, NDS claims that the new Canal+ cards are reversed engineered from its competitors' cards. The London-based conditional access firm plans to file a counterclaim once it has had an opportunity to fully review Canal Plus's suit."

A. Interesting order or campaign. Not quite what has been forcast.

B. Does this mean that C+ have 'pinched' NDS system, and they are suing them over it. If so perhaps they won't be able to introduce it.

This gets curiouser and ....

Regards

W.H.
 

2old4this

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#13
No, it can't mean that since in a separate statement yesterday NDS stated that Canal+'s new smartcards are not state-of-the-art (they claim their own are, of course).
Probably they are insinuating that they stole it from someone else. I don't know if you ever heard, but there was already a long-running bone of contention between Mindport (owners of Irdeto) and the SECA group (owners of Mediaguard) around copyright infringement. Probably they're all at it.

2old
 

w hole

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#14
Hello All

More Grauniad :

http://media.guardian.co.uk/broadcast/story/0,7493,667078,00.html

Worth reading to see why NDS say they paid the money.

Rgards

W.H.

Murdoch security chief linked to TV piracy site

Evidence in the hands of the Guardian suggests that a former Scotland Yard commander who represents two of Rupert Murdoch's companies provided funds to a website that enabled counterfeiters to produce forged smart cards used to defraud ITV Digital, a principal rival in the pay TV market.

Ray Adams, who is the head of security at NDS, a company controlled by Mr Murdoch's News Corporation, had a working relationship with the website, which has now been closed down and whose founder, Lee Gibling, has gone missing.

According to emails in the possession of the Guardian, Mr Gibling was in contact with Mr Adams and received several thousand pounds from NDS paid directly into his personal bank account.

As a representative of NDS and BSkyB, News Corporation's British TV business, Mr Adams is a board member of AEPOC, a European industry action group set up to combat piracy.

Questions about Mr Adams's role have emerged following a legal action begun in California on Monday. Canal Plus, the French media company, is claiming $1bn (£700m) in damages from NDS, alleging it used a laboratory in Israel to crack the secret codes on Canal Plus's own pay TV smart cards. The information was then made available to counterfeiters around the world through favoured websites.

ITV Digital, in fierce competition with BSkyB, uses the Canal Plus access system and claims that piracy in the business has cost it at least £100m.

Last night, Labour MP Martin O'Neill, chairman of the Commons trade and industry select committee, urged the office of fair trading to investigate allegations that ITV Digital's pay TV codes were deliberately cracked and distributed to counterfeiters. He said the broadcaster's "fragile finances" meant it could be driven out of business.

The website, Thoic.com, also known as the House of Ill Compute, was routinely distributing the secret codes used to make counterfeit cards for accessing ITV Digital before its sudden closure last year.

NDS has admitted a financial link with the website, but is adamant that this was part of a legitimate intelligence gathering exercise aimed at keeping a close eye on hackers who might breach its own pay-TV security. The company says it was effectively purchasing intelligence about the hackers who were attracted to the site.

ITV Digital says neither Sky nor NDS should have had any dealings with such a website and believes the Murdoch companies should have stopped any financial support as soon as they realised the internet service was being used to undermine a rival such as itself.

The emails suggest NDS was paying the website's expenses, and even providing them with a second computer "server" when the high level of interest through the internet began to strain their facilities.

One email, from Mr Gibling to Mr Adams reads: "I hope you don't mind me spending so much time on aus and nz activities because I know you cover my work out of your budget."

Another from another NDS employee, Mike Warren, to Mr Gibling says: "Lee - your expenses were signed by R.A and have been taken by hand to finance and received by them last Wednesday I asked that they were dealt with asap."

Mr Adams denies ever having been aware the website published ITV Digital's codes. "We never saw any of those codes," he said. Asked why he had supported the website financially, and what the content of his encrypted messages had been, he said: "I am not allowed to discuss operational matters".
 

rolfw

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#15
[updated:LAST EDITED ON 16-Mar-02 AT 12:11 PM (GMT)]"NDS has admitted a financial link with the website, but is adamant that this was part of a legitimate intelligence gathering exercise aimed at keeping a close eye on hackers who might breach its own pay-TV security. The company says it was effectively purchasing intelligence about the hackers who were attracted to the site."

God that stirs up some memories, I remember the outraged postings of the other moderators on that site when they discovered the mails. but From the look of it, it could have been a double edged operation, to both undermine any attempt to hack Sky and to assist in hacking the opposition. See link at bottom of page for original posts

This could become known as ThoicGate. :)

Rolf

http://www.satellites.co.uk/scripts/webforum/DCForumID22/33.html
 

Burnt Chips

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#16
Hi guys : am i right in assuming that all Sky progs on ITV d are
rented by itvd (a bit like a ppv) from sky. and the most popular
progs on itvd are ssports/s1. and if so with pirate users no record(contract) so sky cannot charge itvd so they would b shooting
themselves in the foot. My personal opinion is that sky were using
this site for DISINFORMATION,about there own encryption sys,and if you were to peak other interest (ie) secca/viaccess etc just enough
to get em started yours would b left alone.(On didge haveing secca)
was a bonus as if ondige fails sky take over.(EVER REMEMBER CABLE/WIRELESS) WENT under with all them bills Ntl got a bargain there.
 
S

Satman

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#17
NDS Group PLC, a unit of News Corp, denounced allegations of piracy made against it by Vivendi Universal's Canal Plus as "outrageous and baseless," and said it will launch a counter-claim.

Earlier, Canal Plus said it had filed a suit in a California court against NDS for engaging in a conspiracy to harm its competitive position in the digital television market.

Canal Plus estimates that NDS's actions have harmed Canal Plus in excess of $1 billion.

In a statement, NDS said: "NDS today described the lawsuit filed against it by Canal Plus as outrageous and baseless and reiterated the company's long-standing commitment to eradicating piracy from the conditional access industry."

NDS president and chief executive Abe Peled denied his company had any involvement with the significant piracy problem Canal Plus has suffered since 1999.

"That problem is due solely to the inferior nature of Canal Plus' conditional access technology, the failure of its business plan to contain measures to protect against piracy and its failure to deal with piracy once it began," he said in a statement.

"This lawsuit is a blatant attempt by Canal Plus both to deflect criticism of its new generation card, which is not believed to be state-of-the-art, and to shift blame for its inadequate technology and its past losses."

NDS also revealed that Canal Plus had approached NDS in December with the idea of merging the two companies and, "recognizing the inferiority of their own conditional access technology," the French group had "attempted to use these baseless allegations to gain leverage in the negotiations."

NDS said it had not yet been served with the complaint, but planned to file a counter-claim once it had had a chance to study Canal Plus' suit.
 
S

Satman

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#19
Canal Plus accuse Rupert Murdoch of piracy (update 21/3/02)

On Monday the 11th of March a $1 billion lawsuit (£760 million) was filed by Canal Plus against Rupert Murdoch’s NDS company accusing NDS of piracy of the Seca encryption system although this could rise to $3 billion or more if Canal Plus win. The lawsuit was filed in the US District Court in San Jose in California and an initial hearing will take place in about 2 weeks time. The suit alleges sabotage and violations of the U.S. Racketeering laws.

Canal Plus and its Canal Plus Technologies encryption company are accusing NDS, the encryption company behind Videocrypt and Videoguard, of setting up a massive operation, in the late 1990s, at its research laboratory in Haifa in Israel, to break the codes in Canal Plus’s Seca smartcards. After the code was successfully extracted in 1998, Canal Plus alleges that NDS sent it (as a file called “SecaRom.Zip) to NDS Americas Inc. in California “with instructions that it be published on the Internet,” so that it “would be freely available to anyone who wanted to use it to produce counterfeit” Canal Plus Seca smartcards. The suit says that, in March 1999, the code was published on a Canadian website that Canal Plus says is frequented by counterfeiters (DR7.com). After the code was published Canal Plus claims that the market was then flooded with counterfeit Canal Plus Seca smartcards.

Now this is very serious stuff indeed and Canal Plus are not messing about – they have even created a very extensive website completely devoted to the lawsuit carrying full details of the suit itself, press releases about the case and plenty more.

NDS - background
News Datacom (now NDS) has a turbulent history. Rupert Murdoch’s Sky started using the Videocrypt encryption system developed by the Israeli Professor Adi Shamir in 1988. His system was incorporated into a company called News Datacom Security Products (NDSP) which was created to exploit the revenues from a secure encryption system.

Videocrypt became the core product upon which Rupert Murdoch built, and protected, his Pay TV channels around the world (at Sky, Star TV etc). Murdoch recognised Videocrypt’s importance and, in 1992, he purchased 100% of NDSP and changed it’s name to News Datacom Ltd.

Then, in 1995, in an unprecedented investigation the Financial Times stated that the history of News Datacom “has involved offshore companies, disguised payments to executives, private investigators and secret telephone recordings”. It is believed that the FT’s investigation was sparked off by revelations that the Israeli tax authorities had raided the offices of Rupert Murdoch’s News Datacom in Tel Aviv seeking evidence of $150 million of allegedly concealed income. NDS denied any wrongdoing but did pay $4 million.

The FT investigation also detailed an alleged conspiracy that defrauded News Corp of £19 million. News Corp became reliant upon NDSP for it’s smartcards, according to Sky, as a result of an alleged conspiracy between a number of people, some of whom were Directors of Rupert Murdoch’s News International (owners of the Times, Sun etc). The conspiracy was hidden, News Corp alleged, behind a complex web of companies owned by the very people who were running News Datacom and therefore Sky’s encryption systems including Bruce Hundertmark (a News International Director), Michael Clinger (a News Group Director – who was wanted in the USA for fraudulent accounting and insider trading) and Meir Matatyahu (Operations Manager at News Datacom). In effect News Corp, and therefore Sky, were ‘over a barrel’ and totally dependent upon a single supplier (NDSP). News Corp also alleged that the owners of NDSP and various other individuals conspired to defraud News Corp by “artificially inflating” the costs of the smartcards

Even after NDSP was purchased by News Corp, in 1992, they were still effectively dependent upon the former owners of NDSP as, according to the FT, the News Datacom executives responsible for the purchase of smartcards “did not have enough technical knowledge” to acquire the cards elsewhere.

The report also states that News Corp’s attempts to get a new source of smartcards were suspended “when it’s smartcards became hit by pirate imitations” and “when a more immediate threat to it’s business emerged - pirates gaining access to Sky’s transmissions illegally”. Subsequently, in 1996, a High Court judge, Justice Lindsay, found in Sky’s favour and awarded the company £28 million in damages.

The Financial Times report also looked at the tax status of some of Rupert Murdoch’s companies and they stated that “Documents show how remuneration to News Datacom Security Products (NDSP) executives was paid, out of Hong Kong, to a variety of foreign bank accounts”

Editorial:
So Mr Murdoch purchased a company not knowing who or what it’s Directors were. And the company itself was engaged in secret telephone recordings, money to offshore bank accounts, tax evasion raids and FT reports. On top of this Mr Murdoch had to sue his own Directors for fraud. Not your normal run of the mill company – and it doesn’t say much for Mr Murdoch’s business skills either.

Canal Plus case
There is a lot of circumstantial evidence to consider when looking at Canal Plus’ claim; a) piracy of Seca is rife :cool: Videoguard is unhacked c) there has been little or no action by Sky/NDS in the UK to crack down on the availability of pirate Seca cards in this country and d) there is a lot of anecdotal evidence to suggest that Sky at least knew of the piracy of Canal Plus’s system.

Our own direct knowledge of NDS’s methods and the security services employed by Mr Murdoch stretches back to 1993 with the start of piracy of Mr Murdoch’s Videocrypt encryption system. We actually met with 2 members of Sky’s security staff, from a company then called “International Security Consultancy Limited” in West London that year. These people were very professional, very intelligent and very frightening. They were interested in trying to find the source of the Videocrypt piracy and we firmly believe that they thought that there had been a deliberate leak of the Videocrypt codes by someone at the head office in Israel. They were sufficiently alarmed to suggest to us that someone had disappeared recently from their Israeli laboratories and they could not find them (see parallel with Mr Gibling later).

Videocrypt piracy was rife and must of cost Sky millions of pounds during the mid 1990s. But the advent of digital stopped that analog piracy in its tracks. However the launch of Viaccess, Conax, Irdeto and Canal Plus’ Seca digital smartcards and systems opened the doors once again to piracy and, indeed, pirate smartcards for all the major encryption systems, except Mr Murdoch’s Videoguard, quickly appeared and proliferated.

There have long been rumours in the industry, which we investigated at the time but have remained unproven, that Sky did a deal with certain pirate code writers to stop the development of a Videocrypt hack (series 6/7/8) and similarly to stop Videoguard piracy.

But – is there any truth in Canal Plus’ allegations? Well any encryption company is going to take its competitor’s products to bits and that must be taken for granted. But Canal Plus are stating that NDS did more than this – they actually put the code on the internet. Why would NDS do this?

European piracy, according to the Anti Piracy Group AEPOC (of which Sky and Canal Plus are both members!), will generate £600 million in revenues for the pirates this year, revenues that the individual broadcasters will lose. This money is the difference between profit and loss for broadcasters such as Telepiu, Stream, Premiere World etc.

For instance the Kirch owned German Pay TV broadcaster Premiere World (in Betacrypt encryption), only back in June, stated that they believed that they were going to lose £500 million from piracy over the next 3 years. And in October the Head of the Spanish Via Digital package (Nagravision) said he believed that there were 300,000 pirate Nagravision cards in use in Spain for his package. In Italy things are even worse. In January of this year some interesting figures came out of Italy regarding their piracy. The advertising agency Cairo TV calculated that there are approximately 4 million dishes in the country but there are only 800,000 official Telepiu subscribing homes and 700,000 official Stream homes (total 1.5 million). This suggests that there could be as many as 2,500,000 homes using pirate smartcards in Italy representing possibly £500 million in revenues! Bearing in mind that together Telepiu and Stream have been racking up losses of somewhat less than that each year – if they stopped piracy in Italy they would have 2 profitable broadcasters operating. And what encryption system do they have in common? Seca. And looking just in the UK a similar pattern emerges. ITV Digital use a form of Canal Plus’ Seca system. The latest estimates are that there are 100,000 pirate ITV Digital cards in use in the UK – and 1.2 million official cards. This suggests that ITV Digital could be losing as much as £20 to £30 million a year to piracy – an amount that would help the broadcaster in its well publicised fight to stay on air.

So – a hack on an encryption system can make the difference between a profitable broadcaster and one that has to fold or, as in Telepiu and Stream’s case, merge. In this context it is notable that Mr Murdoch is circling the Premiere World broadcaster at the moment. Kirch’s Premiere World owe Mr Murdoch £1 billion payable in September of this year. Premiere World use Betacrypt encryption which has been consistently hacked for the past 3 years. On the basis of their forecast loses over the next 3 years it must be reasonable to assume that the broadcaster has lost a few hundred million pounds over the past 3 years – money that would go a large part of the way to fending off Mr Murdoch’s predatory moves!

Another argument that Canal Plus themselves have put forward in their Court documentation is that NDS have presented to European broadcasters on the basis that theirs is the only viable, unhacked, encryption system available. And this is true. All the others have been compromised (although Irdeto II and Viaccess II have, so far, beaten off the pirates). The encryption business is a multi million pound business and is certainly one way for Mr Murdoch to entrench himself in a broadcaster – supply them with Videoguard and then they are tied to him.

And with Pay TV becoming the norm in most countries the encryption systems are going to become more valuable and essential rather than less. Mr Murdoch, at the moment, is able to stroll into any broadcaster and offer his wares and take a large slice of their revenues for his smartcards and technologies. Canal Plus are adamant that NDS’s hacking of Seca has contributed directly to them losing customers – and they are right.

It is also very noticeable to us and to other observers how little Mr Murdoch has done, if anything, to stop the sale or production of pirate cards for any of the foreign broadcasters in the UK. The sale of these cards generates revenues for the pirates who are then able to develop further hacks (Viaccess II, Irdeto II next ?). Strangely Mr Murdoch has done nothing to stop these activities and yet we know that his staff are more than aware of the business. In the context of Canal Plus’ complaint this inertia appears to be, at the least, intriguing.

So – the stakes are very high indeed. High enough to hack an opponent’s system and put it on the internet? NDS had the technologies, the money, the staff, the background (!) and the ‘interest’. Canal Plus claim that they have spent 3 years getting to the bottom of what happened (smartcard technologies are, by their nature, extremely secretive so it will also be interesting to see what comes out of the Court case) and Canal Plus would not make their extraordinary allegations if they did not have evidence to back their assertions up – Vivendi (Canal Plus’ owners) have ridden the media downturn very well – why rock the boat now?

Our own contacts in France tell us that the head of Canal Plus Technologies met with the French Secret Service early last year to discuss the situation but, even though they had been looking for proof of wrongdoing by NDS, at that time they did not have it. We have been told, by the very highest authority, that the French Secret Service were involved because of NDS’s alleged links with the Israel’s own Secret Service. We are very certain indeed that NDS did have these links and still do.

And these same sources now say that they strongly believe that Canal Plus has received information (which is almost certainly written or copies of emails) in the past few weeks that NDS America did supply the DR7.com website owner, Al Menart, or others with the SecaRom.Zip file.

Other facts
And certain other intriguing facts are emerging about the story. For instance NDS’s Head of Security is a Mr Ray Adams. He is also a Board member of AEPOC (the European Anti Piracy Group) representing both NDS and Sky!

He was the youngest ever Commander in the British police force but retired in 1993 and joined NDS. Besides being investigated twice following corruption allegations (once for his involvement in the Kenneth Noye case and a second time for his relationship with a defendant in the Stephen Lawrence case) Mr Adams financed and had regular contact with a smartcard pirate by the name of Lee Gibling whilst he was working as NDS’s Head of Security. Mr Gibling ran a very well known pirate website called THOIC (The House of Ill Compute). Indeed NDS’s Margot Field has confirmed that NDS paid several thousand pounds into Mr Gibling’s personal bank account – “Payments were made for information about hacking activities. It was a commercial arrangement to gather information. It is all part of normal intelligence gathering.”

According to the Observer newspaper links between THOIC and NDS emerged in April last year when several members of THOIC quit claiming they did not want to be ‘stooges’ for NDS. For instance the newspaper quotes one member as saying “THOIC was one big cover for an organisation whose job it was to bust people and take sites down”.

And according to the Observer’s sister publication, the Guardian, they have copies of emails between NDS and Mr Gibling. These emails suggest that NDS was paying THOIC’s expenses and even providing Mr Gibling with spare server capacity when the traffic to the website became too heavy. For instance the Guardian has in its possession the following email sent by Lee Gibling to Ray Adams. “I hope you don’t mind me spending so much time on aus and nz activities because I know you cover my work out of your budget.” And another email in the Guardian’s possession, from NDS’s Mike Warren to Lee Gibing, states “Lee – Your expenses were signed by R.A. and have been taken by hand to finance and received them last Wednesday. I asked that they were dealt with ASAP.”

However although they have admiited links with Mr Giblings THOIC website both NDS and Mr Adams claim that they did not know that the THOIC website published pirate ITV Digital codes!!!! And Mr Adams won’t even discuss the nature of encrypted emails between Mr Gibling and himself! How can an ex-police chief and member of the Board of AEPOC not have known that THOIC was involved in the piracy business? Who is lying – an ex-policeman? Surely not.

It also suggests blinding incompetence or naivete that such an experienced ex-police officer should have thought that information about NDS’s involvement in THOIC would not, eventually, become public knowledge.

The THOIC website abruptly disappeared mid way through last year and Mr Gibling no longer appears at the address registered to the website (The Lodge, Westbury Gardens, Higher Odcombe, Yeovil BA22 8UR). Evidently he is still active in the smartcard world at another web address.

Editorial
This would beat even one of Mr Murdoch’s 3rd rate films for an unbelievable storyline. But it could cost Mr Murdoch around $3 billion if he is proved to have aided or abetted the distribution of the Seca codes to the pirates.

If Mr Murdoch is found to have broken trust and have pirated Seca then the ramifications will be enormous. But it would certainly, at the very least, call into question his suitability to be the gatekeeper, via Videoguard, of British TV. Indeed, if the May 2000 Anti Piracy law was retrospective, Mr Murdoch could, if found guilty of sabotage and racketeering etc, run the threat of a 2 year jail sentance!

However, if he is found guilty he will, no doubt, blame others. It is very interesting that News Corp have already tried to distance themselves by claiming that NDS operates independently - even though News Corp owns 80% of the company and Rupert Murdoch’s son, James, has been on the Board of NDS for 2 years and his other son, Lachlan, since last month! On top of these positions Mr Murdoch has appointed News Corp’s head of legal affairs (and his personal confidant), Arthur Siskind, to fight the case.

And Mr Murdoch certainly would not give control of a company (NDS) upon which his very media empire is so dependent to anyone else – certainly not after the fracas with Mr Clinger in 1994/1995. Indeed it was Mr Murdoch himself who recognised the vital importance of encryption systems by purchasing the News Datacom company back in 1992.

No doubt Mr Murdoch will, if Canal Plus do put up irrefutable proof, twist and turn, hire every lawyer going and prevaricate to the last degree – and won’t that be wonderful to see. The OFT are accusing him of illegal anti-competitive behaviour and now Canal Plus are calling him a racketeer! And, as the Guardian newspaper states – “ So far no one has explained how codes to ITVDigital smartcards ended up on THOIC's site.”
 

Shahid

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My Satellite Setup
Sony KLV26HG2 LCD TV, Humax HD-CI 2000 on a Fixed Sky/Astra/Hotbird.
Cerebro Card. Infinity USB Phonix. Dragon Cam v4.1 w/Firecrypt & Loader Card.
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London UK
#20
I have just read the business section of Fridays FINANCIAL TIMES, it said that Canal + are sending out new advanced smart cards coming week.. Also the CEO said he will not be suprised if the new cards are hacked as well.

Shahid
 
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