Whistleblower made to change his tunePUBLISHED: 28 Mar 2012 00:01:05 | UPDATED: 29 Mar 2012 02:28:05PUBLISHED: 28 Mar 2012 PRINT EDITION: 28 Mar 2012
Swiss hacker Jan Saggiori testified against NDS in a case brought by EchoStar in 2008.
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Senior executives in Rupert Murdoch’s media empire mounted a sham multimillion-dollar lawsuit in the United States to silence a whistleblower whose evidence threatened to expose a dirty tricks campaign by News Corp.
A former Metropolitan Police commander who worked for Murdoch, Ray Adams, orchestrated an extraordinary legal campaign to destroy the reputation of a Swiss hacker, Jan Saggiori, who held key evidence that News had sabotaged its competitors’ products.
“We . . . have no case against Jan,” the US executive overseeing the lawsuit, former Army intelligence officer John Norris, told Adams two months after it was served on Saggiori, yet legal proceedings continued for another nine months.
Emails between Adams, Norris and other News executives and lawyers raise questions about whether News was involved in an abuse of process of the US court system.
Saggiori was added to a lawsuit lodged in Montana in February 2000 by a News subsidiary, NDS, against a group of Canadian pay TV pirates after he became a consultant to News’ competitors, the French media group Canal Plus and later Nagra, a Swiss technology firm. A secretive NDS unit, Operational Security, had earlier “reverse engineered” the two competitors’ products to extract their coding.
To add to the charade, two Bulgarian hackers, who were secretly on the NDS payroll, were also added to the lawsuit even though NDS knew that the legal proceedings against them would never proceed.
The decision to sue the three men was taken at a telephone conference call on November 16, 1999 overseen by News Corporation’s deputy general counsel, Genie Gavenchak, who worked with general counsel Arthur Siskind in the Office of the Chairman.
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. Such “smartcards” are at the heart of satellite television encryption systems, enabling broadcasters to control who can access their services.
“Just to recap, we included Jan in the lawsuit 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,” Norris told Adams on June 8, 1999 in an email copied to their supervisor, Reuven Hasak, in Israel.
The three men worked in Operational Security, a unit within News Corporation and attached to NDS, an Israeli technology company that provided encryption and customer management services to pay TV companies including Murdoch-controlled BSkyB and General Motors’ DirecTV.
Lawyers who spoke to The Australian Financial Review said that as soon as a party came to the conclusion that they had no case, it was their legal duty to drop the case immediately.
A senior barrister said that in the Australian legal system, joining a defendant to an action without a genuine belief in the merits of the case would amount to an abuse of process, if this could be demonstrated on the facts.
Instead, the case continued for another nine months as Adams continued to pressure Saggiori to sign a sweeping permanent injunction which was later used by NDS lawyers in a 2008 court case with Echostar, another rival satellite TV company, as proof of his involvement in piracy.
The crisis for the Operational Security team began on October 22, 1999, when Adams received a copy of a four-page report written by Saggiori for Canal Plus that linked Operational Security personnel to piracy of a range of European pay TV companies including Canal Plus.
Saggiori was now assisting the security chief of Canal Plus, Gilles Kaehlin, in a major investigation of NDS and Operational Security.
Adams was alarmed. “I can tell you that the French Security Services and the German Police are investigating and that one of them is in touch with one of the agencies in the USA,” he wrote to Norris on October 22.
The new Canal Plus security chief wanted to see Adams. “He was until recently a senior member of the French Security Services.
“I met him briefly in Paris a couple of weeks ago. He claimed that he can get anything done anywhere in the world.”
The timing was unfortunate. That same day Adams was involved in the prosecution in Thailand of Rolf Deubel, a German hacker known as MadMax. Adams was also arranging to send a pirate device to a Sydney hacker to promote piracy in Malaysia. His colleague, Avigail Gutman, who headed Operational Security in Asia, suggested Deubel should be released so that he could continue the hack of the Canal Plus system in Asia.
Meanwhile, NDS was scheduled to float 20 per cent of its stock as an IPO on Nasdaq on November 21 and any hint of the Canal Plus investigation could undermine the stock price.
Adams set out to convince Canal Plus that Saggiori was trying to shift the blame and that in fact it was Saggiori who was responsible for all of the piracy.
“I believe that I should start making use of the inevitable outcome and start influencing the thoughts of Canal+ in this direction. This must be subtle and discreet and come from others.”
Having earlier conferred with Norris, Adams wrote to him again on November 3: “Anyway I have a very nice little plan to really shake things up. Can you tell me if you have managed to have Plamen, Vesco and Jan SAGGIORI named in the court case in the USA. This is an important step in my little plan which is all European.”
Norris was about to launch the major lawsuit against the Canadian pirate dealers who had reverse engineered NDS’s new P2 smartcard designed for US satellite broadcaster DirecTV, NDS’s biggest client.
Back in 1997, the Canadians had smuggled the two Bulgarian hackers, Plamen Donev and Vesselin Nedeltchev (known as Vesco) into Canada under false papers, then into the US, where they had hired the University of Montana physics lab to crack the P2 card.
Adams now wanted to add Saggiori to the lawsuit.
By November 12, Adams was writing to Norris, “We have a problem. Jan Saggiori is now known to be working full time with Canal+. He considers that he is on a mission to determine who and where the hack of the SECA system took place.”
Norris replied: “What problem? Whoever hacked Canal plus and SEDKA [sic] may have a problem. ‘We’ don’t have a problem.”
He went on to say that Scott Wilsdon, an external lawyer at Yarmuth Wilsdon Calfo, was working on the lawsuit that would include Saggiori.
“I’ll have more details on Tuesday after a conference call with the lawyers and Genie,” Norris said.
Email records show that Genie was Eugenie Gavenchak, News Corp’s deputy general counsel. She had worked closely with general counsel Arthur Siskind since they were partners at New York law firm Squadron Ellenoff Plesent & Sheinfeld and had joined News in the 1980s. A News Corp spokesman on Tuesday told the Financial Review that News wished to respond to questions emailed to Gavenchak last week, but the AFR had not received a response by the time it went to press on Tuesday night.
Wilsdon, of US law firm Yarmuth Wilsdon Calfo, said in an email last week that his client, NDS, had declined permission for him to respond to questions from the AFR.
Although it was a joint lawsuit with DirecTV, three NDS plaintiffs led the case –NDS Americas Inc in the US, and NDS and News Datacom Ltd in the UK.
Adams and Norris were the responsible officers with the US and UK NDS companies directing the litigation under Gavenchak’s supervision. Their emails were copied to Hasak.
Gavenchak’s decision to add Saggiori to the lawsuit must have been a difficult judgment as the Swiss hacker’s role had been at first sight peripheral.
In April 1997, the Canadian pirate dealers were offering up to $1 million for a top-flight hacker to crack the DirecTV NDS card. They had asked an American hacker, Chris Tarnovsky, to recommend someone in Europe.
The world of pay TV piracy is murky and complicated. What the Canadians didn’t know was that Tarnovsky was a paid informant for NDS, and would shortly become a fully fledged employee.
Tarnovsky contacted Saggiori, a friend of his, for names of hackers.
Saggiori testified in a different case brought by US satellite TV provider Echostar against NDS in 2008 that he gave Vesselin Nedeltchev’s phone number to Tarnovsky, which he passed on to the Canadians.
Providing a telephone number and a name was the extent of Saggiori’s involvement. He had a loose arrangement with the two Bulgarian hackers whom he said offered to pay him $15,000 as an introduction fee but did not pay him.
Did this make Saggiori equally liable for the tens of millions of dollars of damage that NDS was claiming from the piracy of its cards?
In this tortuous story, Tarnovsky (by this time a full-time employee), had played a significant role. Also, News would have to sue Plamen and Donev as well, before they could add Saggiori to the lawsuit.
However, by this time, Plamen and Vesco were working for NDS under contract as consultants. Adams and Norris needed to explain to them the lawsuit against them was a ruse, and to guarantee there was no intention to enforce any claim against them.
“Now we can start to put the rest of the plan into operation,” Adams wrote to Norris on January 7, 2000 after receiving a draft of the lawsuit. “Now with the suit I will be able to get the Bolgers involved.”
Wilsdon wrote back about serving the lawsuit on Plamen and Vesco, “but, as you point out, we are not going to proceed against them any way so we need not worry about the procedural requirements”.
In mid-February, Plamen wrote to the Canadians who had told him of the lawsuit, “I am surprised and pissed off! The silly matherf--ers![sic] . . . By the way, what is the place of Jan there? He has nothing to do with it!”
But by March 11, Norris could write to Wilsdon, “Ray Adams has the two Bulgars fully on board re the HH suit (that names the Bulgars and Jan S). I met with the Bulgars in the UK this week and Ray. The bottom line is, I am 100 per cent confident in their cooperation and support of our objectives.”
Adams emailed a lawyer with the Bulgarian anti-piracy group BulAKT, Velislava Dimitrova, saying Plamen and Veco were “as part of an ongoing operation I need to officially serve papers on both of them denouncing them in a civil case in the USA”. Could she help?
Saggiori was served with the lawsuit on April 4. By June 7, Adams was pressuring Gilles Kaehlin at Canal Plus to rein in Saggiori because of the lawsuit. “Jan is still playing silly buggers. He calls us the ‘enemy’. Yet I have recently put him in a corner. He is starting to realise that we are in charge.”
The following day Norris exuberantly reported that the Canadian pirates were negotiating a settlement, and asked what should be done about Saggiori. They had previously discussed ways to target Saggiori’s parents: “Just to recap, we included Jan in the lawsuit 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 lawsuit certainly impacted him somewhat. I think the biggest impact was the concerns his family has on their good name.
“When and if you can use the lawsuit to your advantage do so as you see fit.”
On July 14 Norris wrote again that Plamen and Vesco “should be reassured they are NOT part of the suit even though named”.
“RE Jan S. We named Jan only to accommodate your efforts to make his life difficult and to give you leverage. If you want us to proceed, we can go through the expense I believe that will require him to spend $$$ on a lawyer (or to ignore us in which case we will get a judgement against Jan in US Federal Court that is enforceable in Switzerland).”
On October 16, Adams wrote to Norris, “It is all window dressing to continue with the action we have taken against him so far. As you know Canal+ have asked for my assistance in having the action in the USA stopped against S....... I told them that this would probably involve S........ signing a document stating that he would not harm NDS in the future . . . I am afraid that without some sort of document it will look as if he has won.”
Adams continued to pressure Saggiori to sign an undertaking. Despite Norris having said there was “no case”, on November 18, Adams wrote to Saggiori: “We have just over a week. The US lawyers are withdrawing the case against those who have signed the same agreement as I sent you . . .
“Bear in mind that many others that have signed have also paid millions of dollars in compensation -- you will not pay anything. We could be faced with the position where you are the only one left and the rest of them give evidence against you. Please hurry.”
By March 20, 2001, with the case about to be wrapped up, Adams wrote to Norris and Wilsdon: “The plan against Saggiori worked out well. Now that our operation is over we must now avoid any embarrassment or problem to ourselves in settling the case.
“I suppose the bottom line is that we are now obliged to settle on whatever terms we can muster.”
Despite this, Adams wrote to Saggiori the same day pressing him to sign the enforceable undertaking: “I intervened on your behalf because Giles asked me to help you and to stop the case. At the same time I asked for nothing in return.”
Faced with the unlimited legal resources of one of the world’s largest media companies, Saggiori signed an undertaking not to reverse engineer NDS products while denying the allegations in the lawsuit.
Saggiori, through his lawyer, Lee Brunner of Montana law firm Poore, Roth & Robinson, PC, declined to comment.
Saggiori rebuffed subsequent attempts by Adams to befriend him. After inquiring after the health of Saggiori’s parents in October 2001, Adams wrote to him: “All I have ever said about you is the truth. Above all I stopped a prosecution case against you. Now you hint that you will be in one against NDS.”
Saggiori finally testified against NDS in the case brought by EchoStar in 2008, providing an encrypted email sent to him by Chris Tarnovsky in March 1999, which contained part of the source code for the Nagra smartcard used to secure EchoStar programming –a document that the NDS independent expert did not challenge.
Tarnovsky said he would not have used the high level PGP encryption in the email as this would have been illegal in the US.
In cross-examination, the NDS lawyer took Saggiori through the undertaking he had signed, clause by clause, not to pirate NDS cards and suggested other payments to him represented money laundering.
The agreement to settle the Montana case against Saggiori, which was not produced, was signed by Genie Gavenchak in April 2000.
The Australian Financial Review