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Deputies investigate piracy allegations

Valencia optical firm accused of counterfeiting and selling movies

Posted: March 8, 2009 1:31 a.m.
Updated: March 8, 2009 4:30 a.m.
Sheriff's deputies question L&M Optical employees during a raid Feb. 5. Sheriff's deputies question L&M Optical employees during a raid Feb. 5.
Sheriff's deputies question L&M Optical employees during a raid Feb. 5.

Santa Clarita sheriff's deputies are investigating whether L&M Optical Disc West in Valencia engaged in DVD and CD piracy.

Sheriff's deputies raided L&M on Feb. 5 after receiving tips that the company's employees allegedly used fake Social Security numbers and alien resident cards to gain employment, Sgt. Steve Low said. Nineteen of the allegedly fake Social Security numbers came from people who live in Santa Clarita.

Fifty-four suspects nabbed in the raid were charged with identity-theft crimes.

The scrutiny of sheriff's investigators has turned to L&M's role in the ID theft and piracy allegations, Low said.

"The investigation is under way and will take several months," he said.

This isn't the first time L&M faced piracy accusations.

Court files obtained by The Signal from federal court in Los Angeles name L&M, one-time owner and consultant Dan Skura, and current owner David Lin in civil lawsuits in 2005 and 2006, respectively.

Yash Raj Films sued L&M in May 2005 for allegedly counterfeiting and illegally selling the film company's movies. Yash Raj Films sought $150,000 from the company and Skura in the suit.

A separate 2006 lawsuit claims L&M operated an adult DVD replication company and violated a license agreement with Philips USA.

Yash Raj Films produces films in India for sale in the United States. L&M agreed to replicate those films for U.S. distribution, according to the suit.

The film company claims L&M produced a DVD called "The Illegal Compilation." The disc allegedly included three Bollywood moves.

L&M settled with Yash Raj Films for an undisclosed amount of money in June 2006. The conditions of the settlement are subject to a nondisclosure agreement, according to the lawsuit.

Skura's name was expunged from the lawsuit after he claimed in a deposition that he was no longer the principal owner of the company, but a part-time consultant.

L&M tangled with Philips USA in 2006 in a patent-infringement lawsuit which also contained RICO allegations.

The Racketeer Influenced and Corrupt Organizations Act defines a company engaging in deliberate and company-wide fraud as operating a criminal enterprise and allows for criminal prosecution as well as civil action by companies affected by the illegal operation, according to the FindLaw Web site.

The RICO statute allows a plaintiff in a civil suit to seek assistance from the U.S. Attorney General to investigate the allegedly corrupt company, according to the FindLaw Web site.

U.S. Marshals can execute a search warrant along with plaintiff's representatives and seize evidence, according to a U.S. Marshals spokesman.

The U.S. Marshals' office declined to comment on whether such a raid was executed at L&M's Valencia office.

Philips sued L&M, Skura and Lin for allgedly knowingly skimming royalties owed to Philips for replicating on Philips brand DVDs and CDs, according to the lawsuit.

The Philips lawsuit claims L&M Optical Disc West operates in the adult DVD replication business.

Philips claimed L&M presented fraudulent royalty reports that understated the company's disc-making volume. Philips claims L&M owed $850,000 in back royalties and accrued interest in a court document submitted in February 2006, the suit states.

During the deposition Philips sent Lauren Gauger, an accountant for Deloitte & Touche, to perform a site audit on March 14, 2006. Gauger claimed Lin refused to allow the accounting firm to audit the company's books during the visit.

L&M Optical Disc West countered with its own audit by Barbara C. Luna. Luna said in her deposition that L&M didn't keep accurate accounting of its royalty reports, which is a requirement under L&M's license agreement with Philips.

Lin and company accounting manager Rosa Gutierrez also said under deposition that the company didn't keep accurate royalty records.

Gutierrez still works at L&M and exercised her Fifth Amendment right against self-incrimination 12 times during pretrial hearings in the ID theft case Feb. 21.

She continued to cite the Fifth Amendment during pretrial hearings Feb. 24.

The Fifth Amendment to the Constitution states that a person shall not be compelled in any criminal case to be a witness against himself.

Lin, Skura and L&M countered with lawsuits against Philips claiming the lawsuit damaged L&M Optical Disc West's ability to earn money.

Philips and L&M Optical Disc West settled the suit Jan. 3, 2007. The details of the settlement are confidential.

Philips declined comment on the lawsuit.

Phone calls to Lin were not returned.

Judges in San Fernando Superior Court will arraign the suspects in the ID-theft case on Monday.


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