CD Piracy Ring in Hong Kong Is Busted; 19 Held

In a dramatic midnight raid, Hong Kong’s anti-corruption unit this week cracked a syndicate pirating compact discs, including one top customs official who was charged with tipping off the pirates before raids.

After a three-month investigation by the Independent Commission Against Crime and Corruption into why pirates had managed to elude capture, the anti-graft unit made 19 arrests, including that of Gregory Wong, head of customs’ Prosecution, Intelligence and Investigation Bureau.

Officers seized almost 8 million illegal discs, a range of master discs and equipment for 41 production lines. The equipment, including “stampers” used to press original discs for mass replication, was valued at $58 million, the discs at $25.8 million. Most of the discs were headed for China.

“There’s no evidence of wide-scale corruption,” said senior officer Neal Maloney of the anti-crime and corruption agency. Though the investigation continues, he added that Wong’s involvement appeared to be “an isolated case.”

The raid came just before Washington’s announcement, due today, on whether Hong Kong will be elevated to a priority watch list for failing to do enough to prevent copyright violations. The U.S. Trade Representative’s Office placed Hong Kong on the list last year, a first step toward sanctions.

This week’s arrests may help solve the mystery of why Chinese authorities have had difficulty slowing the flood of illegal music and video compact discs.

It wasn’t that officials weren’t trying, Assistant Trade Secretary Johann Wong said: Hong Kong passed one of the world’s toughest laws against piracy in April, allowing 24-hour search of factories and seizure of money made from illegal sales. Customs doubled the number of investigators, who confiscated twice as many discs as last year.

“With all this increased action in the Hong Kong government, we hope we are doing something,” Wong said Tuesday. “We hope we are going to win.”

But a crackdown in China has sent many factories to Hong Kong and Macao, and the financial temptations of a surging new market for music and video discs have been too hard for pirates--and perhaps at least one Hong Kong customs official--to ignore.

A boom in cheap video CD players in China has created a demand for cheap and easy-to-smuggle VCDs on the mainland and opened a new front in the battle to fight illegal copies of copyrighted movies and music.

A ticket to a movie in China costs about $5; a copied movie disc costs only about a $1.50. One Shanghai CD store had pirated copies of “Titanic,” which just opened this month in China, and theater owners here have complained that the illegal versions had stolen their audience away from the Hollywood blockbuster.

Sam Ho, Hong Kong spokesman for the Motion Picture Assn., said that videodiscs now outsell music CDs and CD-ROM software in China and Hong Kong. Industry analysts estimate that pirated compact disc manufacturing capacity in Hong Kong has surged to around 400 million discs a year, from just 60 million a year ago.

The 41 replication lines shut down in the raid could churn out about 1.2 million discs a day. Although the haul of seized discs is Hong Kong’s biggest ever, it amounts to only about five days’ production.

“The business is so profitable, and it’s done all in cash,” Ho said. “It tends to attract a lot of triads [organized crime gangs] who are gone today, back tomorrow,” he said. “It’s a never-ending battle.”

Indeed, business continued almost as usual Wednesday in Hong Kong’s CD black market in Shamshuipo. Though several shops were shuttered at the Golden Arcade, sellers were intercepting would-be customers and escorting them to other outlets.