Prison terms to wrap up license guards

Suits settled, dropped after two-year probe of 3000 brokers

After millions of dollars in court fees and fines, and more than 14 years worth of prison sentences, HP’s push to put teeth back into its 3000 licensing closes a two-year chapter this month. But one defense attorney still maintains the company’s actions are simply persecuting a competitor in the courts, while a key HP witness against that competitor remains shrouded in mystery.

The story first broke in January, 1999 that Dallas-based HP 3000 broker Hardwarehouse was being investigated by law enforcement agents from the High Tech Crimes Task Force. The task force, made of agents and officers from several California jurisdictions, would later come under scrutiny in the courts for illegal search tactics while raiding the US Computer broker offices managed by William Conley.

This month Conley will be sentenced for bribing Mark Glazer, a former HP Canada employee who Conley admitted helped him rig bids on used HP equipment including HP 3000s. Conley has signed a plea agreement on the charge of honest services wire fraud — a charge which came out of the blue after months of his legal parrying over license theft and civil racketeering charges.

Glazer signed a plea agreement of his own, according to sources in Canada, testifying to his actions and implicating Conley. HP witnesses like Glazer have been rewarded for cooperating with light sentences — ranging from no jail time for Glazer; to four months of halfway house time for the man who sold secret HP software to Hardwarehouse; to eight months for two ex-HP employees who helped the brothers who owned Hardwarehouse illegally transfer 3000 licenses and rig bids. Those HP ex-employees were able to delay serving their sentences until after the holidays as well.

Throughout the years of investigation and court actions, HP has said it’s lost millions of dollars in illegal MPE/iX license transfers executed by a handful of brokers in the US. HP 3000 resellers complained at the 1998 reseller conference in Venice that brokers were beating them in sales of 3000s, using illegal practices to lower costs. In the summer following that conference, HP funded and helped support the High Tech Crimes Task Force to investigate leading HP 3000 brokers.

Years later, a prosecutor called the HP 3000 “the crown jewel of the computer industry” in florid criminal trial testimony. The admission of millions in losses sent notice to the 3000 market that HP would fight to protect the value of used systems, hardware which some thought the company had left for dead.

“CSY understands the need for a used equipment market, but neither HP nor our customers can tolerate illegal activities in that space,” said HP e3000 division general manager Winston Prather. “We believe the civil judgments obtained by HP and the criminal sentences imposed by the US District Court underscore that message with unmistakable clarity. These legal actions have vindicated HP’s legal rights and, in the process, reinforced the value of the HP e3000 and MPE/iX in today’s market.”

That market lost its two biggest brokers as a result of HP’s civil efforts and criminal prosecutions. In May of 1999 Abtech Systems negotiated a settlement of a civil suit HP had filed, agreeing to pay $900,000 against millions in HP’s license fee losses. It promised to give up copies of SS_CONFIG and also agreed to leave the HP 3000 hardware market. The company continues to resell used HP 9000 systems.

Over at Hardwarehouse, those two brothers, Richard and John Adamson, got substantial federal sentences for wire and mail fraud related to license theft. John Adamson testified against his brother and still received a two-year prison term. But others who were the target of HP’s civil suits or criminal charges have either settled in token restitution agreements, pled guilty to crimes unrelated to license theft, or received light sentences.

The final defendant in the Hardwarehouse criminal actions, Derek Eisenbeis, received a sentence of four months in a halfway house and was ordered to help repay a share of $500,000 to HP in restitution. Eisenbeis testified on HP’s behalf against Richard Adamson, the Hardwarehouse owner who received an 11-year, 4-month prison sentence at the end of his trial. Eisenbeis provided the Adamsons with an unsecured copy of SS_CONFIG, the proprietary HP software which enabled Hardwarehouse to illegally upgrade licenses on HP 3000s.

Weeks before the Adamsons’ trial, a judge in Washington heard charges that the High Tech Crimes task force had illegally taped Conley’s employees in a 1998 raid assisted by Redmond police. Private HP security officers also acted as agents during the raid, seizing a DAT tape alleged to be HP property and interrogating Conley’s employees. HP had paid for the Task Force officers to travel to Washington for the raid.

Conley’s attorney in a hearing about the raid, Anne Bremner, routinely defends police departments against such civil rights allegations. But in this matter — one the Washington judge called “neither common or straightforward” — she said her firm was on the other side, fighting what she termed corporate monopoly practices aided by law enforcement.

“It’s monopolistic and it’s brutal,” she said. “It’s Goliath. Who can survive it? I thought Bill could.”

Judge William Dowling of the King County Superior Court chose to defer to California courts on whether that DAT tape containing a copy of SS_CONFIG could be returned to US Computer after being seized in the raid. But Dowling was clear on the participation of HP’s security force in the raid.

“A good police officer who does not cut corners is said to do things by the book,” Dowling stated in his ruling. “Where private law enforcement is involved, there is no book, but only loose pages.”

Conley and his California criminal attorney Fred Dawson have been unavailable for comment in the months after Conley agreed to his plea bargain. California prosecutors report the charge of honest services wire fraud carries a maximum penalty of five years, but plea bargains immediately reduce that sentence substantially. Bremner believes Conley will get no jail time on the matter.

“It’s been nightmarish, in terms of what they’ve done to him,” she said. “HP kept coming up with these various plea offers. HP and the government said he can plead guilty to this bizarre allegation of giving money to an HP employee in Canada. That has nothing to do with the SS_CONFIG, the DAT tapes, the raids in Washington.

“He was being investigated both state and federally for all these various claims of stolen property, and those charges are gone. All for nothing.”

Bremner said HP’s agreement with Conley includes $1.5 million in restitution to be repaid to HP, abandoning any right to appeal, and giving up the right to file suit over civil rights violations during the search of his US Computer offices.

The impact on the 3000 community has been a tightening of license transfer policies in selling HP 3000s. Some systems don’t qualify for legal exchange anymore, because HP won’t approve proof of ownership it deems inadequate. And HP established an authorized used system channel of its own, an alternative to market whose old systems showed new life.