The Australian Financial Review 14 Thursday 29 March 2012 l www.afr.com

PAY TV PIRACY Financial Review Special Investigation The News story that kept changing When the British media got wind of a UK piracy site being funded by News Corp’s secret unit, the media giant went into damage control but it couldn’t get its story straight, writes Neil Chenoweth.

Rupert Murdoch’s media empire Peter Ferrigno on March 14, Bell a successful competitor,” Ferrigno was ready to fight back against ticked off the steps News needed to reported back to News executives on claims that it promoted television take to pacify stock analysts, March 15. piracy against its rivals, and the investors and government regulators. Murdoch and Chernin both stayed emails were flying back and forth But his advice to Ferrigno on how clear of the controversy, despite the between News Corporation to handle the media was blunt: don’t close historical role the Office of the executives in Britain and the office say anything. Chairman had overseeing NDS; of the chairman in New York. “The only thing that might be Lachlan and James Murdoch were It was March 2002 and the idea useful here would be to get a very both on the NDS board at various that a $40 billion international senior Newscorp executive – times, along with News general media group such as News Corp Rupert himself or maybe [chief counsel Arthur Siskind, finance could be engaged in wholesale operating officer] Peter Chernin, to director David DeVoe and Chernin’s corporate espionage seemed so refer to the lawsuit . . . and generally deputy, Chase Carey, but none of incredible that it beggared belief – dismiss it as a frivolous or ridiculous them were commenting. and News was keen to put out a attempt by a couple of media There is nothing in the emails statement to dismiss it. companies who are having some linking the NDS board to the But behind closed doors at News, rotten financial results at the company’s covert activities. The the story kept changing. moment and trying to blame them on AFR does not suggest board On March 14, three days after members were aware of such French media group Canal Plus had activities. sued News and its technology arm It was left to NDS chief executive NDS Ltd for $US1 billion damages Abe Peled, the pugnacious former for video piracy, The Guardian IBM executive, to denounce Canal newspaper in Britain revealed that Plus for an “outrageous and NDS had been funding a British baseless” lawsuit to cover its own piracy website, thoic.com. And that inferior technology. thoic.com had targeted a News Corp By April 2, Peled was ready to hit rival in the UK, ITV Digital, which back with a statement headed, Lee Gibling was not a direct employee of NDS, but was paid a tax­free salary, health insurance and superannuation by the company. Photo: PANORAMA was launched in 1998 as ONdigital “Regarding Misleading Articles”. and rebranded in 2001. The first draft said NDS was only installed software to have thoic files smartcards. It claimed to be the Piracy had helped cripple ITV one of several security companies automatically transferred to CDs largest key search on the net. Digital, which was now days away that had been involved with thoic as before being sent to NDS. By July 1999, when NDS installed from collapse. “part of normal intelligence- With NDS staff taking a leading thoic on a new US server, the website It was time for damage control at News Corp general gathering activities”. role, Gibling cut back on his own had almost 200,000 hits a day. Close News and NDS. It was never proved that codes to monitoring of the site. “Now the to 9000 users downloaded 3.4 Ray Adams, the former counsel Arthur access ITV Digital had been complete contents are sent to Andy gigabytes of emails and piracy and Metropolitan Police commander published on the thoic.com site, [Coulthurst at NDS] I tend to just hacking files every day–and the site who set up thoic.com (The House of Siskind was on the which had been closed for over a skim through.” was growing rapidly as Gilbing Ill Compute) for NDS, immediately year, and NDS had never admitted Indeed, Ray Adams had a turf brought other sites under his contacted former thoic moderator NDS board. to funding other piracy websites. war with the Asia-Pacific head of umbrella. Nathan Savage to ensure his silence: In fact, offers by NDS to help ITV NDS Operational Security, Avigail Gibling had an Australian page “As we discussed you do not have Digital fight piracy had been Gutman, over who was calling the on thoic, with a closed section for any information. All you did was site rejected, the statement said. shots at thoic: “I created THOIC and elite Australian hackers called Area design.” For eight days, drafts of the still consider it my baby,” Adams 51. He also opened a new website, At the same time, Adams, who statement bounced back and forth declared in another email. also controlled by NDS, called aus- was European chief of the secretive between News executives in London sat.com. Operational Security unit attached and New York as NDS claims were At this time, NDS was paying to NDS, was arranging a £5000 inflated, then watered down. Conditional access £5000 a month for Gibling and the “loan” to the man who ran the thoic By April 10, as Adams continued NDS works in the security field cost of running thoic. Another website, Lee Gibling, who was in negotiations to make the payment to called conditional access. It’s one of conditional access company called hiding in Turkey. Gibling, NDS was saying that no half a dozen companies in the world Irdeto was paying another £1500 a When an NDS lawyer blocked the ITV Digital codes had been posted that encrypt programming by pay month towards thoic costs but payment as “highly inappropriate”, on thoic.com “to our knowledge”. TV groups such as BSkyB in Britain, Gutman and Adams had ordered Adams was furious. Of crucial importance, NDS now DirecTV in the US and Foxtel in Gibling not to provide Irdeto with “As you know I successfully kept maintained that the thoic website Australia. any useful information from thoic. this man away,” Adams complained was closed in early 2000, a year The key components in By December 1999, Adams and in an email. “He is being actively As was News finance earlier than the first draft said. conditional access are the set-top box Gutman were agreed on “making sought by C+, private detectives, Neither statement was true. and the smartcard that holds the key Lee [Gibling] totally and exclusively individuals and also more director David deVoe. Gibling had been sending CDs to unlock the encryption. ours”. Gutman wrote to Adams on importantly by the BBC Panorama with copies of everything on thoic to News Corp has consistently December 23 that Hasak supported team re THOIC and ITV Digital. NDS Israel. Thoic had closed down denied any role in fostering pay TV taking Irdeto out of the thoic “As we have abandoned him I in May 2001 after hackers piracy. operation: “We really only need to fully expect that he will consider unmasked the link to NDS, though From the start, NDS and clear the legal aspect, so as not to himself free to speak with whomever the site went back on line until at Operational Security executives had put Lee in any risk and so as not to approaches him. I did not want this.” least August 2001. worried what would happen if the ‘embarrass’ the company if he is ever The emails are part of an archive Today, NDS stresses that Gibling thoic operation was ever exposed. exposed.” of 14,400 that were recovered from was only ever a paid informant and Gibling had run a BSB online Gutman was keen for Gibling to the hard drive of Adams’ computer. was never an employee. bulletin board site in Britain in the charge for access to some thoic sites, A selection of the emails can be However, the emails obtained by mid-1990s when the NDS though she worried that “if he ever accessed via The Financial Review the Financial Review show Adams smartcards used to decrypt the gets exposed (God forbid, knock on website at afr.com. in January 2000 discussing Gibling’s BSkyB satellite signal were widely wood, etc) – does it put NDS in any Days after Adams sent the email proposed new deal: while Gibling hacked. legal bind we need to think about to the NDS lawyer, Adams’ boss at would not be a direct employee, he Adams recruited Gibling and set now?” Operational Security, Reuven would be paid £2500 salary a month him up with a stand-alone website, If Gibling became an NDS Hasak, a former spymaster who had (with no tax deducted) under a 12- thoic, which would provide a free employee, as he wished, “then NDS been the deputy head of the Israeli month contract, plus contributions email service and multiple chat sites would be liable for whatever he secret police Shin Bet, approved In 2002, current to a health scheme, while another 4 for hackers to discuss how to pirate does”, Adams noted. £8000 in payments to Gibling. per cent of his salary was paid into a smartcards of all kinds with one By now, thoic was recording Another Operational Security News Corp president pension scheme. exception, any NDS cards. 1.8 million hits a day from hackers operative would carry the money to Together with the rent of a “Have a look, Thoic is my site,” all over the world, with up to 2000 Turkey to hand it over. It would not Chase Carey, another property and running costs for the Adams emailed in May 1998 to emails, and was still growing. be the last payment. site, NDS paid £75,000 a year to German hacker Oliver But alarm bells went off in late Within hours of the thoic story NDS board member, run thoic. While NDS says it did not Koemmerling, who was an NDS January 2000. breaking, News International had run, control or moderate the website, consultant. One of Gutman’s Australian engaged British master spin doctor was deputy to COO the Operational Security unit Avigail Gutman pointed out a informants, George Miller (not his Tim Bell. In a meeting with NDS constantly monitored thoic, directed thoic page dedicated to finding real name), frustrated that he was corporate communications chief Peter Chernin. Gibling on how to conduct it, and secret keys to NDS rivals’ excluded from Area 51 (the closed SBA 014