Karen Jean Freyling, 48, and Steven Walter Butts, 62, both of Turlock, has been sentenced to prison after being convicted for running a major Internet-based counterfeit DVD importation and distribution business as well as fraudulent receipt of government benefit
Ms. Freyling was sentenced to 10 years and one month in prison, to be followed by three years of supervised release, a special assessment of $1,500, and restitution of more than $137,000 to the Social Security Administration. Mr. Butts was sentenced to seven years and 10 months, to be followed by three years of supervised release, a special assessment of $1,500, and restitution of more than $15,000 to the California Employment Development Department.
A jury found the pair guilty on Jan. 28 after a 10-day trial.
According testimony at trial, Ms. Freyling and Mr. Butts began selling counterfeit DVDs online in 2006. After their accounts with Amazon.com and eBay were suspended for copyright infringement, they opened three Web sites of their own where they made numerous false statements promoting the sale of their counterfeit merchandise. They claimed that they were selling new, factory shrink-wrapped DVDs, that they had been in business for more than 15 years, that Butts was employed by the Department of Justice and the Turlock Police Department, that they were selling the DVDs as a family business for the benefit of underprivileged children, and that all of their merchandise had been cleared by U.S. Customs.
In fact, according to the trial, the two imported counterfeit DVDs in bulk from suppliers in the Philippines by means of false Customs declarations. Even after U.S. Customs and Border Protection had seized several inbound packages and notified the pair of the seizures, they continued to tell customers that their DVDs were legitimate.
A representative of the Motion Picture Association of America testified at the trial that the defendants were selling extremely high quality pirated movies. Evidence established that the defendants made at least $272,000 in deposits into one bank account and $422,000 in deposits into a different account. The defendants purchased more than 128,000 individual DVD cases that were packaged with counterfeit DVDs and labels and then shipped to thousands of customers throughout the United States.
Numerous victims filed complaints with the Better Business Bureau, the MPAA, Ripoff Report, and their credit card companies.
During the course of the conspiracy, Ms. Freyling received thousands of dollars in Supplemental Security Income payments and Mr. Butts received thousands of dollars in California unemployment insurance benefits to which neither was entitled.
In sentencing the defendants, U.S. District Judge Oliver Wanger characterized the fraud as “egregious, inexcusable, and long-standing,” and noted the “ferocity” of e-mail messages from the defendants that insulted, castigated, and accused unhappy customers of wrongdoing when they pointed out the inferior or infringing nature of the products sold.
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