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Traffic on Tropicana Avenue in Las Vegas, Nevada, passes in front of the MGM Grand.

SAN FRANCISCO -- To prime itself for the U.S. debut of legal online poker, MGM Resorts International, owner of such Las Vegas Strip monuments as the MGM Grand, the Bellagio and the Mirage, wanted a partner that knew the ropes.

So last October it hooked up with Bwin.Party Digital Entertainment Plc, a London-listed, Gibraltar-based specialist that rakes in more from Web betting than any other publicly traded company. MGM Resorts took 25 percent of a new venture 65 percent owned by Bwin.Party, with smaller Las Vegas casino operator Boyd Gaming getting the remaining 10 percent.

Reuters

MGM Resorts International CEO Jim Murren attends a news conference in Hong Kong on May 19, 2011. Murren says his company's online poker tie-up with Bwin.Party, backed by onetime phone-sex and porn entrepreneur Ruth Parasol, gives it a competitive edge.

"We'll be out of the gate as soon as anybody," MGM Resorts Chief Executive Officer Jim Murren boasted to investors in February. 

Online expertise isn't the only thing that distinguishes Bwin.Party. In 2009, an earlier incarnation of the company paid $105 million while admitting to U.S. prosecutors it had run an illegal gambling operation and engaged in bank and wire fraud.

Among its principal backers: a California-born woman who made a fortune in phone sex and Web pornography businesses that, like the pioneering online-gambling company that became Bwin.Party, faced multiple allegations of wrongdoing.

MGM Resorts' choice of Bwin.Party as a partner while applying for online poker licenses in Nevada might seem unusual. It isn't. The alliance reflects the calculated risks that major casino operators, Native American tribes and social-gaming giants Zynga and Facebook are weighing as they angle for a slice of a market valued at billions of dollars a year. 

Caesars Entertainment Corp is prepping for online poker by tying up with an Israeli company that in 2007 acknowledged settlement talks with the U.S. Justice Department over alleged breaches of anti-gambling laws.

A group of Native American tribes in California has signed up to use software from another Israeli company, run by a man who served prison time for stock manipulation and bribery. Another tribe last week announced a deal with Bwin.Party.

Zynga, eager to convert some of its tens of millions of virtual poker enthusiasts into cash gamblers, also has been in talks with Bwin.Party and others that have had brushes with the law, according to people familiar with the matter.

Meanwhile, offshore gambling outfit PokerStars is considering buying its chief offshore rival, Full Tilt, and making a run at the U.S. market even though founders of both were indicted by the Justice Department last year on charges of illegal gambling, bank fraud and money laundering, according to people familiar with the situation. 

All this comes as Nevada prepares to license the first online poker operators and software suppliers late next month -- and as California, New Jersey, Iowa, Massachusetts, Delaware and other states debate similar moves.

Many of the cash-starved states, encouraged by intensive industry lobbying, have felt freer to act since December, when the Justice Department declared that one federal anti-gambling law, the Wire Act, would no longer be enforced beyond sports betting.

But casino operators, Indian tribes and Internet powers bent on offering online poker lack experience delivering it. Online poker is a business that involves processing billions of dollars worth of bets and battling the fraudsters, cheats and robot-player software that can ruin the games. Hence the casinos are cozying up to some tech-savvy offshore partners whose pedigrees might give regulators pause. 

Most states have "suitability" rules designed to keep crooks out of the gambling industry. Nevada requires that successful license applicants and their large shareholders possess "good character, honesty and integrity." Nevertheless, the big casino operators and their offshore partners are betting that regulators will look favorably on their license applications for two good reasons: tax money and high-tech jobs.

Early indications are that they are right.

At a hearing on a Caesars deal with the Israeli company last year, Mark Lipparelli, chairman of Nevada's Gaming Control Board, said: "I don't think as we look at companies that we can have perfection as the standard, because I think that would be a disservice to the state in attracting business here." The board unanimously recommended approval of the venture.

Gambling foes warn that states are putting fiscal worries ahead of public safety, exposing a huge and vulnerable population to the potential for compulsive betting. "The governments are so desperate for revenues that they will partner with these lawbreaking outfits," said Les Bernal, executive director of the nonprofit Stop Predatory Gambling Foundation in Washington, D.C. "They will create addiction in order to feed off of it." 

Porn and cards
Jim Ryan, co-chief executive officer of Bwin.Party, acknowledged in an interview that when the company was looking for U.S. partners, its history was a chief concern of MGM Resorts and other U.S. companies. 

Reuters

Jim Ryan, co-CEO of Bwin.Party Digital Entertainment, sits on a discussion panel during the GiGse online gaming convention at the Westin hotel in San Francisco on April 24.

"Suitability is the very first question on all of their minds," he told Reuters during a recent business trip to San Francisco.

It's easy to see why. 

Bwin.Party grew out of PartyGaming, a brainchild of San Francisco-area native Ruth Parasol, who has a history as colorful as Las Vegas. After earning a law degree, Parasol first prospered in the 1990s through 1-900 phone-sex and other services that were sued by multiple states for aggressive billing and collection practices. In North Carolina's suit, the judge ordered a company she co-founded to pay $270,000 in damages.

Then Parasol put her money behind Internet Entertainment Group, which gained notoriety for releasing an early Pamela Anderson sex video and promising an initial public offering that never happened. Employees accused the company of routinely overbilling customers, and Chief Executive Seth Warshavsky fled to Thailand as authorities investigated. Warshavsky didn't respond to an interview request.

Parasol managed to emerge unscathed, and in 1997 founded Starluck Casino in the Caribbean, providing online gambling to customers in the U.S. and elsewhere. The company had a big hit with its PartyPoker website, which became the dominant force in U.S. online cards, and then renamed itself PartyGaming.

Parasol, who has been living in Gibraltar for most of the past decade, declined requests for an interview.

In 2005, PartyGaming's IPO became the largest London had seen in four years, valuing the company at more than $8 billion. Just then, debate over the U.S. legal status of online gambling flared.

Poker players sue to get to bottom of online cheating scheme

The Justice Department had long argued that Internet poker violated the Wire Act and other federal and state laws. Despite the success of PartyGaming and other offshore companies, no U.S.-based companies offered alternatives for fear of prosecution. 
In 2006, Congress clarified the matter by passing the Unlawful Internet Gambling Enforcement Act, or UIGEA, explicitly barring processing interstate or international poker transactions where state laws forbade such gambling. PartyGaming responded by pulling out of the U.S., leaving two-thirds of its players behind to be claimed by privately held offshore companies.

The law didn't snuff out online poker in the U.S. as players migrated to other offshore providers. Research firm H2 Gambling Capital estimates the U.S. accounts for about $400 million of global annual online poker revenue of nearly $5 billion, or 8 percent. Depending on how many states ultimately legalize online cards, that share could rise to as high as 28 percent in five years, the company says.

PartyGaming's problems didn't end when it left the United States. In 2008, co-founder Anurag Dikshit pleaded guilty to gambling via the wires in federal district court in New York. He forfeited $300 million and agreed to cooperate with prosecutors, leading PartyGaming itself to settle in 2009. The company paid $105 million to avoid prosecution for pre-UIGEA violations. Dikshit couldn't be reached. His lawyer didn't return calls seeking comment. 

In 2010, prosecutor Arlo Devlin-Brown told the court that the probe was continuing and referred to documents under seal. He recently told Reuters he could not comment further, leaving open the possibility that Parasol could be charged if she returns home to the United States. 

PartyGaming's fortunes recovered as it began to focus on non-U.S. customers. Last year it bought rival Bwin Interactive of Austria and changed the merged company's name to Bwin.Party, with annual revenue of 691 million euros, or $902 million. 

During the merger talks, the regulatory suitability of PartyGaming and Parasol became an issue. Parasol and her husband, Russell DeLeon, agreed that the board could force them to restructure their more than 13 percent stake in the merged company or sell it if "required by any gaming regulatory authority in connection with business opportunities," according to merger documents filed with regulators. 

That clause wouldn't apply, however, if the licensing process is "more burdensome to the principal PartyGaming shareholders than the licensing requirements currently imposed by the state of Nevada." That means the couple's stake could, in effect, block deals in states with tougher standards. Bwin.Party's Ryan said he couldn't imagine the couple standing in the way. DeLeon couldn't be reached for comment.

Now partnered with MGM Resorts, Bwin.Party has applied for a Nevada license to offer Internet poker software and services. Co-CEO Ryan said the joint venture will handle all U.S. games where players pay to play and can cash out their winnings. 

In the meantime, he said, Bwin.Party will promote its brands through a social game, to be announced soon, without the ability to cash out. Ryan said negotiations with Facebook, a likely game platform, are continuing.

Facebook declined to comment. MGM did not respond to repeated interview requests about its choice of Bwin.Party.

'Prettiest girl in town'  
One of Bwin.Party's top rivals is also listed in London but based in Israel. That company is 888 Holdings, founded by a dentist inspired to put poker on the Net after a 1996 trip to Monte Carlo. The late Aharon Shaked and his brother Avi mortgaged their homes to fund the company, and their families and a co-founding family still have majority control.

In 2006, 888 joined PartyGaming in pulling out of the U.S. market. But for a time before that, 888's Casino-on-Net gambling website was among the top 10 buyers of banner ads aimed at U.S. home Internet users, reaching more than 10 percent of them in a single week, according to Nielsen/NetRatings.

In 2007 the company acknowledged it was in settlement talks with the Justice Department over suspected breaches of pre-2006 anti gambling laws. No charges were filed.

The 888 deal with Caesars that Nevada regulators approved last year was a trial run of Caesars-branded online poker in the British market, where such games have been legal for years. Caesars, operator of the Strip's Caesars Palace, Harrah's and Rio, has since expanded its relationship with 888, agreeing to use its software in the United States once states approve.

Ambitions are running high at 888. "The most exciting market opportunity for the industry must be that of the States, and we are definitely the prettiest girl in town, with everybody keen to have discussions with us," 888 Chief Executive Officer Brian Mattingley told investors last month. Officials at 888 declined interview requests, as did those at Caesars.

Lipparelli, the Nevada Gaming Control Board chairman, said scrutiny of the initial Caesars venture was lower than what it would have been for a U.S. venture. He said current investigations of Bwin.Party, 888 and more than 20 other license applicants would be far more rigorous than anything the overseas outfits had experienced in their home countries. "Some will probably not make it through," Lipparelli said. 

He said confessions of pre-2006 wrongdoing wouldn't automatically prevent licensing, though. Gambling executives say they expect smooth sailing in Nevada because regulators want to add local technology jobs. Concern about past lawbreaking "has all gone away," one casino executive said. 

One big test could come in the case of PokerStars, based in the Isle of Man, and Full Tilt Poker, based in the Channel Islands, which together snapped up most of the U.S. market after the 2006 law was passed and PartyGaming ran for the exits.

Last year, on an April day known in online poker circles as Black Friday, federal prosecutors unsealed indictments alleging illegal gambling, bank fraud and money laundering against the founders of PokerStars and Full Tilt. Preet Bharara, U.S. Attorney for the Southern District of New York, said Full Tilt had operated as a Ponzi scheme, relying on new players' deposits to cover payouts to older customers while executives and advisers took hundreds of millions of dollars from player accounts.

The indictments prompted Wynn Resorts Ltd to drop a weeks-old "strategic relationship" with PokerStars. The main owner of Station Casinos, which serves Las Vegas locals at 11 casinos off the Strip, abandoned a similar tie-up with Full Tilt. Neither Nevada company returned calls seeking comment.

Full Tilt has shut down while it negotiates with the Justice Department. But PokerStars remains the biggest site worldwide, with what others in the industry believe tops $1 billion in annual revenue. It harbors hopes that a deal with prosecutors could pave the way for a return to the U.S. 

People familiar with the situation say that as part of the settlement talks with the Justice Department, PokerStars is considering buying Full Tilt and refunding U.S. players hundreds of millions of dollars missing from their accounts. PokerStars confirmed the settlement talks but declined to comment on Full Tilt or its American aspirations. Full Tilt officials couldn't be reached for comment. 

'Concerned about probity'  
In California, casinos and gambling-software companies already are scurrying for deals with the tribes and others that would be eligible for direct licenses under a bill pending in the state senate. Caesars manages the Rincon tribe's Harrah's casino and is hoping to build on that with software from 888. 

A coalition of tribes and card rooms known as the California Online Poker Association has signed up to use software from Playtech Ltd, a London-listed British company. About 40 per cent of Playtech is owned by Teddy Sagi, an Israeli billionaire who pleaded guilty to stock manipulation and bribery in 1996 in a scandal known as the Discount Affair. He was sentenced to nine months in prison. Playtech didn't respond to a request for comment.

The tribes are aware of the risks of choosing partners that won't satisfy the state Justice Department, which the current bill would empower to approve license applications.

"We are very, very concerned about probity," said Joaquin Fletcher, president of the Pechanga Development Corp, owner of the Pechanga Resort and Casino in Temecula, California. "We don't want whoever we pick to just create more nightmares down the road." 

Similar concerns are on the minds of social media companies.

Zynga, the dominant provider of recreational games on Facebook, has 36 million monthly average users of its Texas HoldEm Poker, the second most popular game on Facebook after its CityVille, according to market research firm AppData.

The card game doesn't require regulation because players don't receive cash payouts, though they often pay for extra chips to play with. Those virtual chip purchases have made the game one of Zynga's top earners and opened the company's eyes to the potential of the real thing. 

Lazard Capital Markets said in March that it expected Zynga to move "aggressively" and capture an extra $100 million in annual profit by offering online poker with cash payouts and prizes. 

Zynga has held talks with Bwin.Party, 888, multiple California tribes and card rooms, and the big brick-and-mortar casinos, people familiar with the discussions said. The company might experiment first with poker in well-regulated overseas markets such as the United Kingdom, they said. Zynga declined to comment.

The gambling majors have seen the promise of social networking as well. MGM Resorts, like Bwin.Party, is planning its own game without cash payouts but with social networking built in. Caesars recently bought game application developer Playtika, which has a popular free slot machine app on Facebook called Slotomania, and it launched a Caesars-branded casino game suite there, too. 
Despite the enthusiasm, the risks of a regulatory, legal or public-relations setback for Zynga and Facebook are substantial, even if they partner well. 

With millions of free players, "it's very likely these people can be converted" to playing for real money, said one longtime offshore poker executive. "But do they want a headline saying some kid lost $10,000 playing poker on Facebook?"

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It should be clear by now that nothing online is sacred, and no security company is safe from hackers. VeriSign Inc., the firm at the center of so many critical systems on the Web, was infiltrated by hackers in 2010.  Because details of the attack, first disclosed Thursday by Reuters, are so vague we are left to assume the worst -- and the worst is pretty bad.

It's possible that the VeriSign hackers could turn the Web upside down and create an Internet where nothing would be what it seems.  A hacker website could look and act just like your bank's website. Your PC could easily be tricked into downloading automatic software updates that would appear authentic but actually contain viruses. And no matter what web address you typed into your browser, you could be redirected to a criminal's website half-way around the world.

But there's important context to this story which might ratchet down the "Oh My God!" factor considerably.  For starters, there is reason to believe that VeriSign's revelation is nothing more than evidence companies are starting to comply with rules forcing them to disclose such incidents: In other words, similar successful hacks like this may have occurred in the past but simply went unreported.  We'll discuss the evidence for that in a moment. First, let's look at the possibilities raised by the VeriSign attack.

VeriSign is involved in two distinct, fundamental Internet security structures that could be impacted by this attack.  A successful attack on one would be serious, but a raid on the other could threaten the Internet itself. So let's start there.

VeriSign's most critical function is its role in the Domain Name System address book, which governs what happens when Web users type common name Web addresses into their browsers.  There are 13 "root"  DNS servers placed strategically around the planet for redundancy. VeriSign operates two of them. Should a hacker gain access to this part of VeriSign's business, he or she could theoretically poison the other 11 root DNS servers, and the bad data would eventually spread to the other DNS servers. The consequences could be dire: It could mean that everyone who typed "msnbc.com" into a Web browser would be sent to a computer controlled by criminals, instead of the real msnbc.com website.  A computer criminal with destructive intensions could theoretically ruin the database that maps names with IP addresses and effectively shut down parts of the Internet. It has long been discussed that these root name servers are perhaps the most vulnerable point of the attack on the Internet

But it's more likely that the agencies controlling the other 11 root Domain Name Servers would be able to regain control of the DNS table and restore the system within a day or two, if not within hours. As you might imagine, root DNS servers do disagree from time to time and there is a process for handling that.

It's also important to note that VeriSign, in the SEC disclosure which started this incident, claims that its DNS servers were not attacked by hackers.

"Access was gained to information on a small portion of our computers and servers. We have investigated and do not believe these attacks breached the servers that support our Domain Name System ("DNS") network," the firm wrote in the filing.

VeriSign's other crucial function is issuing digital certificates through its VeriSign Authentication Services group. Certificates impact your computer use every day because they tell your PC that a company's website or software is really what is says it is. Certificates are a crucial part of the SSL system that ultimately displays a friendly looking lock when you visit your online bank.  They also identify the legitimacy of software updates sent to your computer by software makers.  Many modern PCs won't install software unless it is digitally signed. 

A hacker who could influence the way VeriSign issues certificates would be a massive problem for both consumers and corporations.

"VeriSign is one of the most important enterprise trust authorities in the world, which delivers people safely to more than half the world's websites,” wrote Catalin Cosoi, Chief Security Researcher at Bitdefender Labs. “A certificate issued by VeriSign will automatically be accepted by both browsers and operating systems. This kind of incident practically voids all the security provided by 64-bit operating systems,"

In other words, hackers would have an easy time loading viruses onto PCs around the world.

That's terrible, but it's not new. Virus writers have been compromising certificate issuers with abandon for the past 18 months. It's one of the reasons that Stuxnet computer virus managed to infect millions of PCs worldwide.  That also means structures are in place to deal with fraudulent certificates.

"The worst case scenario would be several phishing attacks with valid certificates that browsers will render as legit," Cosoi said. "This would potentially yield a huge level of data that could be exploited for financial gain. However, it’s important to remember that a strong anti-phishing solution will keep you protected."

Of course, it's not even clear from VeriSign's filing that its certificate business was compromised.  Complicating matters further: Symantec Corp. purchased most of that business from VeriSign last year. For its part, Symantec said on Thursday that the assets it acquired in the sale were not compromised.

"We want to make it very clear that Symantec takes the security and proper functionality of its solutions very seriously. The Trust Services (SSL), User Authentication (VIP) and other production systems acquired by Symantec were not compromised by the corporate network security breach mentioned in the VeriSign, Inc. quarterly filing," said Symantec spokeswoman Nicole Kenyon in a statement to msnbnc.com.

Of course, it’s possible that one of Verisign’s other business unit – it provides extensive security consulting, for example – was the hackers’ only target.  That seems unlikely, however, given the target-rich environment the offers to computer criminals.

To be sure, many experts think the Verisign attack is serious business.

"The SEC filing says 'Information stored on the compromised corporate systems was exfiltrated.' That sounds like a targeted attack to me," said Mikko Hypponen, chief technology officer at F-Secure.com. "Like the one against Google. And RSA. And Lockheed-Martin."

But it's possible the VeriSign admission, buried in the SEC filing, is little more than paperwork which puts in print something that security professionals have long understood: No firm is safe from hackers.  This might be at once comforting and disturbing: In October of last year, the SEC issued guidelines that called out public firms for under-disclosing security leaks and hinted strongly that fines would come when firms failed to report successful hacker attacks. The VeriSign quarterly report was issued soon after, and it's easy to imagine the disclosure is more routine than anyone would like to admit.  In fact, Stewart Baker, a lawyer at Steptoe & Johnson, predicted as much in a blog earlier this month.

"With enforcement so easy, and the harm from breaches so tangible, so serious and so likely to bring headlines, no one should expect the enforcers to go easy on companies that have been slow to disclose. Instead I expect a growing wave of cases based on companies' failure to make timely disclosure of ongoing breaches," he wrote.

Clearly, admission by VeriSign that executives at the firm were unaware of the breach shows a terrible lack of coordination inside the firm. And it's scary to read this admission, too: "Given the nature of such attacks, we cannot assure that our remedial actions will be sufficient to thwart future attacks or prevent the future loss of information."

Still, it’s important to note that we are talking about attacks that could be a year old, and whatever they were, criminals are already deep in the process of exploiting them. Sad to say there’s nothing most consumers can do in response to this report.

In health news, there’s always the complicated issue of increased diagnosis vs. increased incidence. Is a new disease on the rise, or are we simply better at finding cases of it? The VeriSign incident raises the same question.

But the deeper truth here is probably something that professionals have known for some time: In the cat and mouse game between hackers and security firms, hackers are winning and, in some places, it's starting to look like a blowout.  

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By Rich Gardella and Jamie Forzato, NBC News

Amid growing calls for more government regulation of the Internet, the United States is conducting what it calls "a sustained law enforcement initiative aimed at counterfeiting and piracy" – an effort that already has resulted in arrests and the seizure of 125 websites.

Ask anybody who uses a computer if they've ever downloaded or streamed media content for free on the Internet, and the answer most likely will be yes. The U.S. government and the American media industry say as much as a quarter of this kind of media traffic violates U.S. copyright law, and both are getting serious in their attempts to turn off the spigot.

But detractors of the crackdown say that the government shouldn’t side with industry and attempt to restrict what flows across the Internet.

(A similar debate unfolded this week at the G8 summit in Paris, with French President Nicolas Sarkozy arguing that governments need to impose more rules of the road on the Internet, and tech leaders like Google’s Eric Schmidt and Facebook’s Mark Zuckerberg warning that could stymie innovation and squelch free expression.)

The most recent skirmish in the escalating conflict occurred this week, when the U.S. Immigration and Customs Enforcement agency (ICE) announced that its Homeland Security Investigations unit had seized the domain names of five websites that it said were being used to sell counterfeit goods or illegally distribute copyrighted materials, including media content.

"American business is threatened by those who produce counterfeit trademarked goods and pirate copyrighted materials," ICE Director John Morton said Wednesday in a press release announcing the seizures. "From counterfeit pharmaceuticals and electronics to pirated movies, music, and software, IP thieves undermine the U.S. economy and jeopardize public safety. Our efforts through this operation successfully disrupt the ability of criminals to purvey counterfeit goods and copyrighted materials illegally over the Internet."

The crackdown – dubbed “Operation In Our Sites" – is being spearheaded by ICE’s National Intellectual Property Rights Coordination Center, working in coordination with U.S. attorneys' offices across the country. The initiative has so far seized the domain names of 125 websites since it began last year, ICE says, effectively shutting them down.

Of the seized website domains, approximately 25 – including two of the five announced this week – were hosting or linking to copyrighted media content illegally, the government says. (The rest have been selling counterfeit goods, everything from shoes and clothing and accessories to DVDs of movies and TV shows to pharmaceutical products.)

Free downloading or "streaming" media content from Internet websites – including movies, TV shows, sports events and music – is a big and rapidly growing business. While an exact number is difficult to pin down, available data and estimates show that millions of streamings and downloads occur daily. 

A lot of that traffic is legal – downloading or streaming a full episode of a current television program from an authorized and sponsored service, such as a network's website, for example.

But the U.S. government and the American media industry claim a significant amount of it is illegal. A lot of the media content streamed and downloaded is copyrighted – owned by the person or entity that created it – and a lot of the services providing access to the material don't have permission from the copyright holder to do so.

The government and the media industry say U.S. copyright law (specifically, 18 USC 2319), states that distributing such content without permission from the copyright holder is a crime – copyright infringement.  They generally use a simpler name: theft – of intellectual property, or "IP theft" for short.

It’s been more than a decade since the online music-sharing service Napster made headlines for distributing copyrighted content without permission.  At the service's peak, millions of Napster users traded and downloaded millions of data files containing copyrighted music, free of charge. The music industry, through some of its largest companies, sued over copyright infringements and lost revenue. After losing in federal court, Napster shut itself down in 2001. (Its name and now-legal music service lives on as a part of the electronics retailer Best Buy.)  Despite Napster’s legal troubles, online services providing unauthorized access to copyrighted media content have continued to ply the Internet, though not on such a large scale.

Study: Nearly a quarter of streams, downloads illegal
The media industry seeks to quantify IP theft as a problem.  

It commissioned a study that found that almost one-quarter of all that streaming and downloading is illegal.  In a January report, the Internet intelligence and research company Envisional of Cambridge, England, found that "across all areas of the global internet, 23.76 percent of traffic was estimated to be infringing" on copyrighted material.  

(The report, "An Estimate of Infringing Use of the Internet," was commissioned by NBCUniversal Media LLC, part owner of msnbc.com. The media industry's powerful lobby, the Motion Picture Association of America, supports its conclusions. Microsoft, another parent company of msnbc.com, also is a leading advocate of stricter enforcement of digital copyright protections.)  

The industry claims that all that copyright-infringing media traffic translates not only to lost revenue, but also to lost jobs and wages for media industry workers.

The Motion Picture Association of America claims illegal streaming and downloading cost American workers 375,000 jobs and $16 billion in earnings every year.

A public service announcement, originally produced for the City of New York to help protect its film and television business, with support from NBCUniversal, makes that point bluntly.

Comedian Tom Papa appears on a New York City sidewalk as a vendor hawking illegally downloaded "free movies." As passers-by express interest, Papa gestures to a woman standing beside him carrying audio equipment, who looks a bit forlorn. 

"These are illegally downloaded movies," Papa says, "and because of that people like her are losing their jobs."

"Whether you get it off the streets or off the Internet,” Papa concludes, now facing the camera, "digital piracy and product counterfeiting are not victimless crimes." 

The federal government has adopted that message, releasing the public service announcement to the public through its own media office, and linking it to some of now-shuttered websites whose domains it has seized.

A warning to surfers
Visitors to these websites are redirected first to a government warning banner bearing the seals of the Department of Justice, the National Intellectual Property Rights Coordination Center and Homeland Security Investigations. The banner states that the government has seized the domain name, that it is illegal to reproduce or distribute copyrighted material without authorization and that willful offenders risk prosecution for criminal felony violation copyright law. If convicted, the banner warns, even first-time offenders "will face up to five years in federal prison," plus "restitution, forfeiture and fine."  

William Ross, the unit chief for investigations at the National Intellectual Property Rights Center, said Operation In Our Sites is about enforcing copyright law and protecting the U.S. economy from intellectual property theft, which the government considers a national threat.

"We try to protect the economic interests of U.S. industries and manufacturers," Ross said. "We're protecting them from other people taking their ideas and selling them."

In some cases, the government has arrested and charged website operators. In February, it arrested and charged a Texas man who had streamed copyrighted sports events on one seized site, channelsurfing.net, claiming he'd collected $90,000 in online advertising revenue.

Most of the seized websites appear to be strictly online operations, and their operators were difficult to contact.  But NBC News found one willing to talk: Waleed Gadelkareem, an Egyptian businessman.

The U.S. government seized his domain – torrent-finder.com, which was based in the U.S. – in November. He says his site was getting 100,000 hits a day and generating revenue from online advertising. 

But Gadelkareem claims he wasn't doing anything wrong. He said his site was a just a search engine that linked to other sites with such content, just like other big search engines do.

"It's a dirty game they are playing. and it's totally unfair," said Gadelkareem, interviewed via Skype from his home office in Alexandria, Egypt. "I don't try to sell anything. I'm a search engine. I don't have any database of any copyrighted materials."

Ross said he could not discuss Gadelkareem's case, an ongoing investigation. But he said every website the government acted against was violating American copyright law. 

After the government seized his U.S.-based domain, which was run from a server in Texas, Gadelkareem changed its name slightly, to torrent-finder.info, and moved it to a server based in Sweden.  He continues to operate it from Egypt.

Ross said the U.S. is working with foreign governments to shut down sites if they move out of the U.S. "We keep going after them,” Ross said, “no matter how many times they come back up."

Proposed legislation in Congress would give the U.S. government the power to shut down copyright-infringing websites in other countries – even if they mainly link to copyright-protected material without permission.

Businessman says he was wrongly shut down
Waleed Gadelkareem sees big business behind the government’s efforts.

"The USA government is trying to shut it down," Gadelkareem said, "for the sake of a group of rich businessmen.  That's what I think. That's (what) everybody thinks."

His American lawyer, David Snead, who represents and advises online service providers who distribute content on copyright issues, agrees.

"The government is doing industry's bidding here," Snead said. "I think that it is wrong for prosecutorial resources to be used on behalf of any one industry."

There is vigorous debate in the various precincts of the Internet about whether the government's crackdown and seizures are appropriate. 

The media and entertainment industry – including NBCUniversal – has long advocated more government enforcement of intellectual property violations.

Ross said the motivation for the government's efforts to crack down on unauthorized distribution of media content is simply to enforce copyright law and to protect the U.S. economy and jobs.

He says the media industry itself takes down far more websites hosting illegal copyrighted content than the government does, using its own mechanisms.

"They have a lot more resources, a lot more manpower to do those type things than we have within the government,” Ross said. “So what we're doing is a very small percentage."

As the government and industry crack down on supply, what will happen to demand – the computer users who aren't distributing unauthorized media content but are consuming it, who initiate all those unauthorized downloads and streams?

NBC News recently discussed these issues with six college students at the University of Maryland. 

"I think it's common, especially among college students,” said one, “because it seems anonymous and it seems like something you can get away with."

All six students we talked to at the University of Maryland/College Park agreed that hosting or providing access to copyrighted content without the permission of the copyright holder was illegal. 

They made a distinction between illegal and wrong, however, with only one saying it was wrong.

"If it violates the law," the student said, "then, yeah, I think it should be enforced."

But while five of the six thought that consuming copyrighted media content without the permission of the copyright holder was illegal, none thought that was wrong.

"I just don't think that it's wrong enough for me to stop doing something that's so easy and so available to me," said another, expressing the view of the majority.  "I just don't feel it's wrong."