Cable firms crack down as L.A. becomes piracy capital of nation.

Los Angeles has become the national capital for cable television piracy, with sophisticated Southland pirates illegally modifying and selling thousands of converter boxes across the country, according to cable industry officials.

In Los Angeles County alone, cable system operators estimate they lose $100 million in revenues annually because users of modified converter boxes are bypassing them and tapping into all their programming for free.

Local governments have been shorted $5 million in franchise fees yet local law enforcement has not sent a single pirate to jail or extracted significant monetary penalties, according to cable industry executives.

Some pirates masquerade as legitimate electronics (VCR repair, computer chip) businesses and actually advertise these services but most of their revenues and profits come from illegitimate converter box sales.

The end users have already been wired and hooked up without the cable companies' knowledge. Some pirates provide full service by selling the boxes then sending their people up telephone poles to hook up the illicit end users. Sometimes legitimate customers' service is interrupted because of botched illicit hook-ups.

Mike Bates, head of security for Continental Cablevision, says, "Los Angeles has become a capital of this theft because it's easy to hide here with so much commercial property and law enforcement tied up with more serious crimes. The pirates are close to the harbors which is a source of the electronics."

Customs agents at Los Angeles harbor seized 500 pieces of illegal cable components from a Korean boat earlier this month.

Los Angeles' reputation as the piracy hot spot was affirmed last Oct. 19 when the nation's largest seizure of illegal converter boxes was made by Los Angeles police. Acting on information supplied by Continental, police raided seven sites in the county and three in Las Vegas.

More than 70,000 illegal devices with a street value of $20 million were confiscated. However, no arrests have been made as deputy district attorney, Richard Lowenstein, is trying to put together a case.

Lowenstein said he is up to his "hip boots" with other cases and says it's a question of priorities. He said there is a strong probability he will prosecute the case because of the strong evidence but wouldn't give a time frame.

Continental is taking the most aggressive stance against the cable pirates and their clients, the end users who buy the boxes, and hope not to get caught.

Last week Continental's security team "raided" 12 bars and restaurants in Los Angeles which had illegal hookups and were preparing to show Saturday night's pay-per-view boxing event, for which they had not contracted.

The most ambitious cable piracy detective work was carried out by Bates and his small team. Acting on a tip, he conducted a four month stakeout last year of a Los Angeles home.

Bates said he watched 40 people coming into the house and leaving with converter boxes. This led to police action in June when a raid on a factory/warehouse in Irwindale netted 10,000 converter boxes with a street value of $1 million. About $12,000 in cash and some South African Krugerrands were part of the seizure.

Kenneth Berger, 48, was arrested along with five workers in his plant and charged with two counts of felony conspiracy to manufacture and sell unauthorized cable television devices. A preliminary hearing in the case is scheduled for March 10. Berger was operating under the business names Pacific Coast Pay Phones and San Air Pacific, according to Lowenstein.

Jim Allen, director of signal theft for the National Cable Television Association in Washington, D.C., said 1,300 cases were prosecuted nationally in 1991 with sentences ranging from probation to 16 years in jail. Fines ranged from several hundred dollars to $1.3 million. The largest civil judgment in the U.S. in such cases was $3.2 million won by a systems operator.

Pursuing end users through the civil courts could be Continental's next big push, according to Bates. The company is mapping out a legal strategy which could be implemented in March.

By threatening the public with legal action, the hope is that many people will go straight and convert to paying customers. Bates estimated 12 percent of Continental's audience has gotten into the system illegally. When these end users are caught by Continental's audits, about 35 percent convert to paying customers.

Continental is the county's largest cable company with more than 300,000 paying customers. A smaller system such as CVI West Valley Inc., with 94,000 customers, has a 6 percent rip-off factor, according to Tom Belcher, regional manager.