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Feds Credit New GC, McDermott for Tech Chief’s Fraud Prosecution

Nov. 22, 2021, 10:31 AM

A unique collaboration between a newly promoted general counsel and lawyers at McDermott Will & Emery helped lead to the criminal charges against Amir Golestan, a technology executive accused of illicitly obtaining lucrative IP addresses.

Golestan and his company—Micfo LLC—on Nov. 18 pleaded guilty to 20 criminal counts after two days of testimony in a federal wire fraud trial in Charleston, S.C. Golestan was accused of fraudulently obtaining thousands of IP addresses from the American Registry for Internet Numbers Ltd.

The first-of-its kind criminal case could have wider implications for prosecutions of those that jeopardize the technology allowing the internet to function, as noted by to the Wall Street Journal. Prosecutors said Golestan and Micfo used shell entities to acquire IP addresses with a market value of $14 million.

The Justice Department praised the efforts of Michael Abejuela, ARIN’s general counsel, as well as Sam Neel and Stephen Ryan of McDermott Will & Emery. The lawyers, who have worked together for years, referred the case to federal prosecutors.

“Corporate wrongdoers often avoid accountability by obscuring their criminal conduct through complicated business procedures or by operating in areas unfamiliar to most people,” said Nathan Williams, a criminal chief for the U.S. attorney’s office in South Carolina who prosecuted Golestan along with assistant U.S. attorney Amy Bower. “The world of internet resources is one of those areas.”

ARIN is a Centreville, Va.-based nonprofit that’s been a longtime client of McDermott. Ryan—a prominent Washington litigator who once represented President Donald Trump’s former personal lawyer, Michael Cohen—worked as ARIN’s outside general counsel for nearly two decades while a partner at McDermott.

Ryan retired from McDermott earlier this year but has continued to advise ARIN and a few other select clients. The organization promoted Abejuela, who had been in-house at ARIN for a decade, most recently as deputy general counsel, to succeed Ryan as its legal chief in October 2020.

“When we see something unlawful, we report it,” said Ryan, a former federal prosecutor. “This happened to be the most elaborate and convincing fraud that we’ve ever seen, but our staff, on its own, figured out it was a fraud.”

‘How Everything Connects’

ARIN is a separate organization from the Internet Corporation for Assigned Names and Numbers, a Los Angeles-based nonprofit that assigns website domain names. ICANN is to the domain name community as ARIN is to the IP addresses that make the internet work. Computers, after all, speak in numbers.

“The underlying way that networks, devices, and computers connect to each other is through IP addresses,” said Abejuela, who oversees a senior associate general counsel and staff attorney at ARIN. “The domain names are the easier thing to remember for people who don’t think in numbers. Domain names resolve to a particular IP address, and that’s how everything connects.”

Golestan was a founder and CEO of Micfo, a Charleston-based company that operated data centers in several U.S. states.

The executive and Micfo were criminally charged in May 2019, the same month that ARIN resolved an arbitration proceeding with both in its favor. ARIN secured the return of 532,000 IP addresses, as well as the reimbursement of $350,000 in legal fees and expenses incurred by McDermott.

Golestan and Micfo were charged with acting fraudulently to obtain IPv4 addresses, whose value has increased from about $5 per address a decade ago to almost $50 per address today, Abejuela said. Demand for IP address registration rights has risen due to a need for unique addresses for all kinds of technological devices—a single household could have several for cell phones, computers, and tablets.

“There is a finite number of IPv4 addresses,” Abejuela said. “As time has progressed, all that IPv4 address space is being depleted. As a result of this scarcity, there has been an exponential growth in value of these IPv4 address rights.”

Big Legal Bills

As Golestan’s legal troubles mounted, he filed for personal bankruptcy in October 2019. A list of unsecured creditors in that case shows at least $630,500 owed to four Charleston-area law firms.

“This was a multi-pronged approach by the defendant to intimidate,” said Neel, referencing a lawsuit filed by Golestan against a former executive assistant who ultimately testified against him in his criminal trial. “Ultimately, we think the good side won, at every turn.”

E. Bart Daniel, a former top federal prosecutor in South Carolina who joined Nelson Mullins in 2017, has represented Golestan in civil and criminal proceedings. Daniel, who unsuccessfully sought to subpoena ARIN and McDermott for documents during his client’s criminal trial, said in a statement that Golestan now wants to move on.

“It was a difficult decision, but my client is glad to finally put this behind him,” Daniel said. “He looks forward to putting his life back together.”

ARIN, which recouped some legal fees from Golestan, paid more than $1.8 million to McDermott for legal services from 2017 to 2019 according to federal tax filings. Ryan’s fees are included within that sum. Abejuela was paid nearly $254,000 in 2019, prior to his promotion to general counsel at ARIN.

Ryan hopes the Golestan case will resound beyond U.S. borders.

“The development of law on different continents is affected by each one of us, as opposed to only in your own region,” said Ryan.

He said the Golestan prosecution could impact another case abroad where roughly 6.2 million IP addresses are at stake. That dispute is in the Indian Ocean island nation of Mauritius, the headquarters of AfriNIC, the regional internet registry for the Africa region.

To contact the reporter on this story: Brian Baxter in New York at bbaxter@bloomberglaw.com

To contact the editor responsible for this story: Chris Opfer at copfer@bloomberglaw.com