The middleman cometh
What does it take to be a good middleman? If there’s ever a question that you would expect channel partners to be very well qualified to answer, it would be that one. No wonder. One look at Merriam-Webster’s definition of “middleman” and you’ll see why that should be the case.
Let’s start with “an intermediary or agent between two parties”. That seems about right, doesn’t it? And then there’s the follow up: “especially [Merriam-Webster’s italics]: a dealer, agent, or company intermediate between the producer of goods and the retailer or consumer”.
‘A dealer’. That’s pretty much what the channel was back in the old days. Today, we have all manner of terms and designations for the different types of partner you can find in the channel but they pretty much all fulfil the same intermediary role between the producer of goods or services and the customer. What they do and the services they provide differs dependent on what type of partner they are, but the function is broadly similar.
I bring this up because of the case of Jason Hines, operator of former Avaya reseller, Direct Business Services International, based in New Jersey. It’s fair to assume that Hines took his role as middleman very seriously – and profited from it handsomely, selling millions of dollars worth of Avaya Direct International (ADI) licences. Some middleman, eh?
To gauge how well he was doing, Hines was described as “one of the biggest users of the ADI licence system in the world”. Sounds like a great success story, doesn’t it? And it would be but for the inconvenient fact that although Hines appeared to be acting as the middleman between the vendor (in this case, Avaya) and the customer, he wasn’t.
True, he was selling Avaya software licence keys, but the provenance of those licence keys was very questionable. Illegal in fact.
A news release from the US Attorneys Office, Western District of Oklahoma, reveals that Hines conspired with two others, Raymond Bradley Pearce and Dusti Pearce of Tuttle, Oklahoma, to sell more than $88 million worth of stolen licences.
Hines bought the illegal ADI software licence keys from Brad and Dusti Pearce under his own name and an alias, Joe Brown, and “sold them to resellers and users around the globe”.
Pearce, a long-time customer service employee at Avaya, “allegedly used his system administrator privileges to generate those keys without authorisation, creating tens of thousands” that he sold to Hines and other customers. Pearce’s wife, Dusti, is alleged to have handled accounting for the illegal business.
Another report of the case says that “according to the indictment, the illegal operation not only prevented Avaya from making money on its stolen intellectual property but also undercut the global market in Avaya ADI software licences because the Pearces and Hines sold licences at prices significantly below the wholesale price”.
It’s not often a channel partner can exert such a massive influence over a vendor’s licensing sales. And it’s likely to be even rarer for the partner causing such disruption to the global market to be based in New Jersey. You can see how, if it was legitimate, this would be a very noteworthy story.
Sadly that’s not the case. Although it’s still noteworthy in its own right. In the meantime, Hines has pleaded guilty to conspiring to commit wire fraud. As part of the plea agreement, the Department of Justice has agreed not to advocate for more than five years in prison. Hines must forfeit a money judgment of at least $2 million and make full restitution to his victims.
On a cautionary note, for all the talk of the value of the intermediary’s role, it’s worth highlighting that the middleman was the first to get charged and sentenced. Plus ça change.
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