High-living video pirate faces jail for swindling film industry of millions

A man who ran Europe's biggest video counterfeiting operation, pirating copies of Hollywood blockbusters such as Mission Impossible 2 and The Matrix, faces a prison sentence after unexpectedly pleading guilty to defrauding the film industry.

Allen Watts, a 56-year-old Norfolk businessman, will be sentenced at Norwich Crown Court next month after pleading guilty at a routine procedural hearing earlier this week.

The inquiry began after film industry executives noticed a sudden "black hole" in the sales of videos of Hollywood blockbusters in the summer of 2000. The number of videos they had produced did not match the large quantities being sold at knockdown prices at shops such as HMV and WH Smith. But when films were returned by consumers because of faults, it became clear someone had flooded the market with more than a million pirated video films.

A spokesman for the Federation Against Copyright Theft, which investigated Watts in conjunction with Norfolk police, said yesterday that Watts was part of a new breed of sophisticated criminals. He said: "Watts used all the counter-detection techniques that might usually be attributed to those criminals engaged in other serious criminality."

Watts also faces a civil claim for damages from the industry. He is believed to have made several millions of pounds, most of which cannot be traced. Police established that he received about £2m for the sales of 500,000 fakes, most of which was laundered through his bank account.

But since it was estimated that about 1.5 million videos were produced in total, a lot of money has simply disappeared. Some was spent on overseas travel, eating out, entertaining and luxury cars, including a Porsche, for himself and his partner.

Watts had an unobtrusive front operation, called Covroc UK, based in Thetford, which produced duplicate copies of low-volume, low-budget productions. But his real base was a warehouse near Besthorpe. In February last year police discovered 712 video recorders connected together on shelves to copy films.

Watts initially escaped detection because of the high quality of the fakes. The pirated Gladiator was sold in gold-coloured plastic cases almost indistinguishable from the original. But as the size of the operation grew, he was forced to use cheaper blank cassettes or copy over used ones – which led to customer complaints. The fakes were traced to a legitimate distribution company which had purchased them in good faith.

While on bail after his arrest last year, Watts shifted his base to an industrial estate near Saxmundham, Suffolk, and resumed business to produce a nest egg in the event of his imprisonment. But he was being watched by police and when they raided the site a few weeks ago and discovered a second pirating operation.

At Norwich Crown Court on Tuesday, charges were dropped against five other men, including Watts's 21-year old son Daniel, who had pleaded not guilty to conspiracy. Another man, Keith Cranston, 40, of Brandon, Suffolk, has pleaded guilty to one offence of conspiracy to defraud and will be sentenced with Watts.