Followers for the Bach Seat know that printer ink is one of the most expensive materials on earth. Well, the U.S. Department of Justice just prosecuted one of the worst examples of the sky-high price of printer toner. The DOJ announced that Gilbert N. Michaels of West Los Angeles was sentenced to 48 months in federal prison. He was convicted of orchestrating a decades-long, multimillion-dollar telemarketing scheme that defrauded more than 50,000 victims by selling printer toner cartridges.
According to the DOJ, his firms, IDC Servco and Mytel International, with the assistance of boiler room call center operators, fraudulently sold over a six-year span more than $126 million worth of printer toner cartridges throughout the United States. Michaels’ companies handled the billing and shipping of the toner. He charged the boiler rooms at or above retail prices for the toner they were selling to victims. Michaels provided price catalogs to the boiler rooms to use in making sales. The catalogs listed the price of the toner at up to five to 10 times the retail price. Many of the victims already were receiving toner at no additional charge under their existing contracts for copiers and printers.
Fake printer toner prices increases
To pull off the scam, the telemarketers would pretend to be representatives of toner-supply companies many of the businesses already had contracts with. The telemarketers would then tell the victims that the price of printer toner had increased. The fake sales reps told the victims they could buy the toners at the previous, lower price, prosecutors said.
Believing they were dealing with their regular suppliers, the victims would sign order confirmation forms. IDC would then ship toner to victims along with highly inflated invoices. When the victim businesses realized they had been scammed, they called IDC to complain. The victims were typically told that IDC could not cancel the order or refund money because the victims had signed order confirmation forms. IDC also failed to disclose its relationships to the telemarketing companies that brokered the fraudulent deals.
IDC would threaten legal action or turn them over to collection agencies, prosecutors said. If IDC did agree to take the toner back, it would demand significant “restocking fees,” prosecutors said.
Not the first fraud conviction
Michaels’s operation dates back to the 1970s. This is not his first run-in with the DOJ. Michaels and his companies were under scrutiny in 1988. At that time, the companies were reprimanded for making false statements. They were forced to use an independent sales company to sell printer toner.
As part of the sentencing, Michaels was ordered to pay a $200,000 fine. His net worth is said to be $6.7 million. Ciaran McEvoy, the spokesperson for the US Attorney’s Office in Los Angeles, said, “Mr. Michaels led a conspiracy whose deceptive practices were particularly damaging to the small business community.”
Other defendants
Six other defendants were also found guilty along with Michaels:
- James R. Milheiser of CA who owned and/or controlled Material Distribution Center, PDM Marketing, Bird Coop Industries, Inc., and Copier Products Center. He was convicted of conspiracy and mail fraud.
- Francis S. Scimeca of CA owned Supply Central Distribution, Inc. and Priority Office Supply, was convicted of conspiracy and mail fraud.
- Leah D. Johnson of CO who owned Capital Supply Center and LJT Distribution, Inc.
- Jonathan M. Brightman, of CA and owner of Copy Com Distribution, Inc.; Independent Cartridge Supplier; and Corporate Products.
- Sharon Scandaliato Virag owned XL Supply, Inc.
- Tammi L. Williams, office manager at Elite Office Supply, and worked at Specialty Business Center, Rancho Office Supply, and Select Imaging Supplies.
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Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.