A Massachusetts man has been arrested and charged with defrauding Cisco Systems of millions of dollars worth of computer networking equipment.
Michael A. Daly, 53, of Danvers, Mass., allegedly used false identities and private mailboxes in at least 39 states to commit at least 700 instances of fraud against the networking equipment company. He is facing federal wire fraud charges that carry a maximum penalty 20 years in prison and a $250,000 fine.
Daly is being arraigned in U.S. District Court in Boston, and is expected to be extradited to California within several weeks, according to a spokesman for the U.S. Attorney's Office in San Jose.
The spokesman also says that an indictment should come down within the next month and more charges could be added.
According to a release from the U.S. Attorney's Office, from approximately July 2003 to the present, Daly engaged in a scheme to defraud Cisco. He allegedly used numerous false identities to fraudulently arrange for Cisco to send him replacement parts.
Daly allegedly received and sold the parts, spending at least some of the illegal proceeds on classic automobiles. He either did not return any defective parts to Cisco, or returned parts not covered by SMARTnet that were worth little or nothing.
Under Cisco's SMARTnet program, the company agrees to provide customers with technical support, including advance hardware replacement. Advance hardware replacement allows customers to obtain replacement equipment from Cisco immediately, without having to first return the broken part.
According to the DoJ's statement, Daly allegedly used false identities in 39 states to obtain networking equipment from Cisco under the SMARTnet program.
He allegedly carried out the fraud at least 700 times, on each occasion obtaining equipment with a list price ranging from $995 to $25,000. Cisco estimates that the loss is in the millions of dollars.
Federal agents executed a search warrant on Tuesday at Daly's business, Data Resources Group, in Salisbury, Mass., seizing computer equipment, documents, and other evidence.
Last November, three people were convicted of devising a scheme to defraud Microsoft by obtaining discounted software under false pretenses. The scheme involved buying more than $29 million worth of software that was steeply discounted for academic institutions, and selling it to non-academic entities, in violation of the Microsoft agreement, according to a release from the Department of Justice. Microsoft estimates that it lost more than $60 million as a result.
And a year ago, a California man was sentenced to 33 months in federal prison for participating in a conspiracy to defraud Cisco of networking hardware in 2002 and for fraudulently applying for a passport in 2005. He also was ordered to pay more than $690,000 in restitution.