Owner and Operator of Massachusetts Computer Parts Company Michael A. Daly, Sentenced to 48 Months After Conviction for Wire Fraud and Money Laundering

Source- http://sanfrancisco.fbi.gov/dojpressrel/pressrel11/sf011011.htm

SAN JOSE, CA—The president of Data Resource Group, a company based in Salisbury, Mass., was sentenced today to 48 months in prison for defrauding Cisco Systems of computer networking equipment and engaging in money laundering by selling the fraudulently obtained equipment to other Cisco hardware resellers, U.S. Attorney Melinda Haag announced. Michael A. Daly was also ordered to pay restitution in the amount of $1 million to Cisco and serve a term of three years of supervised release after completion of his custodial sentence.

According to court documents, from approximately June 2003 to February 2007, Daly, 56, of Danvers, Mass., engaged in a scheme to defraud Cisco. To help carry out his scheme, Daily created fictitious personal and company names, obtained e-mail accounts related to those names, and used the fictitious names to rent private mailboxes around the United States. Daly then used the fictitious names to contact Cisco and falsely claim that parts supposedly covered by contracts under Cisco’s SMARTnet warranty program were failed or defective and needed to be replaced.

According to a previously filed indictment, Daly carried out the fraud more than 1300 times and used private mailboxes in 39 states. On each occasion, he obtained equipment with a list price ranging from $995 to $25,000, resulting in a total loss of approximately $15,455,695.

Under the SMARTnet program, Cisco provides customers with technical support, including advance hardware replacement. Advance hardware replacement allows customers to obtain replacement equipment from Cisco immediately, without having first to return the broken part.

Court documents further show that Daly also engaged in money laundering by selling the fraudulently obtained “replacement” parts to Cisco equipment resellers around the country. On a number of occasions, Daly received tens of thousands of dollars from Cisco resellers for fraudulently obtained parts. Daly generally did not return any parts to Cisco and, when he did, he returned parts not covered by SMARTnet and worth little or nothing.

Daly was charged by indictment on May 9, 2007, with multiple counts of wire fraud and money laundering. On April 9, 2009, pursuant to a plea agreement, Daly pled guilty to wire fraud and money laundering and admitted to the forfeiture allegations contained in the Indictment. Today’s sentence was handed down by United States District Court Judge Ronald M. Whyte.

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