Using False Identities and Private Mailboxes in at Least 39 States, Defendant Allegedly Carried out the Fraud Hundreds of Times
SAN JOSE – LAWFUEL – The Law Jobs & Law Newswire – United States Attorney Scott N. Schools announced that yesterday a federal grand jury in San Jose indicted Michael A. Daly, 53, of Danvers, Massachusetts, the president of Data Resource Group, a company based in Salisbury, Massachusetts, for defrauding Cisco of computer networking equipment and engaging in money laundering by selling the fraudulently obtained equipment to other Cisco hardware resellers.
According to the indictment, from approximately June 2003 to February 2007, Daly engaged in a scheme to defraud Cisco in which he repeatedly created fictitious personal and company names, obtained email accounts related to those names, and used the fictitious names to rent private mailboxes around the United States. Daly then associated the fictitious names and particular Cisco parts with Cisco SMARTnet service contracts. Subsequently, Daly used the fictitious names to contact Cisco and falsely claim that parts supposedly covered by the SMARTnet contracts were failed or defective and needed to be replaced. As a result, Cisco sent “replacement” parts to Daly’s private mailboxes, where they were then forwarded to Daly’s business address in Salisbury, Massachusetts.
Under the SMARTnet program, Cisco 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 first to return the broken part. 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 part to Cisco and, when he did, he returned a part not covered by SMARTnet and worth little or nothing. According to a previously filed criminal complaint, Daly carried out the fraud at least 700 times and used private mailboxes in 39 states. On each occasion, Daly obtained equipment with a list price ranging from $995 to $25,000. Cisco estimates that the loss is in the millions of dollars.
The indictment charges Daly with 24 counts of wire fraud and aiding and abetting, in violation of 18 U.S.C. §§ 1343 and 2, and six counts of money laundering and aiding and abetting, in violation of 18 U.S.C. §§ 1957 and 2. The maximum statutory penalties for wire fraud are 20 years in prison, a $250,000 fine or twice the gain or loss resulting from the fraud (whichever is greater), and three years supervised release. The maximum statutory penalties for money laundering are 10 years in prison, a $250,000 fine or twice the amount of the criminally derived property involved in the transaction (whichever is greater), and three years supervised release. Daly may also forfeit fraudulently obtained property and related proceeds, pursuant to 18 U.S.C. §§ 981(a)(1)(C) and 982(a)(1) and 28 U.S.C. § 2461(c). However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing imposition of sentences, 18 U.S.C. § 3553.
An indictment contains only allegations against an individual and, as with all defendants, Daly must be presumed innocent unless and until proven guilty.
Daly was previously arrested in Massachusetts in connection with this case, made an initial appearance at the federal courthouse in Boston, Massachusetts, and was released on a $5,000,000 bond, partially secured by $1,000,000 in cash and real estate. Daly is scheduled to appear in federal court in San Jose, California to be arraigned on the indictment on Thursday, May 17, 2007 at 9:30 a.m.
Matthew A. Lamberti is the Assistant United States Attorney who is prosecuting the case, with the assistance of legal assistant Susan Kreider. The prosecution is the result of an investigation by the Federal Bureau of Investigation. Cisco also assisted the investigation.