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Toner Takedown: $126 Million Telemarketing Scam Exposed
SANTA ANA, California – In a shocking crackdown on a decades-long telemarketing scheme, federal authorities and Huntington Beach Police officers arrested 20 defendants indicted by a grand jury on charges of participating in a long-running telemarketing scam that targeted small businesses and charities by selling them toner products for printers and photocopiers at grossly inflated prices.
The indictment unsealed after this morning’s arrests alleges that participants in the scheme fraudulently induced over 50,000 victims to send more than $126 million to telemarketers who posed as the victims’ regular supplier of toner products at prices as much as ten times the normal retail price.
The 30-count indictment, which charges 23 defendants, alleges a conspiracy that started in 1988 and was orchestrated by Gilbert N. Michaels, a West Los Angeles man who had previously been ordered by federal and state court judges to cease fraudulent and deceptive business practices related to toner sales. Michaels owned and operated IDC SERVCO, a Culver City-based business that sold toner to small businesses, charities (such as Easter Seals Disability Services and the United Way), schools, churches, city governments and other entities in the United States and Canada.
In addition to the 20 defendants arrested this morning, two other defendants have agreed to surrender in the coming days. Authorities continue to search for the final defendant. Those taken into custody in this district this morning are expected to be arraigned this afternoon in United States District Court in Santa Ana.
“This toner fraud has been a tremendous burden on small businesses across America for many years,” said United States Attorney Eileen M. Decker. “The fraud had a tremendous impact on some victims, who reported a severe impact on their finances, and the collective losses caused by the fraud were massive.”
“This case originated from the initiative of the Huntington Beach Police Department,” said Special Agent in Charge L. Robert Savage of the U.S. Secret Service’s Los Angeles Field Office. “Their long-term partnership and steadfast collaboration with the Secret Service and other law enforcement agencies led to the dismantling of a large-scale fraud operation, which impacted victims throughout the United States.”
The indictment outlines a scheme in which telemarketers at a series of companies called victim organizations and claimed to be their regular supplier of toner or affiliated with those suppliers. The telemarketers typically told employees at the victim companies that the price of toner had increased and they had not been notified, however, the victims now had a chance to purchase toner at the previous, lower price. Believing that they were dealing with their regular supplier of toner supplies, employees at the victim companies signed order confirmation forms, which prompted Michael’s company to ship toner to victims and send invoices that demanded payment at inflated prices.
Key Facts
- State: California
- Category: White Collar Crime|Fraud & Financial Crimes
- Source: DOJ Press Release â†â€â€
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