A Massachusetts-based integrator was arrested Tuesday and charged with defrauding Cisco Systems, Inc. of millions of dollars by manipulating its SMARTnet equipment-replacement program.
Michael A. Daly, 53, was arrested at his business, Data Resources Group and charged by the U.S. Attorney's Office with having committed fraud more than 700 times during the last three-and-a-half years.
The complaint charges that Daly, using false identities and private mailboxes in 39 states, used the SMARTnet program to get Cisco to send him new products as replacements for equipment that didn't exist.
Under the SMARTnet program, Cisco sends partners replacement products immediately upon request in order to get a customer up and running more quickly. The Cisco partner who requested the equipment then returns the faulty part or product.
Daly allegedly requested parts under false names, sold them and returned worthless parts that were not covered under SMARTnet, or returned no parts at all.
In the complaint, FBI agents describe a trail of more than 700 incidents beginning in July, 2003, in which they allege Daly posed as companies such as "Delta Logistics," in whose name a box was rented at a UPS store in Caspar Wyo. They charge that a fax with Daly's name requested that packages arriving at the UPS store be forwarded to 5C Fanaras Drive, Salisbury, Mass., the address listed on the Data Resources Group (DRG) Web site.
The FBI describes DRG as an Internet-based discount outlet for Cisco products. Agents obtained credit-card and bank records that, they said in the complaint, provide a money trail connecting Daly to fraudulent transactions.
Daly was arraigned in federal court yesterday in Boston, where he is scheduled to reappear March 6 for a preliminary hearing. A Department of Justice (DoJ) spokesman said he would eventually be sent to California to face further hearings.
A Cisco spokesman declined to comment on the Daly case except to say "we are aware of this issue and are fully cooperating with the authorities."
A message to Daly's attorney, Joseph P. Kittredge, was not returned by press time.
It's not the first time Cisco has been hit in major fraud cases. In 2004 warez-scene cracker Sean Michael Breen was sentenced to 50 months in jail and three years of probation for copyright violations and theft of hundreds of thousands of dollars of Cisco gear sent to a false identity.
In 2006 Behzad Mofrad was sentenced to 33 months and $690,000 in restitution for taking part in Breen's scheme, and obtaining Cisco products fraudulently using a false customer name.
Both Cisco and the DoJ's interest in such cases is with the offenders, not the customers to whom they may have sold illicit equipment. But customers can protect themselves from any potential risks by obtaining written assurances that the products they're getting were bought through authorized channels, according to Cisco spokesman John Noh.
"All of our resellers and channel partner companies are required by their contracts to buy Cisco products from only authorized channels such as distributors, VARs and what have you," Noh said.