Network Gear Reseller Arrested in Cisco Fraud Plot

Massachusetts man is alleged to have defrauded Cisco of millions through a scheme involving orders of 'defective' hardware.

(San Jose, Calif.) A Massachusetts businessman who resold Cisco Systems Inc. networking gear was arrested on charges he defrauded the technology company out of millions of dollars by cheating its program to replace broken or defective hardware.

Michael Daly, 53, of Danvers, Mass., was arrested Tuesday and was scheduled to be arraigned Wednesday in Boston federal court, according to federal prosecutors. After preliminary hearings in Boston, his case will be moved to San Jose, prosecutors said.

Daly faces up to 20 years in prison and a $250,000 fine if convicted of wire fraud.

Daly is accused of using false identities in 39 states to order networking gear from Cisco since 2003. He allegedly exploited a Cisco program that allows customers to immediately obtain replacements for broken or defective parts without having to send in the problem hardware first.

Daly ordered replacement parts at least 700 times and resold them without ever returning the defective items, or in some cases returning worthless parts that weren't covered under the program, prosecutors said.

San Jose-based Cisco makes the routers and switches that direct data traffic over computer networks, and the parts Daly obtained were worth between $995 to $25,000 each, prosecutors said. Some of the proceeds were used to buy classic cars.

Investigators also seized computer equipment, documents and other items from Daly's business, Data Resources Group, based in Salisbury, Mass.

The company's Web site describes Data Resources Group as a private company established in 1991 and offering the full line of Cisco products at "substantially discounted prices."

No one answered the phone at the number listed for the company Wednesday, and it was not immediately clear if Daly had retained a defense lawyer.

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Reader Comments:

Tue, Sep 8, 2009

We always tell customers that a good way to guarantee that you do not purchase counterfeit equipment is to work with companies who are associated with organizations such as UNEDA. The United Network Equipment Dealer Association (UNEDA) is a worldwide alliance of more than 300 of the leading marketers of pre-owned networking equipment. Members represent the entire spectrum of the secondary market, from companies with hundreds of employees and millions of dollars in inventory to small, entrepreneurial organizations. Together their combined yearly buying clout exceeds $2 billion, representing the sale of millions of pieces of equipment to tens of thousands of customers. UNEDA members must adhere to a strict code of ethics that includes a firm policy against selling any equipment that is not legitimate.

John Stafford

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