Federal prosecutors say Gilbert N. Michaels of West Los Angeles, California, charged tens of thousands of small businesses and charities for toner they don’t need to rob them.
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Federal prosecutors said that the sales script is like this: the price of printer toner has risen, but customers can lock in office supplies at a lower price.
But when the tens of thousands of small businesses, charities, and other organizations that signed toner orders—the indispensable but expensive powder used for laser printers and photocopiers—see the details, it was too late.
The Department of Justice stated that they were defrauded of a total of US$126 million in six years, noting that the plan has actually been going on for decades.
On Friday, prosecutors said that the planner of the fraudulent scheme was sentenced to four years in federal prison in the U.S. District Court in Orange County, California, and then two years in prison at home. In the program, telemarketers falsely claimed that they were connected to the actual supplier of printer toner and forced victims to pay for supplies they did not need.
Gilbert N. Michaels of West Los Angeles, California, was found guilty of planning the plan in December 2019. Prosecutors say the plan defrauded more than 50,000 victims and resulted in 6 others is convicted. The verdict was postponed due to the coronavirus pandemic.
According to the 2016 indictment, 79-year-old Michaels is the owner and president of Mytel International Inc., a telemarketing company participating in the program, and IDC Servco, which fulfills printer toner orders.
Prosecutors said that the two companies are located in Culver City, California, misleading victims to believe that they are connected to existing printer toner suppliers, and many of them have received free equipment as part of an office lease agreement.
Federal prosecutors stated that IDC Servco employees have threatened to use collection agencies or take legal action against victims who refuse to pay printer toner invoices. The prosecutor said that in other cases, if the victim tried to return the toner, they would be charged a high "restocking fee."
"Mr. Michaels led a conspiracy whose deception is particularly harmful to the small business community," Ciaran McEvoy, a spokesperson for the Los Angeles Attorney's Office, said in an email on Tuesday. "We will continue to vigorously prosecute such cases and bring justice to the victims."
Mr. Michaels’ lawyer is still free for medical reasons. He said in a telephone interview on Tuesday that his client will appeal his sentence and conviction.
Attorney Joel Levine (Joel Levine) said: "We think the accusation has been exaggerated because there are no better terms."
After six weeks of trial, a federal jury found Mr. Michaels guilty of one count of conspiracy to commit mail fraud, 10 counts of mail fraud, and five counts of money laundering.
He was ordered to pay a fine of $200,000 and report to federal prison before November 1. According to his judgment record, Mr. Michaels suffers from a variety of diseases, including chronic obstructive pulmonary disease, and has a net worth of US$6.7 million.
In 2016, the Huntington Beach Police Department in California announced the arrest of Mr. Michaels and 20 other people accused of being connected to the plan, calling it a "flushing operation." Authorities said at the time that Mr. Michaels had previously received court warnings about deceptive telemarketing practices.
TonerNews.com is a website dedicated to writing about printing supplies. In a post on Sunday, he called Michaels the "Godfather of California Toner Pirates." Mr. Michaels’ lawyers scoffed at the nickname.
"Where did they get these things?" Mr. Levine said. "This is so strange."