Man Gets 4 Years in $126 Million Printer Toner Fraud
Gilbert N. Michaels, of West Los Angeles, Calif., preyed on tens of thousands of small businesses and charities by overcharging them for toner they didn’t need, federal prosecutors said.,
The sales script went something like this, federal prosecutors say: The price of printer toner has gone up, but customers can lock in at the lower rate they’ve been paying for the office supply.
But by the time tens of thousands of small businesses, charities and other organizations that signed orders for toner — the indispensable yet notoriously expensive fine powder used by laser printers and photocopy machines — saw the fine print, it was too late.
They had been conned out of a total of $126 million over six years, the Justice Department said, noting that the scheme had actually gone on for decades.
On Friday, the man who prosecutors say was the mastermind of that fraud scheme was sentenced in U.S. District Court in Orange County, Calif., to four years in federal prison, followed by two years of home confinement. In the scheme, telemarketers misrepresented that they were affiliated with actual suppliers of printer toner and forced the victims to pay for supplies they didn’t need.
The man, Gilbert N. Michaels, of West Los Angeles, Calif., was found guilty in December 2019 of orchestrating the scheme, which prosecutors said had defrauded more than 50,000 victims and led to convictions of six other people. The sentencing was delayed because of the coronavirus pandemic.
Mr. Michaels, 79, was the owner and president of both Mytel International Inc., the telemarketing company involved in the scheme, and IDC Servco, which fulfilled orders for printer toner, according to a 2016 indictment.
Prosecutors say the two companies, which were both in Culver City, Calif., misled the victims into thinking they were connected with their existing suppliers of printer toner, which many of them were already receiving at no additional charge as part of lease agreements for office equipment.
Federal prosecutors say that employees of IDC Servco had threatened to use a collections agency or take legal action against those victims who refused to pay their invoices for the printer toner. In other cases, victims were charged onerous “restocking fees” if they tried to return the toner, prosecutors said.
“Mr. Michaels led a conspiracy whose deceptive practices were particularly harmful to the small-business community,” Ciaran McEvoy, a spokesman for the U.S. attorney’s office in Los Angeles, said an email on Tuesday. “We will continue to vigorously prosecute these kinds of cases and obtain justice for victims.”
A lawyer for Mr. Michaels, who remains free because of medical reasons, said in a phone interview on Tuesday that his client would appeal his sentence and conviction.
“We felt that the charges were overblown, for lack of a better term,” said the lawyer, Joel Levine.
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 after a six-week trial.
He is ordered to pay a $200,000 fine and to report to federal prison by Nov. 1. According to the minutes from his sentencing, Mr. Michaels has several medical conditions that include chronic obstructive pulmonary disease and had a net worth of $6.7 million.
In announcing the arrest of Mr. Michaels and 20 other people accused of being connected to the scheme in 2016, the Huntington Beach Police Department in California called it “Operation Tone It Down.” The authorities said at the time that Mr. Michaels had previously received court warnings about deceptive telemarketing practices.
TonerNews.com, a website devoted to writing about printing supplies, called Mr. Michaels “the California toner pirate godfather” in a post on Sunday. Mr. Michaels’ lawyer scoffed at the moniker.
“Where do they get this stuff?” Mr. Levine said. “That’s just bizarre.”