Sales rep at Cisco reseller pleads guilty to fraud

Cisco defrauded of over US$400,000 in networking equipment

A salesman at a Cisco reseller in Minnesota pled guilty this week to defrauding the vendor of more than US$400,000 in networking equipment.

Charles Levi Lytle admitted to mail fraud, wire fraud, conspiracy to commit mail fraud and wire fraud, and conspiracy to commit money laundering, according to the Help Net Security Web site. Lytle is a sales representative for Interlink Communications, a reseller of new and used Cisco products, according to the HNS posting.

Lytle's plea agreement states that he schemed to defraud Cisco under the SMARTnet service contract program, wherein Cisco agreed to provide customers with technical support, including advance hardware replacement, according to the HNS posting. Advance hardware replacement allowed customers to obtain replacement equipment from Cisco without having first to return the faulty gear.

The plea agreement states that from January 2001 to August 2002, Lytle and others at Interlink conspired to submit fraudulent SMARTnet service contract claims to Cisco to receive replacement parts to which they were not entitled, according to HNS. The defendants and others then sold these parts to customers and deposited the payments in Interlink's bank account.

Lytle and others disguised their fraudulent acquisition and sale by altering their internal purchase, sale and inventory accounting system to make it appear as if the parts had been legitimately acquired, the HNS site states.

This is not the first instance of SMARTnet fraud. Early last year, a Massachusetts man was arrested on charges of scamming Cisco out of millions of dollars through false hardware warranty claims.

Lytle remains out of custody pending sentencing, which is scheduled for April 9, according to the site. The maximum statutory penalties for the mail fraud and wire fraud conspiracy and all but one mail fraud and one wire fraud charge are five years in prison and a US$250,000 fine.

Because one mail fraud violation and one wire fraud violation occurred after the effective date of the Sarbanes-Oxley Act, the maximum statutory penalties for those two violations are 20 years in prison and a US$250,000 fine, according to HNS. The maximum penalties for the money laundering conspiracy are 10 years in prison and a US$250,000 fine.

A Cisco spokesman said the company is "very pleased with the continued support we receive from the United States government in helping us combat fraud."

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