Law and Order: 14 Notorious Acts in the Technology Channel

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They say that crime doesn’t pay. But in the technology business, it seems crime pays handsomely … right up until the time someone gets busted. Here’s 14 of the most infamous and expensive criminal acts perpetrated in and around the channel.

Crime in the channel
They say that crime doesn’t pay. But in the technology business, it seems crime pays handsomely… right up until the time someone gets busted. Here’s 14 of the most infamous and expensive nefarious acts perpetrated in and around the channel.

>> NEXT : NOT-SO-GREAT DANE

Stein Bagger
Infraction: Stein Bagger, the CEO of once-heralded Danish SaaS solution provider IT Factory, was on the run for a week before turning himself in to cops in Los Angeles in Dec. 2008. He was accused of defrauding partners like IBM Corp. out of more $205 million. Punishment: Bagger was extradited to Denmark and sentenced to seven years. The missing money has never been found.

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>> NEXT : AN INSIDE JOB

David Riley
Infraction: According to the SEC, former CIO of Foundry Networks Inc. David Riley tipped off a pair of friends who worked as investment professionals days before Brocade Communications Systems Inc. acquired the company for $2.6 billion, netting the trio an illicit windfall in the millions when Foundry’s share price shot up 32 percent. Punishment: Riley was charged with insider trading in March of this year and the case remains pending.

>> NEXT : COOKED BOOKS

Ramalinga Raju
Infraction: Two days after admitting he’d cooked the books by more than $1.5 billion in 2009 at Indian IT firm Satyam Computer Services, CEO and founder Ramalinga Raju was arrested along with his brother B. Rama Raju. Punishment: Both men remain free on bail with the oft-delayed court case pending.

>> NEXT : FALL FROM GRACE

Terrence Chalk
Infraction: Former managed services pioneer and shining star of the channel Terrence Chalk, the former CEO of the defunct MSP Compulinx Managed Services of White Plains, N.Y., pleaded guilty in 2009 for stealing the identities of his employees and using them secure more than $1 million in loans. Punishment: Chalk got seven years in jail.

>> NEXT : A PERFECT COUPLE

Padma Allen
Infraction: Reddy and Padma Allen, the former owners of TechnoDyne, fled to their native India in 2011 to evade federal indictment for defrauding New York City in a computer software deployment gone awry. A grand jury found that more than $600 million of the project's budget was fraudulent because of an intricate scam run by the husband-and-wife team where they paid $15 million in kickbacks and hired a bevy of crooked subcontractors to run an over-billing scam that pumped money into their firm. Punishment: The pair was charged in absentia, but they remain fugitives, whereabouts unknown.

>> NEXT : CISCO FAKE OUT

Fake Cisco

Infraction: VAR Iheanyi Frank Chinasa was convicted in 2011 of defrauding Cisco Systems Inc. through a rather unsophisticated warrant fraud scheme that netted nearly $27 million. For three years, Chinasa, owner of Data Net Communications of Gaithersburg, Md., and his partner manufactured 950 pieces of counterfeit Cisco equipment and returned the fakes for replacements with authentic gear. Punishment: Chinasa got seven years in jail and was ordered to pay $18.8 million in restitution.

>> NEXT : NOT SUCH A 'BIG DEAL' AFTER ALL

HP
Infraction: Mark Allan James was indicted in 2011 on fraud and money laundering charges for setting up a faux VAR to buy $10 million dollars in deeply discounted computer equipment from Hewlett-Packard Co.'s "Big Deal" program, which he resold without authorization. Punishment: James, a British citizen, faces up to 20 years in jail and a $250,00 fine in the case, which has yet to be adjudicated.

>> NEXT : CAR-CRAZY VAR

Hong Kong
Infraction: Chun-Yu Zhao of Virginia was convicted of fraud in 2011 for posing as a solution provider and selling more than $143 million worth of fake Cisco equipment made in China. Zhao used false import records and billing slips to get the equipment from Hong Kong to the United States, then sold it through a reseller under the name JDC Networking. Punishment: Zhao was sentenced to five years in jail, and ordered to pay $2,709,238 in restitution and forfeit seven homes in Maryland and northern Virginia, a Porsche Boxster, a Porsche Cayenne and a Mercedes sedan; and seven bank accounts containing more than $1.6 million.

>> NEXT : NOT PLAYING NICE

xpert universe
Infraction: Cisco got in hot water in March when it was accused of misleading New York-based collaboration services provider XpertUniverse Inc. in a failed partnership agreement and absconding with some of the smaller firm’s intellectual property. Punishment: A federal jury ruled in favor of XpertUniverse and ordered Cisco to pay just over $70 million in damages.

>> NEXT : TRADING WITH THE BAD GUYS, PART 1

Syria
Infraction: Dubai-based Computerlinks ZFCO, a former overseas distributor for Blue Coat Systems Inc., was caught by the U.S. Department of Commerce’s Bureau of Industry and Security in April unlawfully diverting Blue Coat ProxySG appliances to the embattled Syrian government in violation of long-standing trade embargoes. Punishment: Computerlinks was fined $2.8 million for its role in the sale.

>> NEXT : TRADING WITH THE BAD GUYS, PART 2

Syria2
Infraction: While charges have not yet been filed, Dell Inc. was scrambling in May to explain how Saudi-based mainline distributor BDL Gulf FZCO, one of its largest distributors in the region, managed to sell hundreds of Dell laptops, tablets and desktop PCs to Syria. Punishment: The case is being investigated internally by Dell, not to mention being bird-dogged by the New York Times.

>> NEXT : A LITTLE NIP AND TUCK

Surgery
Infraction: Former Verizon employee Michael W. Baxter used a third-party reseller in Alpharetta, Ga., to defraud Cisco and Verizon Wireless out of $2.8 million in high-end networking gear, which he resold to pay for jewelry, cars, international travel and much cosmetic surgery for his girlfriend. Punishment: Baxter got four years in federal prison and must pay $2,333,241 in restitution to Cisco and $462,828 to Verizon.

>> NEXT : MIAMI VICE

Carl Fiorentino
Infraction: Former Systemax and TigerDirect.com executive Carl Fiorentino was accused in June of steering more than $230 million in business to suppliers after taking more than $7 million in bribes by using a complex web of falsified documents, wire transfers and shell companies in South Florida. Punishment: Fiorentino is awaiting trial, where he could face up to 20 years in prison.

>> NEXT : PLAYING THE NUMBERS GAME

Network Genesis
Infraction: Cuong Cao Dang, a.k.a Calvin Dang, owner of San Jose, Calif., solution provider Network Genesis, was arrested in July 2013 on charges of conspiracy, mail fraud and money-laundering for allegedly reselling $37 million in stolen or counterfeit Cisco equipment with bogus serial numbers. Dang allegedly used the ill-gotten revenue to to buy 11 commercial and residential properties in San Jose and several luxury automobiles including a Lotus. Punishment: Dang’s case is pending.

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