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Sept. 7, 2021, 8:08 p.m. EDT

California man, 79, sentenced to 4 years for charging small businesses and charities hugely inflated prices for printer toner

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By Lukas I. Alpert

It was the worst kind of paper jam.

A 79-year-old toner salesman was sentenced to four years in prison for running a decades-long, multimillion-dollar scam that caused tens of thousands of small businesses and charities to pay hugely inflated prices for printer cartridges.

Gilbert Michaels of West Los Angeles was accused of utilizing boiler-room telemarketing businesses to dupe victims into paying as much as 10 times the retail price for toner, federal prosecutors said. He was convicted with six others of conspiracy, mail fraud and money laundering in December 2019. 

Michaels’s operation dates back to the 1970s. Prosecutors say he may have defrauded more than 50,000 victims around the country over the years. In one six-year stretch, prosecutors said Michaels sold $126 million worth of toner to unsuspecting victims.

Among the victims were a YMCA, a California country club, a Christian preschool in Alabama, a tow-truck company and a steelworkers union local in Kentucky.

In pre-sentencing court filings, Michaels’s attorneys said their client was a Navy veteran in poor health. They said that the charges against him were rooted in the cutthroat nature of the toner business and that many of the allegations were based on accusations from biased competitors.

Michaels’s lead attorney, Paul Meyer, declined to comment.

During a six-week trial, prosecutors said Michaels’s companies, IDC Servco and Mytel International, handled billing and shipping of the toner cartridges, while relying on separate  boiler-room outfits to make the sales.

As part of the scam, the telemarketers would pretend to be representatives of toner-supply companies many of the businesses already had contracts with. The telemarketers would then tell the victims that the price of toner had increased, but they could buy it at the previous, lower price, prosecutors said.

Believing they were dealing with their regular suppliers, the victims would sign order confirmation forms. IDC would then ship toner to victims along with highly inflated invoices. When the companies would complain, IDC would threaten legal action or to turn them over to collection agencies, prosecutors said. If IDC did agree to take the toner back, it would demand significant “restocking fees,” prosecutors said. 

Authorities caught on to the scheme in one case when IDC sent inflated invoices to a southern California storage company that only used typewriters to do business, according to court documents. 

One aspect of the fraud was that the telemarketers didn’t disclose they were working with IDC. Prosecutors said this was direct violation of several court orders following a Federal Trade Commission probe in the late 1980s, in which Michaels and his companies were required to use independent sales companies and were prohibited from making false statements.

The company had reached similar agreements over the years following investigations by officials in several states. 

The six other co-conspirators operated the boiler-room call centers, prosecutors said.

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