Four Minnesota Residents Charged in California with Scheme to Defraud Cisco of Computer Networking Equipment
DOJ Seal
January 9, 2008
United States Attorney Joseph P. Russoniello
Northern District of California
11th Floor, Federal Building
450 Golden Gate Avenue, Box 36055
San Francisco, California 94102
(415) 436-7200
FAX: (415) 436-7234

CONTACT: Joshua Eaton
(415) 436-6958
Josh.Eaton@usdoj.go

Four Minnesota Residents Charged in California with Scheme to Defraud Cisco of Computer Networking Equipment

Defendant Fraudulently Conspired to Obtain over $400,000 in Equipment From Cisco under the SMARTnet Service Contract Program

SAN JOSE, Calif. - United States Attorney Joseph P. Russoniello announced today that Charles Levi Lytle pleaded guilty yesterday to mail fraud, wire fraud, conspiracy to commit mail fraud and wire fraud, and conspiracy to commit money laundering, by perpetrating a scheme to defraud Cisco Systems, Inc. of over $400,000 of computer networking equipment.

According to the plea agreement, Lytle schemed to defraud Cisco Systems under the SMARTnet service contract program, wherein Cisco agreed to provide customers with technical support, including advance hardware replacement. Advance hardware replacement allowed customers to obtain replacement equipment from Cisco immediately, without having first to return the broken part.

Lytle, a Minnesota resident, worked as a Sales Representative for Interlink Communications Corporation, a company based in Edina, Minnesota, that bought and sold new and used Cisco networking equipment.

According to the plea agreement, from January 2001 to August 2002, Lytle and others at Interlink Communications conspired to submit fraudulent SMARTnet service contract claims to Cisco to receive "replacement" computer networking parts to which they were not entitled. The defendants and others then sold these "replacement" parts to customers and deposited the payments from those customers in Interlink's bank account. Lytle and others disguised their fraudulent acquisition and sale of the "replacement" parts by altering their internal purchase, sale, and inventory accounting system to make it appear as if the "replacement" parts had been legitimately acquired.

Lytle remains out of custody pending sentencing, scheduled for April 9, 2008, before the Honorable Jeremy Fogel, United States District Judge, in San Jose. The maximum statutory penalties for the mail fraud and wire fraud conspiracy and all but one mail fraud and one wire fraud charge are 5 years in prison and a $250,000 fine (or twice the gain or loss resulting from the fraud). 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 $250,000 fine (or twice the gain or loss resulting from the fraud). The maximum penalties for the money laundering conspiracy are 10 years in prison and a $250,000 fine (or twice the amount of the criminally derived property involved in the transaction). However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. 3553.

Richard C. Cheng is the Assistant United States Attorney who is prosecuting the case, with the assistance of paralegal Lauri Gomez. The prosecution is the result of an investigation by the United States Postal Inspection Service, Internal Revenue Service-Criminal Investigation, and United States Secret Service. Cisco also assisted the investigation.

Further Information:

Case #: CR 07-00108 JF

A copy of this press release may be found on the U.S. Attorney's Office's website at www.usdoj.gov/usao/can.

Electronic court filings and further procedural and docket information are available at https://ecf.cand.uscourts.gov/cgi-bin/login.pl.

Judges' calendars with schedules for upcoming court hearings can be viewed on the court's website at www.cand.uscourts.gov.

All press inquiries to the U.S. Attorney's Office should be directed to Joshua Eaton at (415) 436-6958 or by email at Josh.Eaton@usdoj.gov.

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