KANSAS CITY, Mo. – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced today that two men have pleaded guilty to their roles in a $1 million fraud scheme to sell counterfeit and modified computer equipment to the U.S. Army.
Mark Morgan, 46, of Newport Coast, Calif., pleaded guilty today before U.S. District Judge Gary A. Fenner to the charge contained in a May 22, 2013, federal indictment. Roland Evans, 44, of Lee’s Summit, pleaded guilty to his role in the conspiracy on Wednesday, March 5, 2014.
Evans was an employee of Missouri Office Systems and Supplies, Inc. (MOSS), in Kansas City, Mo., which sold all types of office machines, including computers, software and other office furniture and supplies.
In August 2010, MOSS received a $2.1 million contract from the Army Recreation Machine Program (ARMP) for more than 2,500 Cisco parts – including network hardware, such as transceivers and switches, which allow computers to communicate with other computers. The network hardware was shipped to numerous locations, including ARMP headquarters at Fort Carson in Colorado Springs, Colo., as well as approximately 19 other ARMP locations in the United States and three international ARMP locations.
After receiving that contract, MOSS provided more than $1 million worth of counterfeit products and Cisco products that were used and modified post-manufacture and were obtained outside Cisco’s authorized distribution channels.
Evans handled all of the contracts MOSS had for Cisco products, including all of the contracts MOSS had with ARMP for Cisco products. MOSS provided 2,013 computer products that were improperly sourced, for which ARMP paid $1,073,022. Due to the products being improperly sourced, they were not eligible for Cisco warranties nor were the SMARTnet contracts legitimate. The products were unusable for ARMP and cannot be used in any portion of its computer network.
Evans admitted that he solicited equipment bids from Morgan’s firm, PRM Technology Equipment, LLC, knowing that it was outside of Cisco’s authorized distribution channels. Between August and December 2010, Morgan obtained counterfeit Cisco products and Cisco products which were used and modified post-manufacture outside of Cisco authorized distribution channels. Morgan shipped these products to ARMP, which paid MOSS $1,073,022. MOSS then paid Morgan $856,651 for the products.
Between September 2010 and August 2011, Evans and Morgan continued to insist to ARMP and to Cisco – in emails, phone conferences and meetings – that MOSS had supplied new, genuine Cisco goods and services which were sourced from Cisco authorized distribution channels and protected by full Cisco warranties as required by the contract. Evans and Morgan altered purchase orders and invoices, which they sent to Cisco to make it appear that the products were sourced properly.
Under the terms of today’s plea agreement, Morgan and Evans must pay $1,073,022 in restitution, for which they are jointly and severally liable. Under federal statutes, Morgan and Evans are subject to a sentence of up to 20 years in federal prison without parole, plus a fine up to $250,000. Sentencing hearings will be scheduled after the completion of presentence investigations by the United States Probation Office.This case is being prosecuted by Assistant U.S. Attorney Matthew P. Wolesky. It was investigated by the FBI, the Department of Defense – Office of Inspector General and the Department of Homeland Security.