The wheels of justice may turn slowly, but they finally caught up with Gilbert Michaels. The 79-year-old Los Angeles man was sentenced last week to four years in prison and 28 months of home confinement in conjunction with a $126 million telemarketing scheme that lasted decades and ensnarled more than 50,000 victims.
The method? Michaels, among a group of people indicted in 2016, targeted small businesses and charities by selling them toner products for printers and copiers at grossly inflated prices, according to the U.S. Attorney’s Office for the Central District of California.
Michaels was accused of using boiler-room telemarketing businesses—an outbound call center where dishonest tactics are used—posing as the victims’ regular supplier of toner products, charging prices reaching 10 times retail. He owned and operated IDC SERVCO of Culver City, California, which sold toner to small businesses, charities, city governments and other companies in the United States and Canada, according to the Department of Justice (DoJ).
While the conspiracy traces back to 1988, it is believed Michaels had been running the scam since the 1970s.
Michaels and six other people were convicted of conspiracy, mail fraud and money laundering in December 2019.
According to the DoJ, Michaels-owned IDC SERVCO and Mytel International handled billing and shipping of the price-inflated cartridges, while the boiler room operations made the sales calls. Telemarketers informed victims that the price of toner had increased, but that it could be purchased at the lower previous price. When the victims signed off on order confirmation forms, IDC shipped the toner along with invoices that were overinflated.
Complaints from customers were met by threats of legal action from IDC. In cases where the IDC agreed to take the toner shipments back, the victims were forced to pay exorbitant restocking fees.
Additionally, the telemarketers failed to disclose that they were affiliated with IDC. This violated court orders that stipulated Michaels must use independent sales companies and prevented him from making false statements.
“Michaels violated these court orders by working with and providing financing to the supposedly independent boiler rooms that were engaged in deceptive and fraudulent practices, even though IDC received hundreds of thousands of complaints from victims claiming they had been defrauded,” the DoJ wrote in a release.
Two defendants, James R. Milheiser, 54, of Huntington Beach, California (30 months), and Francis S. Scimera, 56, of Woodland Hills, California (three years), have already been sentenced to prison. Four other defendants, convicted of conspiracy and mail fraud, will be sentenced in the coming months.
