Conference 7.286::digital

1535.0. "DEC Lawsuit & FBI Indictment RE: DEC Salvage Scheme" by EMIRFI::SEGAL (Len Segal, MLO6-1/U30, 223-7687) Tue Jul 16 1991 18:33

     The  following  is copied verbatim, no guarantees that there are  no
     typos.    It  is  lengthy  (132  lines),  but quite comprehensive in
     describing the  allegations  by  DEC  with  regard  to  the  Salvage
     Program.                          
                                       
     It is particularly upsetting to note that on numerous occasions back
     in    the    early   1980's,  Corporate  Officers  were  advised  of
     "abnormalities" in  how  Salvage  was  being  run (and requesting an
     investigation)...no  interest was  expressed  in  investigating  the
     allegations.  The (now-defunct) DEC Computer Club's former president
     sent letters to the top  officers  of  DEC,  none  of  the  officers
     expressed interest in following up, and the letters resulted in acts
     of revenge (upon  the  letter's  author)  by  the people running the
     Salvage Program.  If  someone  had listened...DEC could have saved $
     millions  (according to the allegations  in  DEC's  suit,  described
     below).                           

     NEWS FLASH:    WODS Radio, Boston just had a news story interviewing
     an FBI Agent  who  has  been  investigating  the  allegations listed
     below.  They just  indicted  16  people in this alleged racketeering
     scheme. They set the loss to DEC at $6.4 million!
     
     Permission is hereby granted for anyone to re-post or  forward  this
     article  (internal  OR  external  to  DEC,  since  the source is  an
     external publication)  PROVIDING  THAT ALL THIS TEXT/HEADER PRIOR TO
     THE <FORMFEED> BELOW IS REMOVED.
    
     (copied without permission: DIGITAL NEWS, July 8, 1991)
     
     DEC Sues: theft, bribery
     By Kyle Nitzsche
     
     Four companies  and  16  individuals  have  been  named  in  a civil
     racketeering suit filed  by  Digital  Equipment  Corp.  that charges
     millions  of dollars were  made  in  a  fraudulent  scheme  to  sell
     illegally obtained CPU module boards,  DECservers,  peripherals  and
     other equipment.
     
     In the suit filed June 14 in U.S.  District Court in Boston, Digital
     is seeking to recover  an  unspecified  amount  from the defendants,
     whom  Digital  has  charged with  violating  the  federal  Racketeer
     Influenced,  Corrupt  Organizations  Act.    Digital   also  claimed
     infringement  to  its  trademark, unfair competition and  violations
     under the laws of numerous states.
     
     The availability of below-market-priced  goods  resulting  from  the
     defendants'  activities deprived Digital of  "substantial  profits,"
     said Ann Fullerton, Digital spokeswoman.  Digital has filed a motion
     to obtain the companies' business records to  determine  the  actual
     amount of the damages it will seek.   She  did  not know if criminal
     charges would be filed.
     
     The suit comes just two weeks  after  a Massachusetts used equipment
     dealer and an associate were arrested on  charges  of  attempting to
     sell  allegedly  stolen  Digital CPU boards.  Members  of  the  used
     equipment community were quick to condemn the alleged actions and to
     come to the defense of legitimate resellers.
     
     "Guys who sell  stuff  that's  hot  or stolen ought to be put in the
     slammer or shot," said  Mike  Monroe, division manager for El Camino
     Resources Ltd., a $400 million  lessor  and reseller of new and used
     Digital and IBM equipment.  "This  kind of thing undercuts and hurts
     all legitimate business, so we're happy that  they're  caught.   But
     we're concerned that they even exist."
     
     Monroe  and  James  Claypoole, chairman of the Ethics  and  Industry
     Practices  Committee  of  the  DDA  (Digital Dealers Association), a
     professional  group  for  used equipment dealers, said the volume of
     sales  of  illegally obtained equipment is high enough to affect the
     entire market.
     
     Claypoole,  who  is  also president of Bay State Computer Group Inc.
     in Boston,  said that because stolen equipment is sold for much less
     than  legitimate  goods,   honest  dealers  lose  their  competitive
     advantage.  And in  tough  economic  times,  customers  who are more
     concerned than ever with finding  the  best  deal,  may  unwittingly
     become ensnared in illegal distribution schemes.
     
     "We've been approached by people who have a product whose history is
     questionable all too frequently," Monroe said.  "We're in the market
     daily, and I'd guess we hear about something like this  a  couple of
     times a month.  Just the other day [we heard about]  six  brand  new
     [VAX] 6000 memory boards with a questionable origin."
     
     The  suit  alleges  that  equipment  was first illegally obtained by
     Currie  Enterprises  Inc.  of Salem, N.H.  and Clinton, Mass., whose
     principal owner  is  Raymond  B.  Currie, of Brentwood, N.H.  Currie
     could not be  reached  for  comment.    From  1982  to  1988 he held
     contracts with Digital to destroy obsolete or rejected DEC equipment
     and to sell reclaimed raw materials.
     
     Digital claims that Currie and two of his sons, Gregory S.   and  R.
     Paul Currie, violated  the  contracts,  and  after failing to remove
     Digital logos, sold much  of the equipment on their own and with the
     help of Edward F.   Desmond  Jr.   Desmond was an employee of Currie
     Enterprises  who  started  his  own  business,  Carlyle-Omni  Realty
     Investors Inc., in Lexington, Mass.  Desmond,  and  Gregory  and  R.
     Paul Currie are defendants.
     
     The Moore Group of Torrance, Calif.  bought  most  of  the equipment
     sold by Currie Enterprises and Carlyle-Omni, according to the  suit.
     Evan  Padilla,  one  of  The  Moore  Group's  directors,  is also  a
     defendant but could not be reached for comment.
     
     The  suit  charges  that  Padilla  and  two  other principals of the
     company - who are now in bankruptcy court and therefore not named as
     defendants - knew the  equipment  had  been  fraudulently  obtained.
     After altering serial numbers on  some  equipment,  The  Moore Group
     then allegedly resold much of it  to  defendant Warren K.  Haeberle,
     then  vice  president  of Electronic Service Specialists  Ltd.    of
     Menomonee Falls, Wis.  Haeberle could not be reached for comment.
     
     Principals of Currie  Enterprises, Carlyle-Omni, The Moore Group and
     Haeberle all "made millions," the suit charges.
     
     Equipment was also obtained by bribing Digital employees responsible
     for overseeing Digital's  equipment-destruction contracts, according
     to the suit.   Raymond  Currie  and Desmond allegedly bribed John J.
     Trebendis,  manager  of two Digital  property  disposal  centers  in
     Massachusetts,  and  Joseph  V.   McGee,  a  supervisor  in  several
     disposal facilities who reported to Trebendis, "on  a  regular basis
     with  cash  and  other  forms  of consideration," according  to  the
     complaint.
     
     In a brief telephone interview, Trebendis said he is innocent.
     
     The suit charges that in return for the  bribes, Trebendis and McGee
     failed   to  ensure  Currie  Enterprises  destroyed  the  equipment.
     McGee's employment  at  DEC was terminated in 1990 after he admitted
     stealing at least  300  computer  module  boards,  according  to the
     complaint.
     
     Digital stopped doing business with Currie Enterprises in 1988 after
     an  employee  learned  equipment  from    Currie   had  entered  the
     marketplace.   But in 1988, Desmond  formed  a  new  company,  first
     called  Windham  Recovery  Inc., then renamed Windham  Systems  Inc.
     Windham applied for and eventually won contracts with DEC to destroy
     equipment and reclaim raw materials.
     
     McGee allegedly sold the  boards to defendants Bradford W.  Blakeley
     and Philip M.  Carnovale,  both of whom own Windham stock.  Denis M.
     Palmisciano, a director of Windham, is also a defendant in the suit.
     
     The  suit  alleges Palmisciano and Carnovale bribed an employee at a
     DEC warehouse in Whitinsville, Mass., entered the premises and stole
     equipment.  In  June  1989,  Palmisciano  was arrested on charges of
     possessing thousands of DECserver  products  stolen  from  a Woburn,
     Mass., facility.
     
     Digital also claims that in  1989  Desmond  and  others bribed Louis
     Buckman,  a  security guard at Digital's  Athol,  Mass.,  warehouse.
     While Buckman served as lookout, equipment was  stolen  and  shipped
     mostly to The Moore Group, according to the suit.
     
     Equipment was also obtained through "fraudulent misuse" of Digital's
     promotional  and  repair  programs, such as DECmailer and DECdirect,
     through which users send equipment to Digital for repair or upgrade.
     
     -------
  

Subject: Guilty plea entered in Digital theft scheme
Date: Thu, 20 Aug 92 10:57:55 PDT

     BOSTON (UPI) -- A Massachusetts businessman Thursday pleaded guilty to
a multimillion dollar scheme to steal computer boards and products from
Digital Equipment Corp. and launder the proceeds.
	
     Edward Desmond Jr., 28, formerly from Lexington, also admitted to a
scheme to defraud the Capital Bank and Trust Co. by falsely inflating
the purchase price of a land parcel by $1 million, and to bribing a
senior bank lending officer.
	
     U.S. Attorney John Pappalardo said Digital lost more than $10 million
because of the theft scheme, Capital Bank lost more than $1 million, and
Bank Hapoalim lost more than $6.5 Million.
	
     In addition to Desmond, three other defendants have admitted to
various charges in the scheme to steal from Digital. Desmond is
scheduled to be sentenced on Nov. 6.
	
     He pleaded guilty to racketeering, money laundering, interstate
shipment of stolen property, bank fraud, bank bribery and making false
statements to a federally insured financial institution. Pappalardo said
no plea bargain arrangement has been made with Desmond.
	
     The charges against Desmond stemmed from three indictments handed up
in July 1991.
	
     The Digital indictment named 16 other defendants, including two
company employees, two former Digital warehouse workers, an accountant
and a real estate agent in Boston and the owner of a Boston bookkeeping
service.
	
     The indictment charged that the defendants shipped stolen computer
products by air freight and tractor-trailer to California and elsewhere
and made more than $6 million from the scheme. Desmond collected more
than $2.7 million, it charged.
	
     The second indictment alleged Desmond conspired with lawyer Paul
Cooperstein and developer Sohiel Omar to defraud Capital Bank by using a
"land flip" scheme to falsely inflate by $1 million the price of a
parcel in a loan application for $2.96 million.
	
     The third indictment said Desmond bribed Alan Rose, senior lending
officer at at Bank Hapoalim, to approve a $6 million loan to Desmond and
his company. Rose pleaded guilty to bribery charges and was sentenced to
27 months in prison.
	
     The case was investigated by the FBI and the Internal Revenue
Service.
	
     Desmond was an employee of Currie Enterprises Inc., with offices in
Clinton, Mass., and Salem, N.H.
	
     Most of the computer thefts occurred after Windham Recovery Systems
Inc. of Boston won a contract from Digital in March 1989 to process and
reclaim precious metals from computer products and boards.
	
     Desmond was identified as a hidden partner in Windham Recovery.

    Interesting! When will someone tell us the real soup
    ..err scoop, on the "severed lamb's head" episode?
    

Copyright � 1992 Dow Jones & Co. from Wall Street Journal
Businessman Sentenced
 In Scheme to Defraud
 Digital Equipment


  BOSTON -- Edward F. Desmond, a Massachusetts businessman, was sentenced to 
97 months in prison for a scheme in which Digital Equipment Corp. was 
defrauded of about $10 million.

  Mr. Desmond has admitted to being part of a scheme in which computers and 
computer circuit boards were stolen and resold in California. The scheme 
allegedly involved at least 17 people, some of whom have already been 
sentenced.

  Mr. Desmond, whom the government considered one of the ringleaders, pleaded 
guilty in August to charges of racketeering, money laundering, interstate 
shipment of stolen property, bank fraud and making false statements to 
financial institutions. He also received concurrent sentences for defrauding 
Capitol Bank & Trust Co. and Bank Hapoalim in the scheme.

  In sentencing Mr. Desmond, U.S. District Court Judge Douglas P. Woodlock 
considered his admissions of being involved in separate frauds against Digital 
even after he had come forward to cooperate with authorities -- actions that 
U.S. attorney's office called "brazen."

  Roger Cox, Mr. Desmond's attorney, said his client was mentally ill, and 
expressed regret that his condition wasn't more carefully considered in 
sentencing.
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