Defendants Admit to $21 Million Xerox Toner-Supplies Fraud
The Rochester Democrat & Chronicle reports that last week, two men admitted to defrauding Xerox via a scheme that prosecutors allege cost Xerox more than $21 million.
On November 2nd, Kyle Haynes and Bryan Day both pleaded guilty to conspiracy to commit mail and wire fraud and also to filing false tax returns. The two were earlier indicted, along with three other men, and accused of the criminal conspiracy.
However, the two men’s defense lawyers say the amount of loss alleged by prosecutors is significantly greater than the actual fraud. The question of the scope of the fraud is said to depend on the price of toner materials.
According to the plea agreements and Assistant U.S. Attorney Richard Resnick, the scheme worked like this:
- Haynes, Day, and others created the Florida-based company, HDH Graphics, which also went by the name Aldar Securities. The entities were “sham” printing companies, prosecutors say.
- Xerox sold and leased equipment to a middle man, Florida resident Robert Lee Fisher, who then resold or leased equipment to HDH and Aldar. Those companies, known as “end use customers,” were not permitted to resell the equipment. Instead, they were expected to pay Xerox based on the number of prints they sold.
- From 2008 through June 2013, the defendants lied about how much toner was being used by the companies, claiming that they had made 38.5 million prints. They instead sold the Xerox toner the companies had received to others.
- Xerox states that the retail value of the goods was $24.8 million. The plea agreement says the accused and Fisher, who is still facing charges, sold the materials for more than $11 million.
Under the government calculations, the recommended sentence for the two will be 63 to 78 months in prison, but their attorneys argued that the fraud amount should not be based on the alleged retail value cited by Xerox, and plan to argue at that the crime was significantly less — a difference that could trim as much as two years off the sentences.
Still facing charges are Fisher and Jason Haynes. Jason Haynes and Kyle Haynes are brothers; David Haynes is their father.
The case first came to light in April 2018. At that time, prosecutors said that Fisher allegedly sold more than 60 printers to sham company HDH Graphics, which was set up by Kyle Haynes and Jason Haynes. Prosecutors say that the Haynes, with help from Fisher, ordered $25 million worth of toner from Xerox, even though HDH Graphics made few, if any, prints with the printers.
Prosecutors say Xerox ended up shipping about $25 million in toner to the HDH suspects, and the suspects in turn allegedly sold the toner to an individual in Miami for $11 million and shared the profits with Fisher.
- April 2018: Five Men Charged with Defrauding Xerox of $25 Million in Toner-Fraud Scheme
- March 2018: Boston Man Convicted of Defrauding Xerox of $6 Million