PHILADELPHIA – U.S. Attorney Jennifer Arbittier Williams announced that Vaugh Simon, 29, of Pearland, TX, was sentenced today to one year and three months in prison and ordered to pay a total of more than 1, $9 million in damages, including more than $1.7 million to Cisco Systems Inc., by U.S. District Judge Joel H. Slomsky for implementing a sophisticated warranty claims system targeting multiple tech companies . Simon was also ordered to separately forfeit over $178,000 in proceeds of crime he earned through his fraud.
In June 2020, the accused pleaded guilty to 22 counts of mail fraud, eight counts of wire fraud, two counts of filing a false tax return and one count of tax evasion. Simon’s conviction stems from a complex scheme he perpetrated with multiple accomplices to defraud Cisco, Sony Electronics, The Neat Company, Canon USA, APC by Schneider Electric, iRobot Corporation and Skullcandy, Inc., from various electronic and expensive devices. hardware, by submitting hundreds of bogus warranty claims to these manufacturers for advance replacement of products worth more than $4 million. Although not all of the false claims were successful, more than 200 of the claims tricked the manufacturers and Simon tricked them into shipping him more than $1.9 million worth of goods, most of which he sold through Internet or to resellers of computer equipment.
The fraudulent scheme involved registering fake domain names and creating fake email addresses, which were used to submit fake warranty claims under fake identities. Simon would usually get legitimate serial numbers for items he didn’t own, then contact the manufacturers, using the fake identities and email addresses he had created, and claim to be the owner of computer hardware or other electronic items believed to be broken and supposedly covered by warranties. The defendant was able to explain the supposed problem in such a way that the items in question could not be repaired by a repairman and had to be replaced instead. Simon promised to return allegedly broken items as soon as he received advance replacements, and he gave false addresses to which warranty replacement items could be shipped. Simon then sold most of the replacement items at a great discount and never returned any of the supposedly broken items, as he had never owned them in the first place.
The main victim of Simon’s fraud was Cisco. Regarding Cisco, between November 2014 and June 2017, Simon and two accomplices submitted 284 fake warranty claims using false identities for products they did not own. Of these, 209 managed to trick Cisco into shipping Cisco hardware worth more than $1.7 million, all of which Simon and his co-plotters sold. Simon’s scheme was uncovered through the work of Cisco’s internal investigation team, which identified the suspected fraud and contacted the FBI, which then initiated a joint criminal investigation with the Internal Revenue Service, Criminal Investigation Division (IRS-CID).
Additionally, the IRS-CID determined that Simon filed false tax returns in 2014 and 2016, and also criminally evaded paying income tax for 2015, the period in which he was earned over $400,000 from his fraud, but had not reported that income to the IRS. Simon is the second person convicted in this investigation: Justin David May, 32, of Wilmington, DE, was sentenced to four years and eight months in prison in June 2021.
“Warranties are designed to make consumers whole by replacing defective products, not to be exploited by scammers seeking to make an illegal profit,” US Attorney Williams said. “Warranty fraud is not a victimless crime. On the contrary, companies that support the employment of thousands of workers risk losing millions of dollars, which was the case here. The defendant’s scheme has caused real harm, and for this he will now spend time behind bars. I want to thank the FBI and IRS for their dedication and partnership in this case.
“Simon not only stole from these businesses, he also stole from the American public and the IRS,” said IRS Criminal Investigations Special Agent Yury Kruty. “The loss of his freedom, along with restitution, is the price he must now pay.”
“Vaughn Simon took advantage of these companies’ warranty programs to earn nearly $2 million in free merchandise,” said Jacqueline Maguire, special agent in charge of the FBI’s Philadelphia branch. “It’s not ‘playing the system’ – it’s blatant fraud, and plain and simple. To anyone else engaged in a scheme like this, please know that the FBI will work to arrest and hold you. responsible for your actions.
The case has been investigated by the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation Division, and is being prosecuted by Assistant United States Attorney Michael S. Lowe.