Texas Man, Vaugh Simon Sentenced for Defrauding Cisco Systems and Other Companies Out of Over $1.9 Million in Computer Hardware and Electronics
(STL.News) United States Attorney Jennifer Arbittier Williams announced that Vaugh Simon, 29, of Pearland, TX, was sentenced today to one year and three months in prison, and was ordered to pay a total of more than $1.9 million restitution, including more than $1.7 million to Cisco Systems Inc., by United States District Judge Joel H. Slomsky for operating a sophisticated warranty claim scheme which targeted multiple tech companies. Simon was also ordered to separately forfeit more than $178,000 in criminal proceeds that he earned through his fraud.
In June 2020, the defendant 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 several co-schemers in order to defraud Cisco, Sony Electronics, The Neat Company, Canon USA, APC by Schneider Electric, iRobot Corporation, and Skullcandy, Inc., out of various electronics and expensive computer hardware, by submitting to these manufacturers hundreds of false warranty claims seeking the advance replacement of more than $4 million worth of products.
While not every false claim was successful, more than 200 of the claims did deceive the manufacturers, and Simon successfully induced them to ship more than $1.9 million worth of merchandise to him, most of which he sold via the internet or to computer equipment resellers.
The fraud scheme involved the registration of false domain names and the creation of false e-mail addresses, which were used to submit the false warranty claims under false identities. Simon typically obtained legitimate serial numbers for items that he did not own and then contacted the manufacturers, using the false identities and the false email addresses he had created, and claimed to be the owner of computer hardware or other electronic items that were supposedly broken and supposedly covered by warranties.
The defendant knew how to explain the supposed problem in such a way that the items in question could not be fixed through trouble shooting and would instead require replacement. Simon promised to return the supposedly broken items as soon as he received the advance replacements, and he gave false addresses to which the replacement warranty items could be shipped. Simon then sold most of the replacement items at a deep discount and never returned any of the supposedly broken items, because he never owned them in the first place.
The primary victim of Simon’s fraud was Cisco. With respect to Cisco, between November 2014 and June 2017, Simon and two co-schemers submitted 284 false warranty claims using false identities for products they did not own. Of these, 209 successfully deceived Cisco into shipping Cisco hardware worth more than $1.7 million, all of which Simon and his co-schemers 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 began a joint criminal investigation with the Internal Revenue Service, Criminal Investigation Division (IRS-CID).
In addition, the IRS-CID determined that Simon had filed false tax returns in 2014 and 2016, and also criminally evaded the payment of income taxes for 2015, during which time he earned over $400,000 through his fraud yet failed to declare that income to the IRS. Simon is the second person sentenced as part of 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 faulty products, not to be exploited by scammers looking to turn an illegal profit,” said U.S. Attorney Williams. “Warranty fraud is not a victimless crime, rather, companies which support employment for thousands of workers stand to lose millions of dollars, which was the case here. The defendant’s scheme caused real harm, and for that he will now spend time behind bars. I would like to thank the FBI and IRS for their dedication and partnership in this matter.”
“Simon not only stole from these companies, but he also stole from the American public and the IRS,” said IRS Criminal Investigation Special Agent in Charge Yury Kruty. “The loss of his liberty, along with restitution is the price he now has to pay.”
“Vaughn Simon took advantage of these companies’ warranty programs to score nearly $2 million in free merchandise,” said Jacqueline Maguire, Special Agent in Charge of the FBI’s Philadelphia Division. “That’s not ‘gaming the system’ — that’s blatant, out-and-out fraud. To anyone else engaged in a scheme like this, know that the FBI will work to shut you down and hold you accountable for your actions.”
The case was 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.