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Date: 09-08-2021

Case Style:

United States of America v. Gilbert N. Michaels

Case Number: 8:16-cr-00076-JVS

Judge: James V. Selna

Court: United States District Court for the Central District of Califonria (Orange County)

Plaintiff's Attorney: United States Attorney’s Office

Defendant's Attorney:


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Description: Santa Ana, CA: Telemarketing fraud criminal defense lawyer represented Defendant, Gilbert N. Michaels, 79, was charged with one count of conspiracy to commit mail fraud, 10 counts of mail fraud and five counts of money laundering.

Michaels owned and operated IDC Servco and Mytel International, companies that, with the assistance of boiler room operators, fraudulently sold toner to businesses, charities, and other organizations throughout the United States. Michaels’ companies handled the billing and shipping of the toner, and charged the boiler rooms at or above retail prices for the toner they were selling to victims. Michaels provided price catalogs to the boiler rooms to use in making sales that listed the price of the toner at up to five to 10 times the retail price. Many of the victims already were receiving toner at no additional charge pursuant to their contracts for their copiers and printers.

The telemarketers told victims that the price of toner had increased, they had not been notified of the increase, and the victims now had a chance to purchase toner at the previous, lower price. Believing that they were dealing with their regular supplier of toner, employees at the victim businesses and organizations signed order confirmation forms, which prompted IDC to ship toner to victims and send invoices that demanded payment at the inflated prices.

When the victim businesses realized they had been scammed, they called IDC to complain. The victims were typically told that IDC could not cancel the order or refund money because the victims had signed order confirmation forms. IDC also failed to disclose its relationships to the telemarketing companies that brokered the fraudulent deals.

In many cases, IDC employees threatened victims with collections or legal action if they did not pay an invoice. In the cases where IDC agreed to take toner back, victims were often forced to pay significant “restocking fees.”

Over one six-year span, victims were induced to send more than $126 million to the telemarketing scammers.

Another aspect of the fraud was that the telemarketers failed to disclose that they were affiliated with IDC. In a series of court orders dating back to November 1988, Michaels and his companies were prohibited from making false statements and they were required to provide oversight to “independent sales companies.” 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.

Six other defendants were also found guilty along with Michaels in December 2019. Those already sentenced are:

James R. Milheiser, 54, of Huntington Beach, who owned and/or controlled Material Distribution Center, PDM Marketing, Bird Coop Industries, Inc., and Copier Products Center, and who was convicted of conspiracy and mail fraud, was sentenced to 30 months in federal prison; and
Francis S. Scimeca, 56, of Woodland Hills, who owned Supply Central Distribution, Inc. and Priority Office Supply, was sentenced to three years in federal prison for his convictions for conspiracy and mail fraud.

The following four defendants will be sentenced in the coming months:

Leah D. Johnson, 57, of Ignacio, Colorado, who owned Capital Supply Center and LJT Distribution, Inc.;
Jonathan M. Brightman, 54, of Westlake Village, who owned Copy Com Distribution, Inc.; Independent Cartridge Supplier; and Corporate Products;
Sharon Scandaliato Virag, 56, of West Hills, who owned XL Supply, Inc.; and
Tammi L. Williams, 46, of Chino Hills, who was the office manager at Elite Office Supply, and worked at Specialty Business Center, Rancho Office Supply and Select Imaging Supplies.

The four defendants pending sentencing were found guilty of conspiracy. Johnson and Brightman also were found guilty of mail fraud.

The United States Secret Service, the FBI, the Huntington Beach Police Department and the Orange County District Attorney’s Office investigated this matter, with assistance from the Federal Trade Commission.

Assistant United States Attorneys Gregory W. Staples, Bradley E. Marrett, and Benjamin D. Lichtman of the Santa Ana Branch Office are prosecuting this case.

18:1349: Conspiracy to Commit Mail Fraud
(1)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(2)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(3)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(4)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(5)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(6)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(7)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(8)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(9)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(10)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(11)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(12)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(13-15)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(16)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(17)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(18-19)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(20)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(21)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(23)

18:1341: Mail Fraud; 18:2(a),2(b): Aiding and Abetting; Causing an Act to be Done
(24-25)

18:1956(a)(1)(A)(i): Money Laundering; 18:2(a): Aiding and Abetting
(26-28)

Outcome: 09/03/2021 1461 TRANSCRIPT ORDER as to Defendant Gilbert Gil N Michaels for Court Reporter. Order for: Criminal Non Appeal. Court will contact K. Bartlett Jordan at bjordan@gibsondunn.com with further instructions regarding this order. Transcript preparation will not begin until payment has been satisfied with the court reporter.(Wagner, Benjamin) (Entered: 09/03/2021)
09/03/2021 1462 MINUTES [IN CHAMBERS] Order re Motion for Bail Pending Appeal by Judge James V. Selna: Michaels moves for bail pending appeal in this matter. (Docket No. 1434 .) The Government has filed an opposition (Docket No. 1446 ), and Michaels has replied (Docket No. 1448 .) For the reasons set forth below, the Motion is DENIED. [See document for details.] (es) (Entered: 09/03/2021)
09/03/2021 1463 MINUTES OF SENTENCING Hearing held before Judge James V. Selna as to Defendant Gilbert Gil N Michaels. Cause is called for hearing with the defendant, his counsel, and counsel for the Government present. The Court's tentative sentencing memorandum was issued previously. Counsel make their arguments on the Court's tentative sentencing memorandum. The defendant declines to address the Court. The Court sentences the defendant (Refer to separate Judgment and Commitment Order) in accordance with its sentencing memorandum (attached hereto). Court Reporter: Sharon Seffens. (es) (Entered: 09/03/2021)
09/03/2021 1466 JUDGMENT AND COMMITMENT by Judge James V. Selna as to Defendant Gilbert Gil N Michaels (1), defendant is hereby committed to the custody of the Bureau of Prisons to be imprisoned for a term of: 48 months on Counts 1, 3, 5, 7, 9, 11, 13, 14, 15, 20, 23, 26, 27, 28, 29, and 30 of the Second Redacted Indictment Supervised release for Three (3) years. Pay Special assessment of $1,600, a total Fine of $200,000. Defendant is ordered to surrender on or before 11/1/2021, bond exonerated upon surrender. Defendant is advised of his appeal rights. (See Judgment and Commitment order for further information.) (es) (Entered: 09/03/2021)
09/03/2021 1473 **AMENDED 9/7/21 AS TO SENTENCING MEMO** MINUTES OF SENTENCING held before Judge James V. Selna re: MINUTES OF SENTENCING Hearing held before Judge James V. Selna as to Defendant Gilbert Gil N Michaels. Cause is called for hearing with the defendant, his counsel, and counsel for the Government present. The Court's tentative sentencing memorandum was issued previously. Counsel make their arguments on the Court's tentative sentencing memorandum. The defendant declines to address the Court. The Court sentences the defendant (Refer to separate Judgment and Commitment Order) in accordance with its sentencing memorandum (attached hereto). Court Reporter: Sharon Seffens. 1463 (es) (Entered: 09/07/2021)

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