Massachusetts man accused of million-dollar warranty fraud against Cisco

A Massachusetts man was arrested this week on charges of scamming Cisco out of millions of dollars through false hardware warranty claims.

Michael Daly, 53, of Danvers, Mass., was arrested Tuesday for allegedly defrauding Cisco's SMARTnet hardware replacement program. He is accused of using fake identities for ordering more than 700 pieces of replacement parts in 39 states, and then reselling the gear for a profit. Daly was arraigned in a Boston federal court on Wednesday and faces as many as 20 years in prison and a $250,000 fine if convicted.

After preliminary hearings in Boston this week, the case will be moved to San Jose, where Cisco is based, according to the Associated Press.

Cisco's SMARTnet program lets users order replacement parts without having to first return defective equipment first to the company. The practice is intended to allow network managers to obtain replacement hardware as quickly as the same day in case critical network gear fails. Prosecutors say Daly took advantage of this program by ordering replacement parts and reselling the new equipment without returning any defective gear to Cisco. In a few cases, Daly returned some old Cisco equipment not covered under SMARTnet warranties.

Authorities this week seized computers and other evidence from Daly's business, Data Resources Group of Salisbury, Mass., a reseller of discounted Cisco equipment.

The parts Daly ordered were worth between $995 to $25,000 each. He used some of the cash from the alleged SMARTnet scam to buy luxuries such as classic cars, according to reports from Associated Press.