Posted: 01/11/2011 07:35:29 AM PST

Updated: 01/11/2011 09:16:55 AM PST

http://www.mercurynews.com/breaking-news/ci_17064877?nclick_check=1

A Massachusetts man who defrauded Cisco Systems of more than $15.4 million and spent some of that money on classic cars was sentenced Monday to 48 months in prison, according to the U.S. Department of Justice.

Michael Daly, 56, president of Data Resource Group, was convicted of wire fraud and money laundering for his part in a scheme of defrauding Cisco Systems of computer networking equipment, according to federal prosecutors. Daly defrauded Cisco of the equipment and sold it to other Cisco hardware resellers, according to the Justice Department.

From approximately June 2003 to February 2007, Daly created fictitious personal and company names, obtained e-mail accounts associated to those names and used the fictitious names to rent private mailboxes in at least 39 states, according to court documents. Daly used the fictitious names to contact Cisco and falsely claim that parts supposedly covered by contracts under Cisco's SMARTnet warranty program were failed or defective and needed to be replaced.

Under the SMARTnet program, Cisco provides customers with technical support, including advance hardware replacement. Advance hardware replacement allows customers to obtain replacement equipment from Cisco immediately, without having first to return the broken part.

Daly carried out the fraud more than 1,300 times, according to court documents. On each occasion, he obtained equipment with a list price ranging from $995 to $25,000, resulting in a total loss of $15,455,695. Daly sold the "replacement" parts to Cisco equipment resellers around the country; he had three regular customers, each of whom bought large quantities of Cisco products. On a number of occasions, Daly received tens of thousands of dollars from Cisco resellers for fraudulently obtained parts.

Daly generally did not return any parts to Cisco, according to federal prosecutors. When he did, he returned parts not covered by SMARTnet and worth little or nothing.

In 1993, Daly incorporated DRG in Massachusetts. He is listed as the president, secretary and treasurer of the corporation, according to court documents. In February 2002, Daly registered the domain name www.dataresourcesgroup.com, and began to advertise Cisco products for sale on the Internet. The website directed anyone searching for a specific product to the Cisco website. The website informed potential customers to contact DRG by e-mail for further information on products and prices.

On December 28, 2006, FBI agents conducted surveillance of DRG in Massachusetts and saw nothing indicating that it was a computer parts business. Agents reported that DRG appeared to be a car repair and restoration shop and observed about 30 classic automobiles around the business and noticed several employees, including Daly, dressed in coveralls and doing repair or restoration work on the cars.

In addition, Daly has 22 vehicles registered in his name, and eBay records show Daly sold or attempted to sell 82 classic cars from July 2005 to January 2007, for a total of over $664,000.

Daly's arrest was the result of an investigation by the FBI's San Francisco division. Daly, who was charged with multiple counts of wire fraud and money laundering in May 2007, pleaded guilty in 2009 to wire fraud and money laundering as part of an agreement.

Daly was also ordered to pay restitution in the amount of $1 million to Cisco and serve a term of three years of supervised release after completion of his prison sentence.

Contact Mark Gomez at 408-920-5869.