Two men admit to toner fraud that prosecutors claim cost Xerox $21 million
Xerox plans to move out of downtown Rochester and relocate the to the Webster campus.(Photo: MAX SCHULTE/@maxrocphoto/staff photographer)
Two men admitted Friday to defrauding Xerox Corp. through a scheme that prosecutors allege cost the company more than $21 million.
Defense lawyers say the amount of loss alleged by prosecutors is significantly greater than the actual fraud. Fittingly, since the cheated company was the printing giant Xerox, the question of the scope of the fraud will hinge on the price of toner materials.
On Friday, Kyle Haynes and Bryan Day both pleaded guilty to conspiracy to commit mail and wire fraud and also to filing false tax returns. The two were earlier indicted, along with three other men, and accused of the criminal conspiracy.
The debate over the size of the fraud — and the value of toner — will be quite meaningful for Haynes and Day, as a federal judge's ruling on the question could trim years off their ultimate sentences.
According to the plea agreements and Assistant U.S. Attorney Richard Resnick, the scheme worked like this
• Haynes, Day and others created the Florida-based company, HDH Graphics, which also went by the name Aldar Securities. The entities were "sham" printing companies, prosecutors say.
• Xerox sold and leased equipment to a middle man, Florida resident Robert Lee Fisher, who then resold or leased equipment to HDH and Aldar. Those companies, known as "end use customers," were not permitted to resell the equipment. Instead, they were expected to pay Xerox based on the number of prints they sold.
• From 2008 through June 2013 the accused lied about how much toner was being used by the companies, claiming that they had made 38.5 million prints. They instead sold the Xerox toner the companies had received to others.