7 convicted for $126 million scheme selling overpriced toner to charities, small firms

Seven people were convicted Friday in federal court for running a decades-long, $126 million telemarketing scheme in which thousands of small businesses and charities were sold overpriced toner for printers and photocopiers.

The scam, believed to date back to 1988 and targeting more than 50,000 victims, involved the defendants posing as the victims’ regular toner-products supplier, but selling them products with the price upped by as much as 10 times the regular retail cost, according to the U.S. Attorney’s Office.

Federal prosecutors say the multi-million dollar scheme was orchestrated by Gilbert “Gil” Michaels, a 77-year-old West Los Angeles man who owned and operated IDC SERVCO, a business that sold toner to a variety of businesses, government agencies, churches and charities.

Jurors following a trial at the federal courthouse in Santa Ana found Michaels guilty of mail fraud and money laundering, according to the U.S. Attorney’s Office.

Also found guilty of mail fraud were James Milheiser, 53, of Huntington Beach; Leah Johnson, 54, of Ignacio, Colorado; Jonathan Brightman, 52, of Westlake Village; and Francis Scimeca, 54, of Woodland Hills.

Found guilty of conspiracy to commit mail fraud was Tammi Williams, 44, of Chino Hills and Sharon Virag, 44 of West Hills. Another 14 defendants pleaded guilty prior to trial.

The scheme targeted clients across the country, according to prosecutors. Among the more than two-dozen victims listed in court filings are a country club in Orange County, a union in the Inland Empire and a marketing agency in the Bay Area.

Local investigators learned of the scheme from a man who owned a storage facility in Arizona. According to police, the man received an invoice for toner, but was confused since he did all of his business on typewriters, and couldn’t understand why he was being asked to pay for something he never purchased.

An address on the invoice sent to the Arizona storage facility owner led officers to a location in Huntington Beach. Detectives with the Huntington Beach Police Department reached out to federal officials after realizing the scope of the toner scheme, officials said.

According to a federal indictment, those involved in the toner scheme would call up companies and organizations, tell them they were affiliated with their regular toner supplier and then falsely claim the price of the products had increased.

The defendants would initially offer the victims the chance to buy the toner supplies at the “previous, lower price,” according to the indictment. However, the defendants would ultimately demand the victims pay the inflated prices after the products were shipped.

If the victims complained, they were told they couldn’t cancel the orders or receive refunds, according to the indictment. If the victims refused to pay, the defendants threatened to take them to collections or court. And if the defendant’s did agree to take the toner back, prosecutors said they would charge the victims significant “restocking fees.”

Unbeknownst to the victims, most of them could have received toner at no extra cost as part of their existing, legitimate printer or copier service agreements, according to the U.S. Attorneys Office.

The seven defendants are scheduled to return to federal court for sentencing on May 29.