KANSAS CITY, MO—Tammy Dickinson, United States Attorney for the Western District of Missouri, announced that three co-defendants were sentenced in federal court today for their roles in a $1 million wire fraud scheme to sell counterfeit and modified computer equipment to the U.S. Army.

Virgie Dillard, 71, of Lee’s Summit, Mo., the owner of Missouri Office Systems and Supplies, Inc., and an employee, Roland Evans, 45, of Lee’s Summit, and Mark Morgan, 47, of Newport Coast, Calif., were sentenced in separate appearances before U.S. District Judge Gary A. Fenner. Evans was sentenced to 37 in federal prison without parole. Morgan was sentenced to 30 months in federal prison without parole. Dillard was sentenced to five years of probation. The court also ordered Dillard, Evans and Morgan to pay $1,073,022 in restitution to the U.S. Army, for which they are jointly and severally liable.

Dillard, Evans and Morgan have each pleaded guilty to their roles in the conspiracy to commit wire fraud.

Missouri Office Systems and Supplies, Inc. (MOSS), in Kansas City, Mo., sold all types of office machines, including computers, software and other office furniture and supplies. In August 2010, MOSS received a $2.1 million contract from the Army Recreation Machine Program (ARMP) for more than 2,500 Cisco parts—including network hardware, such as transceivers and switches, which allow computers to communicate with other computers. The network hardware was shipped to numerous locations, including ARMP headquarters at Fort Carson in Colorado Springs, Colo., as well as approximately 19 other ARMP locations in the United States and three international ARMP locations.

After receiving that contract, MOSS provided more than $1 million worth of counterfeit products and Cisco products that were used and modified post-manufacture and were obtained outside Cisco’s authorized distribution channels.

Evans handled all of the contracts MOSS had for Cisco products, including all of the contracts MOSS had with ARMP for Cisco products. MOSS provided 2,013 computer products that were improperly sourced, for which ARMP paid $1,073,022. Due to the products being improperly sourced, they were not eligible for Cisco warranties nor were the SMARTnet contracts legitimate. The products were unusable for ARMP and cannot be used in any portion of its computer network.

Dillard and Evans admitted they solicited equipment bids from Morgan’s firm, PRM Technology Equipment, LLC, knowing that it was outside of Cisco’s authorized distribution channels. Between August and December 2010, Dillard and Evans caused 46 purchase orders for products under ARMP contract to be sent to Morgan and PRM. Morgan obtained counterfeit Cisco products and Cisco products which were used and modified post-manufacture outside of Cisco authorized distribution channels. Morgan shipped these products to ARMP, which paid MOSS $1,073,022. Dillard signed the 14 checks that were paid to PRM for those products from the fraudulent proceeds, totaling $856,651.

Between September 2010 and August 2011, Dillard, Evans and Morgan continued to insist to ARMP and to Cisco—in e-mails, phone conferences and meetings—that MOSS had supplied new, genuine Cisco goods and services which were sourced from Cisco authorized distribution channels and protected by full Cisco warranties as required by the contract. They altered purchase orders and invoices, which they sent to Cisco to make it appear that the products were sourced properly.

This case was prosecuted by Assistant U.S. Attorney Matthew P. Wolesky. It was investigated by the FBI, the Department of Defense—Office of Inspector General and Immigration and Custom Enforcement’s (ICE) Homeland Security Investigations (HSI).