Death Engineer
12-24-2008, 03:07 PM
http://online.wsj.com/article/SB123008146563231973.html?mod=googlenews_wsj
This seems like a good reason to avoid shopping at Fry's.
A top executive at Fry's Electronics Inc. has been arrested on federal charges that he defrauded the retailer of $65 million in a kickback scheme, using much of the money to repay huge gambling debts at Las Vegas casinos.
Ausaf Umar Siddiqui, a onetime computer salesman who worked his way up to vice president of merchandising and operations at the privately held San Jose, Calif., company, allegedly charged vendors commissions of as much as 31% in exchange for agreeing to buy merchandise at inflated prices, according to court documents. He then allegedly funneled the money to a straw company he created called PC International LLC.
[A Fry's Electronics store in Wilsonville, Ore. An executive of the retailer was charged in a kickback scheme that defrauded it of $65 million. ] Associated Press
Mr. Siddiqui, whom investigators described as a well-dressed compulsive gambler with a penchant for fast cars, allegedly used the money to finance a lavish lifestyle that included driving a Ferrari and spending tens of millions of dollars at Las Vegas casinos such as the MGM Grand and Venetian. His straw company wired almost $18 million to subsidiaries of Las Vegas Sands Corp. to help cover his casino gambling losses, prosecutors say.
He was arrested at the company's headquarters Friday in front of stunned colleagues and on Monday was released on a $300,000 bond -- with a condition that he not travel to Las Vegas. On Jan. 15 he is slated to be indicted on federal charges of money laundering and wire fraud, which could land him in prison for 10 years if he is convicted.
The allegations are detailed in an Internal Revenue Service affidavit filed by U.S. prosecutors and unsealed Monday in the U.S. District Court in San Jose.
Mr. Siddiqui, who is 42 years old and goes by "Omar," was fired on Monday and couldn't be reached for comment Tuesday. A criminal-defense attorney for Mr. Siddiqui, Sam Polverino, declined to comment, saying he hadn't yet reviewed the government's evidence.
"Obviously when one of your colleagues is led away in handcuffs, people are shocked, to say the least," said Fry's spokesman Manuel Valerio. "But business goes on." Company officials said the alleged fraud hadn't harmed consumers or significantly affected merchandising decisions.
Fry's Electronics is a chain of 34 stores selling computer equipment and other devices, primarily in California and Texas. Founded in 1985 by three brothers named Fry and a fourth investor, Fry's also sells electronics online through Frys.com and owns the now-shuttered e-commerce site Cyberian Outpost.
The company has a loyal following among computer enthusiasts and is famous for quirky stores with themes such as King Tut's tomb, Atlantis and the Space shuttle. Fry's recently was ranked No. 189 on Forbes magazine's list of America's largest private companies, with estimated revenue of $2.35 billion and 14,000 employees.
Prosecutors said that Mr. Siddiqui's alleged fraud began in January 2005 and began to unravel in October this year, when an anonymous upper-level manager at Fry's contacted the IRS to report that a colleague was engaged in a multimillion-dollar kickback scheme. The manager provided the IRS with spreadsheets listing purchases and kickback payments, documents that he claimed to have stumbled upon during an unannounced visit to Mr. Siddiqui's office.
The documents allegedly detail "secret, back-room deals" between Mr. Siddiqui and vendors that took place without the knowledge of other Fry's managers, according to an affidavit by IRS Special Agent Andres Gonzalez.
The vendors -- including foreign-based U.S. Media Technologies Inc., Elitegroup Computer Services Inc., Phoebe Micro Inc. and Lead Data International Inc. -- allegedly paid Mr. Siddiqui's straw firm commissions as much as 10 times larger than normal. In exchange for the exorbitant commissions, which were sent to his Palo Alto, Calif., home, Mr. Siddiqui allegedly had Fry's purchase merchandise for more than market value, prosecutors say.
None of the vendors, primarily Asia-based computer-equipment makers, have been charged with crimes.
None of the companies could be reached for comment on Tuesday.
An IRS review of the Wells Fargo bank account linked to PC International found that $167 million was deposited in the account during the past three years, suggesting that the alleged fraud may be larger than the $65 million prosecutors described.
This seems like a good reason to avoid shopping at Fry's.
A top executive at Fry's Electronics Inc. has been arrested on federal charges that he defrauded the retailer of $65 million in a kickback scheme, using much of the money to repay huge gambling debts at Las Vegas casinos.
Ausaf Umar Siddiqui, a onetime computer salesman who worked his way up to vice president of merchandising and operations at the privately held San Jose, Calif., company, allegedly charged vendors commissions of as much as 31% in exchange for agreeing to buy merchandise at inflated prices, according to court documents. He then allegedly funneled the money to a straw company he created called PC International LLC.
[A Fry's Electronics store in Wilsonville, Ore. An executive of the retailer was charged in a kickback scheme that defrauded it of $65 million. ] Associated Press
Mr. Siddiqui, whom investigators described as a well-dressed compulsive gambler with a penchant for fast cars, allegedly used the money to finance a lavish lifestyle that included driving a Ferrari and spending tens of millions of dollars at Las Vegas casinos such as the MGM Grand and Venetian. His straw company wired almost $18 million to subsidiaries of Las Vegas Sands Corp. to help cover his casino gambling losses, prosecutors say.
He was arrested at the company's headquarters Friday in front of stunned colleagues and on Monday was released on a $300,000 bond -- with a condition that he not travel to Las Vegas. On Jan. 15 he is slated to be indicted on federal charges of money laundering and wire fraud, which could land him in prison for 10 years if he is convicted.
The allegations are detailed in an Internal Revenue Service affidavit filed by U.S. prosecutors and unsealed Monday in the U.S. District Court in San Jose.
Mr. Siddiqui, who is 42 years old and goes by "Omar," was fired on Monday and couldn't be reached for comment Tuesday. A criminal-defense attorney for Mr. Siddiqui, Sam Polverino, declined to comment, saying he hadn't yet reviewed the government's evidence.
"Obviously when one of your colleagues is led away in handcuffs, people are shocked, to say the least," said Fry's spokesman Manuel Valerio. "But business goes on." Company officials said the alleged fraud hadn't harmed consumers or significantly affected merchandising decisions.
Fry's Electronics is a chain of 34 stores selling computer equipment and other devices, primarily in California and Texas. Founded in 1985 by three brothers named Fry and a fourth investor, Fry's also sells electronics online through Frys.com and owns the now-shuttered e-commerce site Cyberian Outpost.
The company has a loyal following among computer enthusiasts and is famous for quirky stores with themes such as King Tut's tomb, Atlantis and the Space shuttle. Fry's recently was ranked No. 189 on Forbes magazine's list of America's largest private companies, with estimated revenue of $2.35 billion and 14,000 employees.
Prosecutors said that Mr. Siddiqui's alleged fraud began in January 2005 and began to unravel in October this year, when an anonymous upper-level manager at Fry's contacted the IRS to report that a colleague was engaged in a multimillion-dollar kickback scheme. The manager provided the IRS with spreadsheets listing purchases and kickback payments, documents that he claimed to have stumbled upon during an unannounced visit to Mr. Siddiqui's office.
The documents allegedly detail "secret, back-room deals" between Mr. Siddiqui and vendors that took place without the knowledge of other Fry's managers, according to an affidavit by IRS Special Agent Andres Gonzalez.
The vendors -- including foreign-based U.S. Media Technologies Inc., Elitegroup Computer Services Inc., Phoebe Micro Inc. and Lead Data International Inc. -- allegedly paid Mr. Siddiqui's straw firm commissions as much as 10 times larger than normal. In exchange for the exorbitant commissions, which were sent to his Palo Alto, Calif., home, Mr. Siddiqui allegedly had Fry's purchase merchandise for more than market value, prosecutors say.
None of the vendors, primarily Asia-based computer-equipment makers, have been charged with crimes.
None of the companies could be reached for comment on Tuesday.
An IRS review of the Wells Fargo bank account linked to PC International found that $167 million was deposited in the account during the past three years, suggesting that the alleged fraud may be larger than the $65 million prosecutors described.