November 2000

HP 3000 brokers get jail time, plead guilty in California cases

HP 3000 hardware broker Richard Adamson, founder of former HP broker Hardwarehouse, received an 11-year, 3-month sentence for fraud in a California court on Oct. 27, while another well-known broker filed a guilty plea on a wire fraud charge in the same week. William Conley, owner of US Computer Corp. in Redmond, Wash.“pled guilty to defrauding Hewlett-Packard Company by bribing one of its employees to rig auctions for valuable computer equipment,” according to a press release from the US Attorney‘s office for the Eastern District of California.

Adamson‘s case, which was tried this summer, was based on illegal activity from 1995 through 1998 surrounding the use of the SS_CONFIG software to rig HP 3000 user licenses, as well as the fixing of HP‘s open bid process for auctioning off used HP 3000 systems. According to Assistant US Attorneys Christopher Sonderby and Michael Malecek, evidence in the trial demonstrated that Adamson and his brother John used SS_CONFIG “to illegally upgrade used computer servers he received from Hewlett-Packard. He then defrauded HP by causing the company to transfer licenses on those servers in their upgraded state, without ever paying HP for those upgrades.” Evidence showed that Richard Adamson bribed HP employee Deborah Balon to fix the open bidding on HP 3000 servers being returned to HP in lease arrangements and upgrade swaps. Balon, along with her husband and accomplice Marc Loriau, also of HP, pled guilty in exchange for testifying against Richard Adamson during the latter‘s trial. The US Attorney‘s office reported that Adamson paid the two HP employees more than $250,000 in cash, gifts and travel during the scheme, including trips to France, Italy, St. Barth‘s, Tahiti, Aspen and Lake Tahoe.

One week after Adamson got his 11-plus year ticket to prison, the two former HP employees received four-month prison sentences, four months in a halfway house, and a $3,000 fine each. According to a report in the Sacramento Bee, the two were represented by attorneys who had formerly worked for the US Attorney‘s office and knew the cooperation process well. The judge at their sentencing hearing gave them the option of beginning to serve their prison time after the year-end holidays; Adamson has been incarcerated since his trial began. The pair of HP employees have repaid some $500,000 to their former employers as part of their reparations. HP estimates its license fee losses in the Hardwarehouse scheme at more than $15 million.

Meanwhile, another allegation of fraud won‘t have to go to trial, because an HP 3000 broker has pled guilty. William Conley admitted to bribing an HP employee in another bid-rigging effort. Conley faces up to five years in prison and a $250,000 fine after he pled guilty to honest services wire fraud. A Seattle Times story which quoted Conley‘s attorneys reported Conley has agreed to repay HP $1.5 million in restitution so HP will drop the civil lawsuit that it filed against him. The US Attorney‘s Office said Conley‘s plea agreement outlines actions where the broker paid $73,000 in bogus consulting payments to a company owned by the wife of HP Canada employee Mark Glazer. Conley‘s company obtained HP servers, including HP 3000s, from an HP division in Ontario, Canada. Glazer, who‘s been fired by HP, was responsible for selling the used HP 3000 inventory to the highest bidder in what was supposed to be an open auction. “Conley also paid for Glazer and his family to take trips to Boston, Aruba, Hawaii and purchased gifts for Glazer,” the Attorney‘s office reported while detailing information from the plea agreement. “In return for these payments and gifts, Glazer rigged numerous auctions of valuable servers to favor Conley,” the US Attorneys reported, “by telling him the amounts of his competitors‘ bids, so he could win the auctions by submitting only slightly higher bids. “Glazer did not give this last look opportunity to any other broker on the equipment.” Conley is scheduled to be sentenced for his wire fraud crime on January 13, 2001.

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