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Home center scammers sentenced

BY HBSDEALER Staff

A reported member of the Gambino crime family who helped engineer multiple fraud schemes against Lowe’s, Home Depot and other retail chains was sentenced to 132 months in prison on federal racketeering conspiracy charges, according to The U.S. Attorney for the District of New Jersey.

Andrew Merola, also known as “Andrew Knapik,” 43, had previously pled guilty to a number of charges relating to his role in a criminal enterprise that included illegal gambling, extortion of lunch truck vendors, no-show construction jobs and embezzlement of union funds. The crimes, which took place in New York and New Jersey between February 2002 and March 2008, also involved a bar code scheme to defraud stores such as Lowe’s, Home Depot, Circuit City, Best Buy and Walmart, and identity theft involving stolen credit card information, primarily at Lowe’s.

In the bar code scheme, Merola and his co-conspirators went to stores to find and record the bar code numbers of items with significantly lower prices than similar items in the same store. Using their own equipment, they then created a bar code label with the bar code number of the lower-priced item. Merola and his co-conspirators would later return to the stores, place the fake bar code label over the original label on the more expensive merchandise, and then purchase the item at the reduced price.

On various occasions, Merola and his co-conspirators would remove the phony bar code and return the merchandise for a refund or in-store credit based on the item’s true price.

In the original 85-page indictment, unsealed on May 8, 2008, federal prosecutors claimed that one of Merola’s co-conspirators, 31-year-old India Fugate, went to work for Lowe’s as a cashier in Paterson, N.J. In that role, Fugate began stealing customers’ personal information when she processed credit card applications, investigators said. That information was passed on to Merola, who then used it as part of fraudulent credit card schemes. Fugate also assisted Merola’s crew in their bar code-switching scheme.

Fugate was sentenced on Oct. 18, 2010, to six months in prison and six months of home confinement for her involvement in the bar code and credit card schemes.

Vincent Fichera, 50, was sentenced on Oct. 22, 2010, to a year and a day in prison and a $15,000 fine for his involvement in the bar code scheme.

To date, 14 other defendants who were charged in the original indictment have received various prison sentences. In addition to his 132-month sentence, Merola must complete three years of supervised release, forfeit $100,000 and pay $161,481 in restitution.

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Lowe’s raises offer to drywall victims

BY HBSDEALER Staff

Lowe’s has substantially raised its offer to customers who claim they bought defective drywall at its stores in Georgia after coming under criticism for its previous offer, according to a report by the Sarasota Herald-Tribune and Pro Publica.

In Lowe’s latest offer, filed on Oct. 28, affected homeowners are now eligible for up to $100,000 in cash, instead of gifts cards in the amounts of $50, $250 or $2,000, with a maximum payout of $4,500 in combined cash and gift cards. The previous settlement had been offered as part of a class action lawsuit that is being negotiated in a Georgia state court.

The earlier settlement set aside $6.5 million for victims and $2.1 million for the attorneys who negotiated the agreement. This resulted in an outcry from public interest attorneys and consumer advocates, who also criticized the payout as being too low. The cost of removing and replacing tainted drywall and corroded electrical wiring can cost $100,000, according to the U.S. Consumer Product Safety Commission.

The newly amended settlement was negotiated by a separate team of attorneys on behalf of a Florida corrections officer. Lowe’s has set aside an additional $2.25 million for the homeowners in this case. The original attorneys will still get $2.1 million in fees. The new attorneys will receive a separate fee based on how many $100,000 claims Lowe’s eventually pays.

The North Carolina retailer has stated that it does not believe the drywall it sold was defective because Lowe’s vendors assured the company that they never sold it any Chinese drywall. Lowe’s entered into the original agreement “as part of our commitment to serving our customers,” according to a company statement.

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Sentence for former Depot buyer

BY HBSDEALER Staff

A former Home Depot product category merchant was sentenced to more than two years in prison for participating in what has been described as a $1.5 million fraud scheme in the retailer’s flooring department.

According to an article in the Atlanta Journal Constitution, Ronald Douglass Matheny II, 43, of Chattanooga, Tenn., was sentenced to two years and three months after he pleaded guilty to conspiracy to commit mail fraud and wire fraud, and additional charges.

The trials of those involved in the kickback scheme that occurred from 2002 to 2007 have been slowly working their way through the court system.

In April, two of the three figures involved were sentenced. James Robinson, a former divisional merchandise manager for hard flooring at Home Depot received a sentence of 63 months in prison. Ronald Johnston, the company’s global product merchant for rugs, was sentenced to 46 months in prison. Both men were also ordered to pay $1.8 million.

In June, former buyer Anthony Tesvich was sentenced to six and a half years.

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