Original URL: http://www.theregister.co.uk/2012/10/05/sysadmin_jail_kit_theft/

Pilfering sysadmin gets four years and $2.3m fine for kit theft

FBI nails Verizon engineer over Cisco scam

By Iain Thomson

Posted in Security, 5th October 2012 16:39 GMT

A former Verizon network engineer is beginning a four-year jail term after being sentenced for scamming Cisco and Verizon out of millions of dollars worth of kit and fencing it through the reseller community.

For nearly a decade, Michael Baxter, 62, used his position at Verizon to order processors, cards, and other networking equipment from Cisco, saying it was needed to repair Verizon's critical infrastrure. In fact, he was selling it and using the proceeds to fund a high-rolling lifestyle, including frequent foreign holidays and a round of plastic surgeries for his girlfriend.

"To accomplish his fraud, this defendant exploited a program designed to keep this critical infrastructure running uninterrupted: Cisco’s program for replacing expensive equipment on a moment's notice," said United States Attorney Sally Quillian Yates in a statement.

"He also abused his insider access to Verizon's procurement system," Yates said. "He funded a lavish lifestyle with his stolen funds and has now earned himself several years in a federal prison."

Seven years after joining Verizon, Baxter began exploiting purchasing access to an extended warranty contract Verizon had with Cisco. If a part failed, Cisco undertook to get a new one sent out before receiving the old one in return, to deal with network outages more quickly. Baxter sent out hundreds of false failure reports for equipment, some costing up to $40,000 apiece, and then sold them to resellers.

Not content with this system, Baxter also had Verizon purchase around half a million dollars worth of kit from Cisco directly, again apparently for critical network operation. This too went out via the reseller market.

Baxter ran this scam for almost a decade before being found out and fired from Verizon. According to the FBI, he spent his purloined loot to buy jewelry, cars, and "extravagant international travel, and other personal luxury goods and services, including multiple cosmetic surgeries for his girlfriend."

In addition to his sentence of four years in the big house (and three years of probation thereafter), Baxter was ordered to pay Cisco $2,333,241.18 in restitution and $462,828 to his former employer. Neither company is expected to see much of that since there's not much of a market for second-hand breast implants, so the ruling will most likely bankrupt Baxter.

The fact that a network engineer was able to get away with such a relatively simple scam for almost a decade raises serious questions about the internal accounting of the companies involved. El Reg suspects that Baxter is not the only person involved in the affair that's going to earn some hard time in the near future. ®