Dell Computer Warranty Scamsters Get Prison Time; Harold Ruggles and Joseph Grooms Made $600K, Feds Say

Joseph Grooms and his friend, Harold Ruggles, were each sentenced to about three years in prison for scamming Dell Computers.
Dell has a great warranty program for its computer equipment -- just ask Harold Ruggles of Phoenix and his friend, Joseph Grooms of Glendale.

These two 20-somethings made a fortune in 2009 and 2010 by selling unwitting buyers replacement parts from Dell that weren't really replacements. The cash rolled in as hundreds of people took advantage of the ads they placed on eBay, often posing as a company called Precision Tech Experts.

Ruggles and Grooms made about $600,000 in the scheme, and used the money to buy ATVs, big-screen TVs and other goodies. But the law caught up to them, and tomorrow, they're off to prison.
U.S. District Judge Neil Wake sentenced them yesterday to about three years in prison each -- 37 months for Groom, 33 months for Ruggles. They're scheduled to report to federal prison authorities tomorrow.

They've also agreed to pay more than $1 million in restitution to Dell. However, the fine print of their plea deal says they only have to pay $500 a month for three years after they get out of prison.

According to court records, the scam worked like this: Ruggles and Groom placed ads on eBay and elsewhere for monitors, computers and other products. Customers would pay though PayPal. Then the pair would submit a claim on Dell's warranty program for the desired product, using the Service Tag numbers Dell assigns to its products. It's unclear how they got those numbers.

Groom and Ruggles often had Dell ship the product directly to the buyers, who had no idea they were helping carry out a fraud.

Normally, Dell expects to receive the defective product from customers who receive replacement items. The company wasn't getting any defective products mailed in from the scam, but shipped the replacement parts anyway. Dell was suspicious of only a few of the orders and canceled several of them.

As part of their day of reckoning, Ruggles and Groom (who lists his occupation on his Facebook site as a sales manager at Blue Ox Heating and Cooling) were forced to forfeit their dirty money and the many items they purchased with it.

Dell's warranty program, meanwhile, comes off looking fairly generous.

The case was investigated by the U.S. Secret Service and the Round Rock, Texas, Police Department, and prosecuted by federal officials from Arizona and Texas, according to the Arizona U.S. Attorney's Office.

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Ray Stern has worked as a newspaper reporter in Arizona for more than two decades. He's won numerous awards for his reporting, including the Arizona Press Club's Don Bolles Award for Investigative Journalism.
Contact: Ray Stern