2013-06-22 at 9:58:51 am #2069
HP files lawsuit against reseller, end-user in grey matter case
Hewlett-Packard Has filed a lawsuit against Murfeesboro-Tenn.-based Capital City Computer and Kentucky-based beverage wholesaler P&E Distributing in what it charges was an elaborate scam to sell cheaper equipment.
HP has filed the suit against Capital City and its president Martin Meeks, as well as P&E Distributing and its president, David Walker, charging that Capital got more than $8.6 million (U.S.) in pricing discounts on hardware that was supposed to go to P&E, but was later sold elsewhere.
"In a special pricing situation, it's specified who the end-user customer is going to be in order to get that price," said HP spokesperson Glenn Rossman. "We're giving them a special deal with the arrangement that it's what's needed to win a specific end-user, and in this case, we had a clear violation."
HP, in fact, severed its dealings with Capital City after it discovered the initial $2.9 million (U.S.) deal was fraudulent in 2001. It was not until after HP merged with Compaq that the company learned Capital City had gone on to allegedly repeat the same pattern with Compaq after HP had de- authorized it, this time to the tune of $5.7 million (U.S.). At that point, in May 2002, it severed all relations with Capital City, and began its investigation, according to Rossman.
Rossman stressed that HP was not in a hurry to go to court, but said that filing the lawsuit became necessary when it could not get further information from Capital City or P&E. "It took quite some time, because this was a full and complete investigation of two large transactions that ended up in a complex fraud scheme," he said.
Rossman said that some of the gear that had been earmarked for P&E ended up overseas. The company has had a special group for investigating grey market activities since 1999, and in that time, Rossman said the company has seen an increase in the number of resellers de-authorized as a result of abuses of special pricing deals. But he would not comment on whether the activity itself was on the increase, or if the company is simply investigating a higher percentage of the cases that are out there.
"There are more variations [on special-pricing fraud] than you can imagine," he said.
Still, most cases end out of court with de- authorization of the reseller and some sort of financial compensation for the money lost on the special pricing. "We're not looking to jump into the courts," Rossman said. "We try to resolve these things without taking it to that extent."
The only publicly listed phone number for Capital City Computer has been disconnected, and Rossman said he was unsure if the company is still in business. HP was not sure when the case, filed in a Tennessee federal court, would go to trial.
* Post was edited: 2004-09-07 10:58:00