Ex-Systemax execs Carl & Gilbert Fiorentino jailed over $27m fraud

Brothers get five and six years of stripey suntan time

Shamed former Systemax execs Gilbert and Carl Fiorentino were last night sentenced to five and six years in the slammer respectively for masterminding a $27m fraud when employed at the company.

The Feds charged them in November with taking kickbacks from components suppliers in exchange for steering business to them, and with tax evasion. The two pleaded guilty the following month.

“They weren’t really in the business of helping Systemax,” said US District Judge Jose E Martinez, “they were in the business of helping the Fiorentino brothers.”

The judge handed Carl, a former veep of Systemax subsidiary Tiger Direct, more than six years in prison, even though his crimes (mail and wire fraud, money laundering and tax evasion) carried a maximum of 25 years.

Gilbert, previously CEO of Systemax’s Technology Products Group, was handed a five year prison term despite his defence attorney’s recent filing stating he is a changed man who does charity work and who has found religion.

The desperate duo joined Systemax in 1995 when it acquired PC maker Tiger Direct, which they founded, and subsequently rose through the ranks to senior positions.

They steered up to $230m worth of orders to PC component suppliers between 2003 and 2011 in return for kickbacks, until whistleblower allegations emerged. Records show the scam cost Systemax at least $27m in higher supply costs as they were over-charged for goods.

Carl Fiorentino bagged $9.5m alone from Taiwanese component biz RICI International which received orders worth $157m – the biggest example in the case – for PC parts, cables and other equipment. RICI exec Eddy Kuo has been charged in the case but has remained a fugitive in Taiwan.

A restitution hearing set for April will look to decide how much the Fiorentino brothers owe Systemax.

Assistant US Attorney Jerrob Duffy, said the brothers often took delivery of bags of cash in car parks, including one containing gold coins worth $240,000.

The proceeds were used to fund the brothers’ lavish lifestyle in Miami including expensive houses, sports cars, yacht and luxurious furniture. Gilbert amassed 300 million American Express membership reward points as a result of doing company business on his personal card.

“Essentially, they were treating Tiger Direct as their own personal candy store,” said Systemax chief counsel Eric Lerner. Systemax did not make further comments.

In a brief statement issued at court, Gilbert said: “I think that pride turned into arrogance and greed. I know I broke the rules and I broke the law”.

Carl said he can “only blame myself. A bigger house and everything else did not make me a happy person”. ®

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