Rhode Island businessman charged with running elaborate scheme to defraud Amazon

 

Date: June 17, 2020

Contact: newsroom@ci.irs.gov

PROVIDENCE – The former owner of an East Providence automobile transport company who is awaiting sentencing in federal court for fraudulently obtaining more than $400,000 from various financial institutions and using the stolen personal identifying information of another person to continue to illegally operate his auto hauling business after being ordered to shut down for safety violations, was arrested and charged today with allegedly executing an elaborate scheme to defraud Amazon.

It is alleged in court documents that Michael Chaves former owner of CAT Inc., executed a scheme to defraud Amazon through fraudulent transactions and theft of inventory through falsely represented returns. It is alleged that Chaves ordered thousands of products from Amazon and replaced the original products with lesser value replacements, often items different than the ones he originally ordered, before returning the packages to Amazon for refunds.

According to court documents, since March 2017, Chaves has held approximately 30 Amazon customer accounts under various names and email addresses. Over this time period, Chaves' accounts placed approximately 10,795 orders totaling approximately $713,970.78, most of which have been refunded based on Chaves' return of the items purchased. Chaves received a total of approximately $643,324.04 in concessions or refunds on approximately 7,450 orders, including nearly approximately 7,200 items that were physically returned to Amazon. Many of the returned items were sent back in the original packaging in an attempt to deceive Amazon's incoming inspection process. Amazon's standard inspection process flagged approximately 149 of the returned items as potentially fraudulent, valued at $23,872.89.

According to court documents, while investigating Chaves' fraudulent activities associated with his now defunct automobile transport company, Internal Revenue Service Criminal Investigation Division and U.S. Department of Transportation Office of Inspector General agents executed a court-authorized search of Chaves' home and business. At the business location, agents observed many opened and unopened Amazon packages and packaging materials. The room containing these items appeared to be a packing area for Amazon returns. The room contained a wide-ranging variety of items such as televisions, incense, European wall plugs (some for phone chargers), computer parts, small electronics, and a significant quantity of auto parts. At a later date, a United Parcel Service (UPS) driver told investigators that he would stop at Chaves' business location every day delivering Amazon packages and picking up returns, often times dropping off an Amazon package one day and picking up the same package the next day as a return back to Amazon.

According to court documents, currently Chaves has six active Amazon accounts. The majority of Chaves' purchases and returns consist of auto and commercial motor vehicle parts. Chaves also purchased and returned many other non-vehicle related items, including, but not limited to; electronics including cellular telephones and televisions, household items including chandeliers, closet organizers, lawn sheds, lawn mowers and vacuum cleaners. Most of these items were returned in an unsellable condition.

According to court documents, Chaves' schemes would, at times, include replacing an original product purchased with a substitute product which, at first glance, appeared similar to the original purchase. Other returns were placed in boxes to represent the approximate weight of the original product. Among the examples cited in court documents of purchases and fraudulent returns include Chaves having ordered a commercial truck tire and sending back two pieces of wood; Chaves having ordered Apple Air Pod Pros and returning an unopened package of mini light bulbs; Chaves ordering a vehicle suspension joint and returning an oil filter wrench; and Chaves ordering a stabilizer bar link kit and returned in its place doggie treats.

Chaves was arrested today by Internal Revenue Service - Criminal Investigation and U.S. Department of Transportation Office of Inspector General agents, with the assistance of East Providence Police, on a federal criminal complaint charging him with wire fraud and mail fraud, announced Special Agent in Charge of Internal Revenue Service Criminal Investigation Kristina O'Connell.

Chaves appeared today before U.S. District Court Magistrate Patricia A. Sullivan and was ordered detained in federal custody pending a possible preliminary hearing.

A federal criminal complaint is merely an accusation. A defendant is presumed innocent unless and until proven guilty.

Chaves is currently on pretrial supervision while awaiting sentencing, having pleaded guilty in August 2019 to falsification of US DOT records, aggravated identity theft, five-counts of bank fraud, two-counts of wire fraud, and tax evasion. The charges were brought in connection with the investigation into Chaves having falsified US DOT safety records at his trucking company, using the personal identification of another person to continue to run the transport company after it was ordered closed, fraudulently securing $400,000 in financing, and having taken numerous steps to evade paying personal income taxes to the IRS.

The cases are being prosecuted by Assistant U.S. Attorney Dulce Donovan.