Minnesota: Gambling Addiction + $388,000

Network manager admits defrauding company to feed gambling habit
Network manager guilty of mail fraud


After he had burned through his family's assets to feed his gambling addiction, Phillip Adrian Webb found, quite by accident, a way to get his employer to pay for it.

As the head of a credit union's computer network system, Webb knew that when he needed a replacement part from Cisco Systems Inc., they'd send him one and ask him to return the defective part. But he discovered the company seldom checked to see if the faulty part he sent back was actually what he told them it was.

So in the spring of 2007, he hatched the scheme: Tell Cisco he needed a new piece of computer hardware, then when it arrived, he'd sell it online and pocket the proceeds. He then sent some cheap second-hand part back to the company, telling them it was his original broken part.

Over a two-year period, the scheme cost Cisco more than $388,000. On Monday, Webb learned it might cost him nearly three years in prison.

Webb, 46, of Brooklyn Park pleaded guilty to a single count of mail fraud in federal court in Minneapolis. U.S. District Judge John Tunheim listened as Webb acknowledged the elements of the crime and that he knew what rights he was giving up by entering a guilty plea.

Tunheim ordered a presentence investigation into Webb's background but he didn't set a date for sentencing.

"He gambled everything away, including every asset the family owned," defense attorney Michael Colich said of his client after the hearing. "Every penny went to gambling."

Webb was charged last month, and as he appeared before Tunheim, he waived his right to be indicted and also entered a plea of guilty, the product of a plea agreement with prosecutors. Under the deal, both sides agree that federal sentencing guidelines call for a prison term of 27 to 33 months, although Tunheim is not bound by the agreement or the guidelines.
The defendant was dressed casually as he stood before the judge. Answering questions from Colich and Assistant U.S. Attorney William Otteson, Webb admitted to the workings of the scheme.

Webb, who was born in San Francisco and moved to Minnesota in 1987, finished 11th grade in high school and earned a GED. But he showed a talent for computers and eventually became manager of network services for Postal Credit Union in North St. Paul.

As part of his job, Webb dealt with Cisco, the California-based company that makes computer hardware and software. Under the contract the credit union had with Cisco, if a computer part became defective, Cisco would send a new one via Federal Express and then have Webb return the old part.

Otteson told the judge that sometime before June 2007, Webb accidentally discovered a "glitch" in the computer company's inventory system for returned parts: Cisco didn't know what part Webb had sent back.

He tried it "a few more times" to make sure the glitch was indeed a glitch, Otteson said, and then decided he could use the error to his advantage.

Between June 2007 and October 2009, Webb asked Cisco to replace 55 pieces of hardware, but investigators later found that 42 of the claims were bogus. Thirteen of the parts were genuinely defective.

The charge to which Webb pleaded guilty says that on June 29, 2009, he asked Cisco to replace a faulty Ethernet port switch. Cisco sent the switch, valued at about $7,500. Twelve days later, Webb returned what he claimed was the original defective part, but it was actually a cheap second-hand switch.

Otteson did not say how much Webb profited from the scheme, but he did say the loss to Cisco was about $388,000.