iPod repairman accused of defrauding Apple of 9,000 shuffles

Prosecutors have filed fraud and money laundering charges against an independent iPod repairman who is accused of acquiring more than 9,000 replacement shuffle music players by entering serial numbers into Apple's Web site, reports the AP.

Nicholas Woodhams, 23, of the Kalamazoo area is accused of taking advantage of an Apple service that allows iPod shuffle owners to get a replacement if the unit had problems, according to the government.

"Through trial and error, the defendant determined that he could guess valid, warrantied serial numbers and enter them into Apple's Web site for 'replacement' units without ever in fact purchasing or possessing the 'original' units," Assistant U.S. Attorney Nils Kessler wrote.

Woodhams instructed his employees to enter numbers and have music players shipped to a box at a UPS store in Portage or addresses in the Kalamazoo area, Kessler said.

If Apple doesn't receive a defective iPod in return, the company normally charges the cost of a replacement to a credit card provided by the customer. But Woodhams used credit or debt cards that rejected the transaction, the prosecutor said.

Woodhams allegedly turned around and sold thousands of the iPod shuffles for $49 each, according to court documents filed Wednesday in federal court in Grand Rapids.

Interestingly, it looks like users on the iLounge forums had already smelled something fishy back in July 2006, when they posted the following complaints (cached):

(click to enlarge)

There are five pages of complaints, tracking the situation all the way to Apple launching a suit against Woodhams.

The government says it wants to seize real estate belonging to Woodhams, seven Apple computers, two vehicles, a motorcycle and more than $571,000.

Apple spokesman Steve Dowling had no comment on the case. The Cupertino, Calif., company was aware of Woodhams and filed a lawsuit in federal court in Grand Rapids in June 2008.

Besides alleging fraud in the Shuffle replacement program, Apple accused Woodhams of shipping out-of-warranty iPods for repair by replacing the back casing with serial numbers from music players still under warranty.

Levine said the lawsuit is on hold while the criminal case moves through court.