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3/20/2009
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iPod Repairman Charged With Defrauding Apple

Apple's warranty repair program for iPods allows customers to receive replacement units before the original nonfunctional music players are returned.

A Michigan man was charged with felony mail fraud and money laundering on Wednesday for allegedly duping Apple into sending him approximately 9,000 iPod Shuffles, some of which he allegedly sold online for $49 apiece.

Nicholas Arthur Woodhams, of Kalamazoo County, Mich., ran an iPod repair business, alternately called "iPod Mechanic," "iMechanic," and "Pod Tradeup," according to court documents filed by Assistant U.S. Attorney Nils R. Kessler in the Western District of Michigan.

Apple filed a civil fraud lawsuit against Woodhams June, following an attempt to get Woodhams not to use its trademarks. That case was stayed in December in deference to the criminal case that the U.S. Attorney's Office in Michigan was building at the time.

Apple's warranty repair program for iPods allows customers to receive replacement units before the original nonfunctional music player is returned. It requires the serial number of the nonfunctional unit, a valid credit card, and a shipping address.

Once a claim is submitted, Apple charges a $1 pre-authorization fee to verify the submitted credit card and then ships out a replacement unit. The customer is required to return the nonfunctional iPod within 10 days. Those failing to do so are charged for the full value of the unit.

Woodhams allegedly figured out how Apple's iPod Shuffle serial numbers are formatted, with specific digits corresponding to the model, color, and other features. He allegedly used this information to guess valid serial numbers of units still under warranty.

Using a series of stored-value Visa gift cards to satisfy Apple's credit card requirement, he and several part-time employees allegedly submitted the guessed serial numbers to receive replacement iPod Shuffles for units that they had not purchased.

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