iPod Repairman Charged With Defrauding Apple

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. As Apple explained in its 2008 complaint against Woodhams, when the broken iPods failed to show up at Apple, the company tried to charge the credit/debit card numbers that had been submitted, only to find the cards had insufficient funds.

Woodhams allegedly tried to sell the iPod Shuffles he had obtained through his Web site, using PayPal and Google Checkout. The government's complaint says that he shipped more than 5,000 packages to customers containing stolen Apple merchandise between March 2006 and October 2007.

iPod Mechanic doesn't have a very good reputation online. In 2006, The Consumerist posted a complaint from a customer who had sent his iPod in for repair and then couldn't get it back.

The site then posted a response from a person identified as iPod Mechanic owner Nick Woodhams. The post says that to rectify the situation, iPod Mechanic hired two new customer support specialists, offered partial refunds and "sometimes free accessories," and worked to improve its response time. A quote from the letter attributed to Woodhams asks The Consumerist to change the critical post it had made, to clarify that the issue had been resolved. The Consumerist declined to do so.

Apple says it lost $75,000, plus legal fees, as a result of Woodhams' alleged scheme. The company did not respond to a request for comment.

Woodhams stands to lose a lot more. The government wants Woodhams to forfeit two parcels of land he owns in Michigan, a 2004 Audi S4, a 2006 Ariel Atom 2 sports car, a 2007 Honda Motorcycle, more than $500,000 in currency seized from a Scottrade account, about $76,000 in other funds, seven Mac computers, and other miscellaneous computer equipment.

Assistant U.S. Attorney Kessler said that he couldn't comment on the case beyond what was contained in the legal filing. He did suggest, however, that a plea agreement may be reached soon.

Woodhams' attorney, Randall S. Levine, did not return a call seeking comment.