Sales agents for Lawson Products, Des Plaines, IL, have been indicted on federal fraud charges. The sales agents allegedly paid kickbacks totaling $140,000 to employees of some of their customers, including suburban municipalities, school districts, a non-profit organization and private businesses.
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They disguised the kickbacks as purchasing incentives, according to the US Attorney’s office in Chicago. In return, the sales agents allegedly obtained higher sales commissions based on greater volume and prices.
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Eleven of the defendants were charged in six separate cases in Chicago, while two additional cases were filed in Dayton, OH, and Philadelphia, PA. All of the cases involve commissioned sales agents for either Des Plaines-based Lawson Products, Inc., or one of its subsidiaries, Drummond American Corp.
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Lawson, which is publicly traded, and its subsidiaries have about $400 million in annual sales of products as hardware, tools and chemicals.
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The charges follow the execution of federal search warrants in December 2005 at Lawson facilities.
According to the indictments, the Lawson businesses -since as early as the 1990s -ran a program called Winners Choice,” in which Keogh Inc., would issue checks to individuals purchasing Lawson merchandise on behalf of their employers. The sales agents would order “Certificates of Award” for individuals designated by the sales agents.
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The certificates, often awarded in multiple $25 increments, entitled recipients to receive checks for a certain amount that could be used to purchase items at various retail stores.
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Keogh, Inc., would then issue the checks, oftentimes in $50 increments. One defendant charged allegedly received $80,000 worth of checks through this program. The kickbacks were allegedly a way for the sales agents to increase their commissions and the prices paid by their customers.
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The programs ended following the execution of the search warrants, authorities said.
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All of the defendants will be arraigned at later dates in U.S. District Court.
