Compaq sues over alleged fraud

Compaq is suing Harry Martin and Shafiq Ahmad, principals of the Virginia-based Millennium Technology Group, and South Carolina-based Creative Resources Group and its president, Stephen Pridemore. Compaq is seeking to recover what it alleges were millions of dollars in unearned rebates and marketing support funds for government contracts that Compaq alleges never existed.

The alleged fraud was related to $70 million in orders from August 1998 to October 1999, Compaq spokeswoman Elizabeth Gillan said.

Compaq's suit claims the defendants told the computer maker that they had large U.S. government contracts that required significant rebates and discounts from Compaq. Compaq claims that no such contracts existed and that the defendants collected payments from Compaq and diverted Compaq products to computer brokers instead of to final customers--something that authorized Compaq resellers are not allowed to do.

Pridemore and Creative Resources Group could not immediately be reached for comment. A phone number listed for Millennium Technology Group was disconnected.

In the suit filed in U.S. District Court in Alexandria, Va., Compaq accuses the individuals and Creative Resources Group of conspiracy, fraud, breach of contract and other charges. The company is seeking compensatory damages of more than $20 million, as well as interest, costs and attorneys' fees.

"We will show that the defendants created a scheme to defraud Compaq of millions of dollars based on nonexistent United States government contracts," Compaq attorney Thomas Siekman said in a statement.

This is the second time Compaq has filed suit related to allegedly bogus government contracts, Gillan said. The other case was filed last year and settled out of court, she said.

Gillan added that the company is stepping up its efforts to combat fraud and has set up a worldwide unit to train its sales force to spot warning signs.