HP wins suit in gray market clampdown

Hewlett-Packard has recovered more than $1.8 million from a company that improperly acquired HP products using an educational discount.

The Palo Alto, Calif., computing giant said Thursday that it will recover the money as part of a civil lawsuit, filed in a court in Ohio, against a company known as S-Systems and its owner, Leroy Anthony Sallee.

According to HP, S-Systems acquired more than $5.7 million in equipment from Compaq Computer, paying only $3.1 million through the use of an education discount. The company said the machines were headed for Case Western Reserve University in Cleveland, but then attempted to resell the equipment, according to HP, which acquired Compaq in May 2002.

The move is the latest in HP's battle to fight the gray market, in which genuine products are sold in unauthorized ways.

"The recovery of funds represents another victory in the battle to fight gray market fraud. HP continues to closely monitor and pursue individuals and corporations that engage in fraudulent behavior to obtain equipment for resale in the gray market," Nikolaj Sjoqvist, HP director of brand protection and pricing, said in a statement.

HP said a call to Case Western revealed that it was not making the purchase claimed by S-Systems. A raid on a Massachusetts warehouse allowed HP to recover some of its gear as well as documents outlining S-Systems' plan, the company said.

Sallee recently pleaded guilty to federal mail fraud charges for his participation in the alleged scheme, HP said.