Toronto VAR ordered to pay 3Com Canada US$6.5 million

A Toronto reseller and two of its principals have been ordered to pay US$6.5 million to 3Com Corp., for deceiving the company into giving discounts on millions of dollars of equipment.

In a ruling released late last week Justice Russell Juriansz said Domenic Sicilia and Sam Marotta of the

now defunct Zorin International Inc. made phony statements in 1999 to 3Com Canada to get cut prices from Tech Data Canada on 5,000 hubs, switches and modems that were supposed to go to the ministry of education in China and Australian schools.

However, the trial was told some of the gear supposedly destined for Hong Kong was tracked to England, while some ended up in the U.S. grey market.

“”I have no hesitation in finding that both Mr. Marotta and Mr. Sicilia knew that the representations (given to 3Com Canada) were false,”” the judge concluded, agreeing their actions could be described as “”high handed,”” “”disgraceful”” and “”wanton.””


Among the documents at the heart of the trial was a Dec. 15, 1999 e-mail sent from Zorin to 3Com Canada outlining plans for the equipment, including an attachment for “”immediate requirement”” for China. The e-mail was cited by 3Com as proof Zorin suggested a deal had been struck.

At the trial Sicilia and Marotta denied having anything to do with the attachment, and insisted the rest of the e-mail should be read as being a business plan, not a deal.

However, the judge concluded the first half of the e-mail “”clearly and unequivocally indicate that the 3Com products being ordered by Zorin from Tech Data were being purchased for particular end users”” in China and Australia.

Marotta’s credibility on that point “”was exceedingly weak,”” the judge said, “”and I do not believe his testimony when he states that the original document did not include the last page.””

The judge also accepted that Marotta gave 3Com Canada two commercial invoices purporting to prove delivery of some gear to China, documents at trial both he and Sicilia denied making. And the judge accepted that 3Com was given a shipping invoice purporting to show products had been shipped to Hong Kong for the Chinese ministry of education, another document the defendants denied creating.

Zorin was buying equipment to be used by a U.S. application service provider,, in countries outside the United States. That company had given it, and a company headed by Sicilia called Learningstation Canada, the rights to buy client and server hardware and software for international sales.

At trial, Sicilia and Marotta said the discounted equipment was sold to partners of who said they wanted the gear. But the judge noted that under cross-examination they had no expectations as to where these partners would resell the equipment.

The judge concluded there was no doubt that the representations of sales to China and Australia in the Dec. 15 e-mail was false, that e-mails from Marotta to 3Com Canada a week later were “”patently false”” and that the Learningstation Canada invoices given to Tech Data Canada were also false.

The damages ordered by the judge are equal to the rebates 3Com paid to Tech Data for the discounted equipment.

Zorin had filed a third-party complaint against Tech Data, but the judge found no liability on the distributor’s part.

3Com said the award may be the largest reseller fraud judgement ever issued in Canada.

Martin Mahoney, the company’s senior corporate counsel, said the vendor was “”thrilled”” by the judge’s ruling, which he said proved its internal practices were successful.

“”We felt very confident that the judge would find in our favour because the documented evidence was overwhelmingly against the defendants,”” he said. “”Our practices are to retain relevant information concerning various sales and in so doing we were able to look back at the various files that individual employees had collected.””

Sicilia said he would be conferring with his lawyers over the next few days to prepare an appeal to a higher court.

“”I feel that it’s really gross injustice that’s occurred here,”” he said. “”There were many, many areas that couldn’t be explained, and (I) felt that I would be fine in this decision. I was very shocked in the way the judge ruled.””

At press time, Marotta had not returned a phone call from requesting a comment on the ruling.

Mahoney said it was too speculative to suggest 3Com would refine the way it qualifies resellers under its channel program or introduce more checks and balances to avoid these kind of situations.

“”I’m not sure that anything could have prevented the extent of the fraud that was perpetrated by the defendants in this case,”” he said. “”These were completely fabricated invoices, as well as false representations in e-mails. I’m not sure that any amount of request for additional disclosure would have allowed them to come clean with respect to the fraud that they were committing.””

Sicilia maintains the e-mail attachments at the centre of the trial did not come from Zorin.

“”There were documents that we never created, that weren’t ours. No one knows whose they were,”” he said.

This is the second court case this year to pit 3Com Canada against one of its resellers. In April, an Ontario superior court ruled that Vaughn, Ont.-based Intelligent Decisions Inc. created phony government purchase orders to justify $4.4 million in special discount pricing for 3Com equipment in 1999.


Would you recommend this article?


Thanks for taking the time to let us know what you think of this article!
We'd love to hear your opinion about this or any other story you read in our publication.

Jim Love, Chief Content Officer, IT World Canada

Featured Download

Related Tech News

Get ITBusiness Delivered

Our experienced team of journalists brings you engaging content targeted to IT professionals and line-of-business executives delivered directly to your inbox.