â€œMagid Glove & Safety Manufacturing Co., a Chicago manufacturer of industrial work gloves, protective clothing and other safety equipment, pleaded guilty this week to a federal criminal fraud charge for overcharging millions of dollars for inferior products, according to an article in the Chicago Tribune.
The company also settled a civil lawsuit over the same alleged misconduct by paying $1 million to Illinois and federal governments and to a former salesman who blew the whistle.
In pleading guilty, the company admitted that its bonus system became an incentive for numerous employees to bilk government and private customers. Employees substituted work gloves that were lower in cost and quality than the products that had been ordered but charged the higher prices, according to the article.
The suit alleged that Magid carefully selected inferior products that customers wouldn't easily identify as lower quality. If customers discovered the substitutions, customer service reps were instructed to blame unintentional shipping errors, the suit said.
Magid acknowledged that some senior managers facilitated the fraud by counseling salespeople on which inferior gloves to substitute. No senior management was charged with criminal wrongdoing.
In settling the lawsuit, Magid did not admit any wrongdoing or liability.â€