In the first convictions of a new type of confidence man that U.S. Postal Inspectors call "toner bandits," five Baltimore men have pleaded guilty to mail fraud charges resulting from a nationwide investigation of fraudulent sales of office supplies.

Businesses from Massachusetts to California allegedly lost more than $3 million in a scheme operated by Mid-State Chemical Co. of Baltimore, postal officials said Friday.

Other firms in Chicago, Atlanta and California are still under investigation for what the National Office Products Association says is a rapidly growing crime against business.

The investigation centers on telephone and mail order sales of chemicals called "toner" that are used to produce images in office copying machines. The chemicals cost as much as $36 a pound.

"It's not only toner; it's pens, pencils, paper clips--you name it," said Bruce McLellan, director of government relations for the office products trade association. "It seems to have proliferated and grown in intensity in the last year or two. I wouldn't be surprised if every business in the country hadn't received a call from one of these outfits."

Using the same boiler-room techniques employed in fraudulent sales of commodities ranging from gold to crude oil, the so-called "toner bandits" use long-distance telephone calls to swindle their victims.

Indictments filed in Baltimore allege that Mid-State Chemical salesmen tricked businesses into placing orders, charged inflated prices for inferior products and delivered merchandise that wasn't ordered, then demanded payment.

Postal Inspector Thomas McLure said businesses big and small fell victim to the scheme because of poor internal controls over purchases. In many companies, he noted, "the person who pays the bills isn't the person who orders the toner. The companies do not have the internal checks and balances they should have."

The original indictment included 16 separate mail fraud counts and six wire fraud charges against six Mid-State owners and employes. After plea bargaining in which at least one of the defendants apparently cooperated with authorities, five employes pleaded guilty to one count each. They face up to five years in prison.

Three of the Baltimore men were scheduled to go on trial last Tuesday, but pleaded guilty to one count just as the case was convened. There were identified by postal authorities as Michael Wayne Smith, 32, president of Mid-State, Daniel Fader, 29, vice president, and Charles W. Swomley, 40, an employe.

Last fall, two other employes of the firm, Kenneth Leslie Smith and Robert Vernon, Hite entered guilty pleas. No action has been taken in the case of the sixth person named in the original indictment, Brian Ray Brown, a telephone salesman.

The indictments say Mid-State officials wrote fill-in-the-blanks scripts to be followed by the sales crews in pushing the products. After getting a search warrant for the firm's offices, postal inspectors seized "training tapes" used to prepare the salesmen and found dozens of phone books from across the country.

Mid-State's victims, identified in the indictments, included a Catholic high school in Chicago, a construction equipment firm in Portland, an electrical firm in Albuquerque, a hospital in San Francisco and the D.C. Theatrical Protective Union in Washington. Many of the targets of the scheme were small businesses, but Mid-State's salesmen made their pitch to branch offices of such industrial giants as General Dynamics Co., Braniff International Corp. and Parker-Hannifin Corp. ostal authorities arrranged to tap the phones of some of the victims, then tape recorded Mid-State employes when they called again making a second sales pitch they called a "repop."

To make contact with their victims, the callers followed a script in which they pretended to be from a copying machine company and claimed they needed the model number of a machine. With that information, they could determine which of several types of toner the office used and other details needed to snag unsuspecting employes.

McLellan said the office products association has received complaints about other tricks used by unscrupulous telephone office supply sellers to get their foot in the door.

One frequently told lie is that a small nearby office supply firm has just gone out of business because the owner died and the old inventory has to be liquidated. Another gimmick is to claim that because of a leaky water pipe or a fire in the building next door, cases of brand name ball point pens got wet and now can be purcahsed without their boxes at bargain prices.

Other companies use names like Federal Surplus Property Dispersal Agency to suggest that excess inventory from the government is available at bargain prices, he added.

"They're overpriced," McLellan said. "They collect the bill and then they don't deliver, or if they deliver they deliver inferior merchandise. They'll quote a price on Bic pens, then ship some off-brand."

The indictments filed in Baltimore say that Mid-State Chemical salesmen were taught how to make a call that was supposedly to confirm the initial order, but actually was used as an excuse to ship a second batch.

Once a customer fell for the pitch and paid for the shipment from Mid-State without objection, the salesmen would call back, following a script that claimed a mistake had been made and only part of the last order had been shipped. There was no mistake, federal prosecutors charged, the call was simply another ruse to ship more unsolicited merchandise.

The boiler-room sellers tape-recorded the calls, the indictment alleges. If customers objected that they had been shipped merchandise that wasn't ordered, the Mid-State callers played back the tapes as justification for the orders and demanded payment.

The toner supplied by Mid-State was a poor quality product that fouled up some machines, McLure added.

Investigators are now pursuing the case back up the ladder to the suppliers of the toner and are trying to determine whether there are connections between companies using the similar illegal techniques in different areas of the country.

McLellan said virtually identical sales pitches have been used all over the country, despite repeated warnings from the office products association. "We've even received calls here," he added. "On the Wednesday after Christmas, somebody called up and asked the model number of our copier."