Milo's scam was basically "upselling" his franchise owners. The franchise model works by having separate owners for the individual stores with a corporation overseeing certain aspects of the business. For example, your local McDonalds is owned by a private party who is contractually obligated to purchase all food and other supplies directly from McDonalds, or from an approved list of suppliers.

In Milo's case, his list of suppliers were grossly overcharging, allegedly to maintain quality. When Gene Stafford investigated he discovered that the suppliers were all shell companies secretly owned by Milo. That's borderline illegal because it was not disclosed up front.

So Milo was ripping off his franchise owners by overcharging them. As Lewis (Louis?) Lacey said, not strictly illegal, but certainly unethical. If Gene exposed Milo, he could lose all of his investors and ruin his reputation.

I wanted to add to Quid's comments on the old phone systems: When a call was received it would automatically go to Line One. Milo was secretly using Line Two to call himself (as Gene), and that would light up the Line One button. But when his secretary answered, she would notice that Line Two was also lit and that would raise questions. So Milo disconnected the light for Line Two.

As usual, Columbo noticed it. When he saw that all calls to Milo were recorded, he realized how a phony call could be placed, making Gene appear to still be alive. That's why it was important that Jessica was never at Milo's house before and yet, after she answered the phone, Gene said "Hi Jessica". He shouldn't have expected her to be there.

My last rambling note (I love talking about Columbo): How crazy was physical fitness in the 70's? I remember those sweatboxes, fat shaking machines and other nonsense. But Milo, after a vigorous workout, had a breakfast of vitamin tablets and carrot juice.

Yeah i remember the exercise fads in the 70's. Another Columbo references 'Wheat Germ' which i remember as a kid. Is that still a thing?

thank you guys for all the comments and replies. I appreciate them and now it is more clear for me :)

As well as grossly over charging the franchise holders, Milo's companies were not actually making anything of greater quality. They were buying stuff at discount retail prices and then selling it on with a huge mark up.

Milo was then transferring the profits from these transactions into overseas accounts with presumably declaring it to the tax authorities.

The bit uncovered by Lewis was the relatively legal side of the operation. It was the money laundering aspect thst crossed a legal line.

" I have to maintain quality"

Love that!

You can tell from the way he says that to both Ruth and Gene that he's convinced HIMSELF. And maybe it's partly true - he could be a con artist AND committed to "quality."

One of the cleverest things about it is how he lectures Columbo about his eating habits and his cigar smoking. The person investigating the murder he committed is the last person he should be lecturing about his health! But being Milo Janus, he can't help it.