There are two separate issues here, as I see it. One is EC's policy on so-called "grey market" units, and how to deal with owners who may have purchased them "innocently." While it is ideal to buy from a dealer, many people here, myself included, buy used gear because it is the best way to get the most bang for your buck. You can be as careful as possible in buying from the classifieds and still be snookered. Due to the general trustworthiness of audiophiles, most elect to take that risk. Too, it is the ONLY way to audition gear in your system without taking a major loss in resell. Almost all of us do it, so let's put aside after-the-fact moralizing and deal with the issue, which is how a company treats owners of its products and deals, at the same time, with the grey market. There are valid points on both sides, but refusing to work on these units as a matter of policy is probably short-sighted and bad for business, as many posters have already noted.
But this is a separate issue that EC needs to resolve apart from Ernie's situation.
In this situation, Alan appears to have made a mistake in agreeing to do the upgrade, then reneging once he discovered the unit was grey market. I would have assumed, as Ernie did, that once he was asked about the serial number on the phone and gave an answer, the matter was settled. It is unconscionable to question an owner, agree to perform a service, then back out later because YOU overlooked a central question.
EC should decide what it will charge to do the upgrade for grey market owners and in the process let any other EMC owners who may unwittingly have grey market units know how to make them "legit," then credit Ernie for his time and trouble, deducting that from the cost of the upgrade. In other words, Alan should take responsibility for his mistake and make this right with Ernie.
EC and any other company and/or dealer has a right to protect its market, and it is clearly reasonable to expect those who do benefit from buying used to pay more for service and/or upgrades. But is it really wise to PUNISH people who own your products in order to make a point? Isn't there some acceptable middle ground?
If so, EC had better find it, and fast. Hats off to F&S Audio for trying to find a solution. Nothing worse than being stuck in the middle.