I don't know if this is the same person, but a couple years ago there was someone in Arlington that was constantly being accused of selling stolen bikes. If I remember right, it was a woman's name though. Not sure if there is any relation to the seller you're talking about (Arlington is a pretty big city, after all).

As far as where they get them from, I've heard all kinds of stories as far as having connections with city dumps, metal recycling places, thrift stores, etc. I think those relationships are a matter of being in the right place at the right time. Then there are the time intensive methods of cruising garage sales and looking through neighborhoods on trash night. I've gotten three or four bikes for free that way- one from the city dump, a couple from the curb, one from a dumpster.

There is an industrial lot I've seen that has dozens of bikes stacked up; they just sit there. I have no idea where they came from, but the stack grows once in a while. The guy never seems to move them. I got his phone number at one point but never bothered to call.

I guess my point is that if you want to get into the flipping business, there are probably "wholesale distributors" of old, junked bikes out there if you keep your eyes open.