Prison Chaplain Sentenced to Prison - Vincent Inametti Sentenced to 48 Months for Sexual Abuse!

It’s not uncommon to hear of sexual abuse in prison. What is uncommon is to find that the abuse was at the hand of a Catholic priest - a prison chaplain no less!

Vincent Inametti, a Roman Catholic priest, who worked as a chaplain at Federal Medical Center (FMC) Carswell in Fort Worth, was sentenced to 48 months in prison. Inametti, 48, who pled guilty in November to two counts of sexual abuse of a ward, was also ordered to pay a $3000 fine.

Inametti is a naturalized U.S. citizen who was ordained in his native country, Nigeria. He was immediately remanded into custody to begin serving his sentence.

The Department of Justice, Office of Inspector General, (DOJ-OIG) received a complaint in March 2007 that Inametti was sexually involved with a particular inmate, “D.D.” Subsequent investigation by DOJ-OIG agents revealed that Inametti was also sexually involved with another inmate, “E.R.” Both inmates were serving federal prison sentences for drug distribution conspiracy convictions.

“D.D.” became acquainted with Inametti in August 2004 when she began attending Catholic services, joining the choir and participating in Bible study classes at FMC Carswell. “E.R.” became acquainted with Inametti a few months later, in November 2004, as a result of her assignment as a clerk for the Religious Services Department at FMC Carswell.

Inametti admitted that in February 2006, he directed “D.D.” to the chapel library, where he engaged in a sexual act with her. He further admitted that in June or July 2006, he summoned “E.R.” to a classroom in the chapel where he engaged in a sexual act with her.

According to an article in the Dallas Morning News,

His Fort Worth attorney, Michael Heiskell, said the sexual liaisons between Mr. Inametti and the two women were consensual, and he expressed hope for mercy from the court.

“Unfortunately, it was the wrong place and the wrong time,” Mr. Heiskell said. “We hope the court will judge him on the entire good work in his life as opposed to a lapse in judgment.”

But Tahira Khan Merritt, a Dallas attorney who represented one of the plaintiffs in the case, disputed the contention that the relationships were consensual. Mr. Inametti once threatened to kill her client if she told anyone about the abuse, she said, and the other plaintiff has filed a complaint with the federal prison system over the abuse.

“He was in a supervisory role over them,” Ms. Merritt said. “That implies they cannot consent to sexual acts when they’re wards of the state.”

Mr. Inametti, who was ordained in 1986 in his native Nigeria, served as a parish priest at Our Mother of Mercy Church in Fort Worth from 1991 to 1996, said Pat Svacina, a spokesman for the Diocese of Fort Worth.

After a sabbatical, Mr. Inametti returned to the diocese in 1999 and served in mission churches in the Ranger, Texas, area for about a year before he went to work for the prison system.

Every choice has a consequence. In this case Inametti is facing the consequences of his actions. The sad part is, like most crimes, his choices and the consequences that follow overshadow the good that he might have done as a priest up to that time.

Perhaps his time in prison will give him the chance to do some good in ways that he could not have done as an outsider - even as a chaplain.

Business Ethics Speaker - Chuck Gallagher - signing off…

White Collar Crime - So You Think You Invested Your Money? Mark Wayne Jaster Sentenced to Prison for Massive Fraud Scheme!

Some people have innate gifts. In the case of MARK WAYNE JASTER it must have been the power of persuasion, as this Texarkana, Texas man was successful at persuading investors to give him over $1.1 million dollars to invest.

PROBLEM: He invested none of it. Not one red cent! His skill to persuade was used in a misguided way and now he’s set to reap the rewards of his choices. Every choice has a consequence. In the case of MARK WAYNE JASTER, United States Attorney John L. Ratcliffe announced that 48-year-old Texarkana, Texas man, JASTER, has been sentenced to 78 months in federal prison for wire fraud.

MARK WAYNE JASTER was indicted on April 3, 2007 and charged with defrauding investors through a wire fraud scheme. He pleaded guilty to that charge on August 29, 2007 and was sentenced today to 78 months in federal prison by United States District Judge David Folsom. Jaster was also ordered to pay restitution in the amount of $1,134,623.30.

According to information presented in court, between 2002 and 2005, Jaster represented to investors that he was involved in the business of personal investment services. Jaster told those investors that he actively managed money through his InvestWise account at A.G. Edwards and Sons, Inc. in Texarkana, Texas. He claimed that through investing in various investments such as real estate, stocks, mutual funds, and pension funds, he achieved significant returns for his investors.

NOTE: There are many great investments out there, but, when someone tells you that they get great returns for their clients - “here, invest you money with me! Well, beware - there’s a fair chance it’s a scam. Use your common sense and check the investor out. It’s too easy these days to do that with the internet.

Jaster had some investors deposit money directly into his Mark Jaster DBA InvestWise account at Hibernia Bank. However, instead of using the money for investments, he would use it for his own personal expenses. Jaster had other investors open accounts at A.G. Edwards for the purpose of depositing funds for investments. After gaining signatory authority over these accounts, Jaster would then transfer the funds to his InvestWise account at A.G. Edwards to be used for his personal expenses.

During this time, Jaster would speak with the investors, advising them that their investments had grown significantly, and would send e-mails to the investors with false representations as to the status of their investments and legitimacy of the investments. None of the money Jaster received from investors was ever invested.

NOTE: If you’ve invested your money with an investment representative you should be able to get your account status on-line or at a minimum verify the investment status with someone other than the person who took your money to invest.

COMMENT: As a former white collar criminal (not something I am proud of) I did essentially the same thing as JESTER. I took clients money - used it for personal purposes (lifestyle) and ended up in exactly the same spot. Had either the clients done their “due diligence” by checking me and the investment I was representing out, or had they checked with someone other than me about the status of their investment, they would have found out the truth. In fact, the fraud was uncovered when ONE client sought information about his investment from someone other than me.

Every choice has a consequence. I am living proof that you do reap what you sow. And while JESTER is headed for prison, there is hope that he might learn from this experience. Today, as a speaker, I address college kids in business schools for free - it’s my way of warning them about the law of choices and consequences. This service was recently reported on in Business Week. See the article here.

For information on my presentations to colleges and universities or business associations, contact me at www.chuckgallagher.com.

West Virginia Dentist James E. Kirkpatrick, III Sentenced to Prison for Drug Fraud

Going to prison for drugs isn’t limited to “so called” drug dealers. An Ohio man was just sentenced to prison for his role in obtaining drugs illegally.

JAMES E. KIRKPATRICK III, DDS, 44, who resides in Belpre, Ohio, was sentenced to eight months in prison for fraudulently obtaining hydrocodone. KIRKPATRICK previously pled guilty in January 2008, to a one-count information. DR. KIRKPATRICK’S office is in Parkersburg, WV. He began practicing in West Virginia after losing his Ohio dental license.

Information related to his Ohio license is here.

The conviction is the result of an investigation conducted by the Drug Enforcement Administration and the Washington County, Ohio, Major Crimes Task Force. The investigation revealed that at least three patients received prescriptions for controlled substances from KIRKPATRICK and then gave some or all of the drugs back to KIRKPATRICK for his personal use. Pharmacy records indicate the patients received multiple prescriptions for controlled substances from KIRKPATRICK in 2006 and 2007.

At sentencing, DR. KIRKPATRICK apologized to one of the patients from whom he attempted to fraudulently obtain hydrocodone following his January 2008 plea of guilty in Federal Court.

Every choice has a consequence. Often, as a speaker, I share that statement with my audiences. But, what is also true is - behavior changes only when the consequences become so significant that you want behavior to change. While losing his Ohio license may not have been directly related to the drug charge that sent Kirkpatrick to prison, certainly prison will be another consequence that will change his life.

Perhaps upon his release, Kirkpatrick can use the experience in a positive way to benefit others.

For now, business ethics and white collar crime speaker - Chuck Gallagher - signing off…

And I Only Thought It Was George Washington Who Chopped Down the Cherry Trees!

You gotta be careful when you enter the national forests in this country…cause the rules are - only George Washington can chop down a cherry tree.

O.K. - being a bit serious…here’s one that I know won’t make national attention - hence it deserves a mention on this blog just for posterity.

United States Attorney Mary Beth Buchanan announced today, May 5, 2008, that Joseph Michael Harvey, a resident of Ridgway, Pennsylvania, pleaded guilty in federal court to a charge of theft of government property. 

WHAT DID HE TAKE YOU MIGHT ASK?

Harvey, age 40, pleaded guilty to one count and Assistant United States Attorney Marshall J. Piccinini advised the court that Harvey and another co‑defendant stole property belonging to the United States, by cutting down and removing approximately 11 black cherry trees from the Allegheny National Forest, having a value in excess of $1,000.00.

NOW WHAT THE HECK WOULD ANYONE WANT WITH 11 DEAD BLACK CHERRY TREES?

Judge McLaughlin scheduled sentencing for July 31, 2008 at 10:00 a.m.  The law provides for a total sentence of ten years in prison, a fine of $250,000, or both.  Under the Federal Sentencing Guidelines, the actual sentence imposed is based upon the seriousness of the offense and the criminal history, if any, of the defendant.

Wow…as a white collar crime speaker, I’ve got to mark this date on my calendar just to see what kind of sentence is issued for a tree chopper.

William J. Trier, II Faces Retirement in Prison for $5.2 Embezzlement - Comments by Chuck Gallagher White Collar Crime Speaker

The first step to a new life is to accept responsibility for your actions. Every choice has a consequence and after ten years of admitted fraud, William J. Trier, II has made a life changing choice - he plead guilty to an embezzlement scheme that lasted for ten years.

Now, as a white collar crime speaker, I must admit that it is generally unheard of for a white collar crime to last for that period of time. More times than not they fall apart before a decade passes.

William J. Trier, II, 57, of Williston, South Carolina, pled guilty today to embezzling approximately $5,200,000.00 from his former employer and to money laundering.

Trier worked at Crane Co., a vending machine manufacturing company in Barnwell County, as the director of logistics in the shipping department. From 1997 through October 2007, Trier embezzled funds from Crane by creating phony invoices from two fictitious freight transport companies and submitting them to Crane for
payment. He used his position to approve the payment of the fraudulent invoices, and received company payments mailed to a Post Office box he had opened as the mailing address for the phantom companies. Over a ten year period, Trier collected approximately $5,200,000.00 using the false invoice scam.

The maximum penalty Trier faces is twenty years imprisonment and a fine of $250,000. Trier must also make full restitution and has agreed to forfeit millions of dollars in assets towards restitution.

Wow…$5.2 million over ten years. This case is a classic example of lack of effective internal control. The ability to create an invoice and approve said invoice enabled Trier to effect this fraud. White collar crime consists of three parts: (1) need; (2) opportunity and (3) rationalization. While I can’t speak to Trier’s need, the opportunity was created thru simple lack of controls. Crane could have at any time thwarted the fraud with effective auditing and control mechanisms in place. As to “rationalization” - who knows, other than the longer a white collar criminal gets by with the crime, the greater the chance the white collar criminal thinks that the action is actually O.K. If I don’t get caught, I won’t get caught is the idea.

Every choice has a consequence. As a white collar crime and business ethics speaker, I speak from first hand experience about the truth about consequences. Reality is - no one escapes the consequences of their choices. While Trier may have enjoyed his good for a time and avoided the consequences - he did not avoid the consequences all together. Prison is no fun and Trier is facing many years plus substantial restitution for his conviction. Likely he will serve time and that will prove to be a dramatic change from his prior activities. You do reap what you sow.

If anyone reading has any background on Trier - feel free to comment as I study the behaviors and backgrounds of those convicted of white collar crime.

White Collar Crime Speaker - Chuck Gallagher - signing off…

Mortgage Fraud - Loan Kickback Scheme Earns Renato Gonzalez Quiazon 3 Years in Prison!

It might have been mortgage fraud that started the crime, but in the end it was the IRS that nailed Renato Gonzales Quiazon, who was sentenced to three years in prison, followed by three years of supervised release for wire fraud and filing false tax returns. This sentence is the result of an investigation by the Internal Revenue Service - Criminal Investigation.

As evidenced by the recent prison sentence for Wesley Snipes for failure to file a tax return - the message is clear. Pay your taxes and don’t mess with the IRS!

Quiazon, age 54, of Hayward, California, acknowledged that he knowingly devised a scheme to fraudulently obtain payments of loan kickbacks, commissions and cash outs/extraneous line items from borrowers’ escrow accounts from which he received more than $500,000. Beginning about January 2000 through October 2004, the defendant was employed as a loan officer with New Century Mortgage, located in Emeryville, CA. During this time, Mr. Quiazon entered into an agreement with an independent mortgage broker to use his name and broker’s license on loans that Mr. Quiazon processed as the loan officer. By using the mortgage broker’s identity on these particular loans, Mr. Quiazon defrauded New Century Mortgage by causing it to issue a 1% commission (1% of the total loan amount) to the mortgage broker who had not earned that commission. As part of the agreement with the mortgage broker, the mortgage broker was to retain 20% of the fraudulent commissions and pay Mr. Quiazon a kickback of 80% of the commissions.

Mr. Quiazon further admitted that from about 2002 through October 2004, he violated his agreement with the mortgage broker by retrieving some of the commission checks directly from title companies, forging the mortgage broker’s signature on the back of these checks, and depositing them into his bank account. He conducted these financial transactions without the mortgage broker’s knowledge or consent.

Not only did he conduct a crime against New Century Mortgage, but he expanded the crime by conducting a crime against his co-conspirator. Note: if someone suggests participation in a crime - run like a scalded dog. If they are willing to deceive others they will deceive you. In fact, more times than not, the reason a crime is uncovered is that a co-conspirator exposes the crime. But back to Quaizon…

During this same time period, Mr. Quiazon added cash outs, ranging from approximately $1,500 to $12,300, and extraneous line items on borrowers’ escrow accounts that were shown as payments to creditors or other third parties on behalf of the borrowers in amounts ranging from approximately $200 to $14,000. Title company checks were disbursed for these amounts from borrowers’ escrow accounts without the borrowers’ knowledge or consent. The defendant forged the borrowers’ signatures and deposited these checks into his bank account.

Mr Quiazon also filed false individual income tax returns for the tax years 2001, 2002, 2003 and 2004. He did not report income relating to the aforementioned scheme to the IRS. The total amount of unreported income was approximately $430,661 for the period under investigation.

STOP: I am not proud of my past, but what gives me license to discuss these crimes in detail is that I have been convicted of them myself. I, too, went to prison for failure to pay taxes on stolen money. As a former CPA and tax partner for a CPA firm, it never occurred to me to pay taxes on stolen money. The thought never crossed my mind. Well, obviously it didn’t cross Quiazon’s either…and that’s what got him in the end. Me too!  However, I have learned that every choice has a consequence and you do reap what you sow…

Your comments are welcome…

For now, white collar crime speaker, Chuck Gallagher, signing off…

FOREX Trading “Guru” - Joel Nathan Ward - Sentenced to Nine Year in Prison for $11 Million Fraud!

Described as a financial serial killer, JOEL NATHAN WARD, 49, of Turlock, California, was sentenced to nine years in prison for masterminding a Ponzi scheme in which nearly 100 investors lost over $11 million. WARD was also ordered to pay restitution in the amount of $11,275,501.53 and to serve three years of supervised release after the completion of his prison sentence. He was remanded into custody immediately following the sentencing hearing.

Ward took in more than $15 million from investors from 2003 to 2006 and most of the money was used to promote his business interests, salary, travel and other expenses, according to the statement.

This case is the product of an extensive joint investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation Division. The Commodity Futures Trading Commission, the federal agency that regulates commodity futures and options markets in the United States, has noted the sharp rise and increasing complexity of foreign currency exchange (“forex”) trading scams. WARD, a frequent
commentator and seminar speaker on forex trading, ran an elaborate forex trading scam through an investment fund he controlled called the Joel Nathan ForexFund.

Now as a white collar crime speaker I must admit, anyone can make wrong choices. It’s ashamed that Ward used his speaking skills to further perpertrate a fraud of this magnitude.

According to material presented at sentencing, WARD offered investors the opportunity to invest in the foreign exchange interbank “spot” market through his fund. Between early 2003 and November 2006, WARD took in over $15 million from investors. Of that, about 85% was diverted to other purposes, including promoting WARD’s business interests, salary, travel and other expenses, and purchasing a foreign exchange trading school in Sacramento called Learn:Forex. WARD also used about $3.7 million to make “Ponzi” payments back to investors who sought to withdraw funds. According to trading records, he only actually traded about $2 million, and lost virtually all of it in the foreign exchange market. WARD concealed his diversion of funds by sending false account statements to investors purporting to show trading profits. He also defrauded investors in a second scheme relating to a purported real estate investment project in Mississippi. Nearly 100 investors lost a total of over $11.3 million.

“Joel Nathan Ward earned every minute of the nine-year sentence the court imposed. He brazenly defrauded scores of victims out of over $11 million,” stated US Attorney Scott. Several victims spoke during the sentencing hearing, telling the judge about the financial devastation caused by WARD’s conduct, and their hopes for restitution. In sentencing WARD today, Judge Burrell stated that WARD “defrauded many people. He caused losses over $11 million, and many investors suffered devastating losses.”

The defendant had proposed that he be allowed to remain out of prison while he attempted to generate funds to repay investors. In rejecting that plan, Judge Burrell stated that the “magnitude of his crimes, the manner in which the economic crimes were committed and concealed, and the duration of the criminal activities” required a lengthy prison sentence.

Every choice has a consequence. Ward’s choices have resulted in a substantial prison sentence. And, having spent time in federal prison (not something I am proud of), the time Ward spends will be life changing. Not only will he become a number, lose his identity, and have little to no ability to earn money, he will emerge with limited opportunity to make restitution.

Today, I speak nationwide on (1) fraud in business, (2) how to avoid fraud in your company and (3) how business ethics can improve your financial performance.

One thing is for sure - You do reap what you sow! Ward has come to learn that as he is now sleeping on a prison bed.

If you know fell for Ward’s ponzi scheme and are willing to share the effect you loses have had on you…feel free to comment.

Larry Gordon May Sentenced in Massive Nursing Home Fraud! Gary Trebert and Steven Michael Ewing Sentenced in July ‘08

It was October 2007 and Larry Gordon May plead guilty to his role in a massive nursing home fraud. Today he received his sentence - 4 years in federal prison.

Larry Gordon May, a resident of Texas, became president and a controller of various nursing home entities and staffing/payroll companies without any previous experience or knowledge of licensed nursing home operations or responsibilities.

Ewing and his coconspirators, using the names of sham corporate entities, obtained control of 70 licensed nursing facilities with thousands of patient beds and thousands of employees. In order to acquire control of these facilities, Trebert, Ewing and May used false statements and false and fraudulent documents, including Applications for Nursing Facility License and Medicaid Contracts, Medicare Federal Provider Enrollment applications, ownership documents, IRS Employer Identification Number applications, Health Insurance Benefit Agreements, and Electronic Fund Transfer forms. Their falsifications included falsely identifying relatives as owners, operators, and managers of the nursing homes on the applications; failing to disclose staffing/payroll companies on nursing home applications; failing to disclose Ewing and May as the true owner/operators of nursing homes; and forging names of individuals on filed documents to divert responsibility away from the three defendants. They used the false statements and documents to hide from HHS, state licensing and Medicaid agencies, and the IRS, the true control and management of the nursing facilities, their responsibility for more than $200 million in money derived from the nursing homes, and their responsibility for the nursing facilities’ residents.

May testified at the Ewing trial that during some of the periods covered by the Indictment, he was making $10,000 to $25,000 per month for doing little more than signing documents, including tax returns, and taking tax returns to England to mail back to the IRS in the U.S. More than 150 sham staffing/payroll entities, many with foreign business addresses at drop boxes in England and Austria, were created to file Form 941 employer withholding tax returns with the IRS, preventing the IRS from assessing and attempting to collect more than $34 million of unpaid payroll tax liabilities from Trebert, Ewing and May, and creating the appearance that these sham staffing/payroll entities employed more than 4500 nursing facility employees, when they did not.

At the sentencing hearing May contended, was he merely a bag man — a pawn in a labyrinthine conspiracy conducted by more sophisticated men who wished to defraud the Internal Revenue Service and U.S. Department of Health and Human Services? But, U.S. District Judge Terry Means said, “You’re either gullible or willfully blind.”

While May received a sentence well below the 70 to 87 month range suggested by the sentencing guidelines, he was acknowledged the least of the players in this massive fraud.

Comments: Every choice has a consequence! You cannot avoid the consequences - you do reap what you sow. Larry Gordon May will report to federal prison on June 2nd for an experience that will be life changing. Some who have followed the series of blogs about May, Trebert and Ewing might infer that a sentence below the sentencing guidelines for May is an indication of what is to come for Ewing and Trebert. Wrong! I predict that both will get sentences substantially longer than May. In fact, Trebert’s has been negotiated to 8 years. Ewing elected a jury trial and was found guilty quickly and, I predict, that he’ll get the longer of the sentences for his lack of cooperation.

In February, Trebert pleaded guilty to two counts out of the 29-count indictment. He is scheduled to be sentenced July 14. In March, a jury found Ewing guilty on all 29 counts. He is scheduled to be sentenced July 21.

White collar crime speaker - Chuck Gallagher - signing off…

Wesley Snipes to Prison - Big Win for IRS! Comments by White Collar Crime Speaker Chuck Gallagher

This was a day that famed actor Wesley Snipes did not want to see. This day was life changing for him. Wesley Snipes will never truly be the same as time in prison will change your perspective. I know. I have been there. And while I write and speak about white collar crime and the consequences of the choices we make, I share no joy in what Snipes will be facing.

But, as I say often, Every choice has a consequence and Snipes made some mighty strong and profound choices that he will now pay the price for. Of course, there were those in attendance who supported Snipes much like there were those who attended my sentencing hearing who spoke kindly about me. The reality is - within the sentencing guidelines, regardless of family, small children, or others who feel that you are a “mighty oak” - you reap what you sow.

Snipes obviously came to his senses almost a year ago when he made an offer to plead guilty to one count of failure to file, pay all the taxes due in exchange for not going to prison. The government said NO! The Justice Department must have felt that the Snipes case was a high profile enough case to pursue. But then, they lost the prize they sought - a conviction for tax fraud - which would have guaranteed Snipes time behind bars (not literally, he’ll likely go to a minimum security facility with no bars). Licking their wounds, the government came back with a sentencing request of 36 months in federal prison. They got that! IRS = WIN.

According to published reports in the Orlando Sentinel:

Snipes was not taken into custody today. He most likely will serve his time at a federal prison near his home in New Jersey.

Snipes made a $5 million payment to the treasury on Thursday, but prosecutors called it a grandstanding move.

“it”ll be a fraction of what he owes,” said Assistant U.S. Attorney M. Scotland Morris, who made the argument for the government.

Morris said a rough estimate of Snipes’ outstanding tax liability, with penalties and interest, will exceed $20 million.

“The law is very clear: people must pay their taxes,” Internal Revenue Service Commissioner Douglas Shulman said in a statement released by the U.S. Attorney’s office just moments after the sentence was handed down.”There is no secret formula that eliminates a person’s tax obligations, nor are there any special exceptions. The majority of Americans pay their taxes timely and accurately. Those who willfully violate the law must be held accountable.”

The IRS must be overjoyed at the message that has been sent to the tax protester movement nationwide. Snipes prison sentence makes it clear that something as simple as failure to file can result in dire consequences. Now I must admit that the sentence for most working people would likely have been less had it not been for Snipes forthright stance on protesting the federal tax system.

Kahn, who refused to defend himself in court, was sentenced to 10 years, (what an idiot) while Rosile received 54 months. Both will serve three years of supervised release. Snipes will serve one year of supervised release.

I have said in past blogs and will say again, I don’t care whether you think it is legal or not. If you don’t comply with the tax laws, the consequences will be less than pleasant. Having spent time in federal prison and knowing people who were there for exactly the same reason as Snipes - each one emerge changed. One thing they do is file and pay their taxes. The cost to Snipes is far greater than he could have ever imagined when he started this foolishness.

Costs:

• Payment of taxes
• Payment of Interest
• Payment of Penalties
• Payment of Lawyers (to fight a losing battle) and
• Loss of freedom

The loss of freedom alone is enough. Again, I know, I’ve been there and there is nothing - I MEAN NOTHING - worth losing your freedom. When it’s all said and done, it would be interesting to ask Snipes is the short term monetary savings was worth the cost. I think I know the answer.

Your thoughts are welcome!

IRS Agents and White Collar Crime - What’s Up? Former Revenue Agent George Tannous Charged With Securities Fraud!

Let me help you states a former IRS agent. Problems with the IRS - I’m there for you!

George Tannous was the man, so thought hundreds of people from around the country. Apparently so did the government, as George Tannous, 51, of Tujunga, was charged in a two-count information that accuses him of conspiracy to commit securities fraud and subscribing to a false tax return. In a plea agreement Tannous agreed to plead guilty to the two felony counts

A former revenue agent with the Internal Revenue Service was charged in relation to a securities fraud scheme that took more than $10 million from hundreds of victims across the country. According to the news release from the US Attorney’s office:

Tannous and three co-conspirators solicited victims to purchase unregistered stock in Bidbay.com, Inc. (also known as Auctiondiner.com, Inc.) and several related shell companies. Tannous was the president of Bidbay. The information alleges that victims were lured by false statements that Bidbay.com and/or the shell companies would soon be acquired by Ebay, Inc. for $20 per share. Ebay never had any intention of acquiring Bidbay.com and, in fact, had filed a trademark infringement lawsuit against Bidbay.com over the use of “bay” in its name.

In an article in auction bytes Ina Steiner reported the following:

BidBay decided to settle with eBay after eBay filed a trademark infringement lawsuit against the smaller auction site last summer. The lawsuit had charged BidBay with copying eBay’s look and feel in the design of its logo and for using the letters “bay” in the BidBay name. Ironically, BidBay owner George Tannous had purchased the domain name “BidBay.com” from an eBay auction. Last month, BidBay redesigned its logo, but apparently that was not enough.

“We can’t fight eBay - it would cost us half a million dollars,” George Tannous, BidBay’s CEO, told AuctionBytes. Tannous said his company has already spent thousands of dollars in legal fees relating to the suit.

Tannous failed to disclose that Bidbay.com and the related shell companies paid sales commissions of more than 50 percent to telemarketers who solicited investors, according to court papers. In 2001, Tannous personally received nearly $3 million in investor funds that he failed to disclose to the IRS, which resulted in more than $800,000 in unpaid taxes.

Wow… George Tannous, former IRS agent who clearly knew better, decided to play with fire and not report income. Now he had to know that would get him in trouble. Big trouble.

According to the information, Tannous failed to disclose to investors that one of his co-conspirators was a convicted felon awaiting sentencing on unrelated fraud charges. That co-conspirator, De Elroy Beeler Jr., was indicted last December by a grand jury (see: http://www.usdoj.gov/usao/cac/pressroom/pr2007/157.html), and he is scheduled to go on trial on May 20.

Every choice has a consequence. Tannous choices will result in a prison sentence. Fortunately for him, he elected to work out a plea agreement which usually results in a shorter prison sentence. Having spent time in federal prison (not something I am proud of), many who cooperate with the government find that an early guilty plea and cooperation will substantially reduce their time behind bars. Today, I speak nationwide on (1) fraud in business, (2) how to avoid fraud in your company and (3) how business ethics can improve your financial performance.

One thing is for sure - You do reap what you sow! Tannous and others will come to learn that soon.

If you know George Tannous and have any comments feel free to jump in! Your comments are welcome!