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

April 24, 2008

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!


Neiman Marcus Security Officer – Manuel Alvarez – Sentenced to Federal Prison for Theft!

April 4, 2008

A trusted member of their team – that’s how Manuel Alvarez was described by Neiman Marcus Vice President Gary Manson. However, Alvarez broke that trust as the pled guilty to an Information charging transportation of stolen goods in interstate commerce and aiding and abetting, admitting that the stole jewelry from the store and sold it on Ebay.

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Manson said that that theft of property by Alvarez, a loss prevention specialist for many years, had meant more than a financial loss to the company and its employees. Breaking trust is painful. And, Alvarez now knows that every choice has a consequence.

Alvarez worked at Neiman Marcus as a store loss prevention specialist and in 2004, he met an accomplice and they agreed to sell jewelry on Ebay and split the proceeds. Alvarez would obtain jewelry from a Neiman Marcus store and then his accomplice would post the items for auction/sale on her Ebay auction site, representing that the jewelry was legitimate merchandise that belonged to her. They agreed to equally divide the profits from the sales.

Alvarez admitted that he stole designer jewelry items and other merchandise from Neiman Marcus by taking the items from open stock drawers or by using his key as a loss prevention specialist to access items kept in locked storage in the store. He hid the jewelry on his person to remove it from the store and delivered the jewelry to his accomplices to sell on Ebay. He also provided an accomplice with gifts of jewelry which he had also stolen from Neiman Marcus, some of which she sold on Ebay and kept the proceeds for herself. In June 2005, Alvarez approached a friend who lived in the Houston area, and provided her items he had stolen from Neiman Marcus for her to sell on Ebay. This accomplice also photographed the items and placed them for auction on Ebay using her Ebay account. Both accomplices mailed the items to the purchasers using the U.S. Mail and equally divided the net proceeds with Alvarez.

The Court found that the intended loss to Neiman Marcus from Alvarez‘s scheme exceeded $400,000.

Alvarez is 37 years old of Mesquite, Texas must also make restitution of more than $323,000. Alvarez, who admitted stealing at least 400 items, must report to prison May 1.

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 Alvarez and his accomplice may have looked good for a time and avoided the consequences – they did not avoid the consequences all together. Prison is no fun and Alvarez is facing over two 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 Alvarezfeel 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…