Illinois Couple Swindles Best Buy Out Of $31 Million
The Chicago Tribune says that Russell Cole calls his $2.75 million Deerfield, IL home "the house that Best Buy built," but now investigators are claiming that the Best Buy money was obtained through fraud.
The Trib says:
Missing from the Kenmore Avenue property are the Ferrari coupe, Lamborghini convertible and a collection of nine other luxury and high-performance vehicles worth about $2.8 million that federal agents seized in November and December.
An investigation by the Internal Revenue Service, FBI and U.S. Postal Service that triggered the seizure was spurred by a "multiyear, multimillion-dollar online bid-rigging scheme," according to the documents.
Abby Cole, Russell Cole's wife started a computer chip supply business in the basement of her home in Arlington Heights in 1988. The business took off, and through 2003-2007 the Coles reported about $15.5 million on their income taxes.
Now investigators say that $14.2 million of that income was from fraud.
The scheme worked like this, Chip Factory, the Cole's company, would submit winning low bids to Best Buy, but then later charged a much higher price. Objections from Best Buy were quieted with gifts to employees.
In one example outlined in the documents, Chip Factory won a bid for 20 computer parts at $42 per part, while the next lowest bid was $72. Chip Factory later charged Best Buy $571 per part, according to documents.
The Coles have not been charged with a crime, but their fleet of sports cars have been confiscated.
Deerfield couple swindled $31 million from Best Buy, federal court documents say [Chicago Tribune]
(Tribune photo by David Trotman-Wilkins / February 17, 2009)
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Comments:
Awwww. I know that stealing is bad, but some reason I like. ::claps::
Nothing says "classy" like a faux finish on a McMansion.
When I worked at Best Buy they would do the same thing every day to customers (especially on Sundays), just in lower dollar amounts, and as a result of working there I won't shop there when I don't have to. Therefore to read that it happened against them, I couldn't care less. Actually I could. I want to buy Russel Cole a beer. Or 12.
You'd think that after getting swindled the first couple of times, they would have just ignored bids from these people.
I suppose though that if they were all small orders, I could see how it could be overlooked or hidden and not made it's way properly though the chain or command.
I wonder what sort of "gifts" quiet up a $10k billing discrepency (based on the example given)?
"Chip Factory won a bid for 20 computer parts at $42 per part, while the next lowest bid was $72. Chip Factory later charged Best Buy $571 per part, according to documents."
Hey, that's almost like setting one low price on your external website, and then changing the price on your internal, in-store website.
Oh wait...
While at first, I was thinking 'Good, anyone who can stick it to BestBuy is good in my book.' but then further thinking just leads me to believe they just pass this right onto the consumers.
How is this any different than the cost plus contracts that the US government gives out all the time?
It seems to me that if they hadn't become so greedy they might have pulled this one off forever. But $571 for a part after a bid of $41?
Just because you can pull of the Kessel Run in 12 parsecs, doesn't mean you should it everytime.
The phrase, "A taste of your own medicine" comes to mind...
Is it fraud when the company accepts the second price? (not poking the bear, looking for a well reasoned explanation).
Where is the fraud?
I don't like the business practice, but isn't this BEST BUY'S fault for, to quote what others around here say about mortgages, BUYING CHIPS THEY COULDN'T AFFORD.
All Best Buy had to do was produce evidence of the earlier bid and take them to court. So... seems to me like Best Buy is the one who messed up here.
As long as there is no tax fraud, not sure what the crime is.
@nataku83:
Best Buy spends hundreds, the government spends tens of thousands.
Like the $50,000+ coffee maker that would survive a jet crash. Where they planning on re-using it?
The extra $529 was for the extended warranty. Duh.
This is the way business works and how profit is made. Best Buy is simply upset because they are not the ones that profited and instead and 'mom and pop' shop did.
@MarleneMops: Maybe, but I think the quaint 'Mom and Pop' image becomes a little strained when Mom and Pop have a number of exotic Italian cars parked in the garage of their North Shore mcmansion.
You know I'm not entirely certain this is fraud. It's employee misconduct on the part of the best buy employees who took the gifts, but best buy accepted the goods and paid the inflated price. There's nothing illegal about that.
With a good lawyer, they can probably get those cars back.
@SirNotAppearing: @MarleneMops: Actually, grossly deceptive bidding and hush money is not the way business works, unless your interpretation of "the way business works" is remarkably like those currently doing 7-10 in Club Fed.
@Blueskylaw: Actually, having worked at Sikorsky, the reason something like that might exist is so that it doesn't turn into shrapnel and kill everyone inside the aircraft in the event of a crash. Of course, I have no idea what specific example you're talking about, but I don't really have a problem with expensive equipment certified for flight. What I have a problem with is giving a contract to the lowest bidder without any actual expectation that they're going to come in anywhere near their estimate. You're basically rewarding the biggest liar. It looks like it worked really well with the Lockheed / MV Augusta presidential helicopter replacement...
They must have also sold Best Buy usb cables.
@SirNotAppearing: I thought the term "McMansion" referred to homes that were massed produced in an assembly line fashion (like McDonald's), and were typically in neighborhoods full of similar looking houses. How do you know this house was built that way? I see people calling large homes McMansions on here a lot and wonder if they really know the details of the house. It could just be a large home. This is a serious question by the way. Is my definition of McMansion incorrect?
Unless there is more to this story, I have a feeling they are not going to be seeing any jail time for their "fraud".
Why should politicians have all the fun in Illinois?
@MarleneMops: This is NOT the way business works and how profit is made. This is fraud! Maybe not the way a lawyer will explain it and get his clients off the hook, but it is fraud.
fraud
-noun
1. deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage.
2. a particular instance of such deceit or trickery: mail fraud; election frauds.
3. any deception, trickery, or humbug: That diet book is a fraud and a waste of time.
4. a person who makes deceitful pretenses; sham; poseur.
Maybe I'm missing something, but I'm having trouble understanding why this is fraud.
Fraud cannot be based on future promises. And here Cole made a bid based on a future promise. He changed the terms of the bid. Best Buy accepted the new terms of the bid. Everyone's happy.
I believe in Karma, you rip off customers and then it finally comes back to bite you in the ass 10 folds. If Best Buy did not employ scum that would give into bribery then this would not have happened. But to be honest I am glad it did happen....
@JGKojak: Are you serious? They bribed employees of the company, who owed a duty to that company, to not do anything to combat the overcharges for which they received a fraudulent benefit.
@MarleneMops: Are you serious? They bribed employees of the company, who owed a duty to that company, to not do anything to combat the overcharges for which they received a fraudulent benefit.
@nataku83: I have a much cheaper alternative then: don't have a coffee maker in an aircraft! Congratulations to me, I just saved the government 50K on a coffee make. Hey Obama, you said you want to halve the deficit; got an open cabinet position for me?
@R3PUBLIC0N: What do you think that Best Buy is? Do you think that the buildings are responsible for accepting the goods and authorizing payment of the inflated price?
Best Buy is made up of individuals. The individuals at Best Buy responsible for authorizing payment were bribed by the Coles to authorize marked up prices; this is the definition of fraud!
Consider, you bribe an employee to steal a tv and bring it to your home. Under your theory of fraud, you have done nothing wrong. Switch $ for the tv and you have the same situation.
hahahaha
if anyone deserves this its best buy!
@GMFish: Wrong. Best Buy employees fraudulently authorized payment under the new terms because of the bribes paid by the Coles.
Am I taking crazy pills this morning?
No posts yet questioning why $2.8 million worth of private property was seized months ago and still no charges placed.
It would make sense to seize the vehicles if they contained evidence of a crime, but that seems unlikely given the nature of the accusations. Also, for those who say the cars were seized because they were bought with the proceeds of a potential crime: what about the house itself? Or any other expensive item? Why were just the cars taken?
Look, I'm all for this being investigated and any crimes being charged, but without a charge where's the due process for the seizures?
@JGKojak: Bribing is actually bad, look at the fine Siemens had to pay for bribing everyone:
[business.timesonline.co.uk]
@R3PUBLIC0N:
By this logic, if I bribe your nurse to not give you your life-sustaining medicine, I am not guilty of murder?
It was scheme to defraud Best Buy. The perpetrators of this scheme was Chip Factory and the Best Buy employees that assisted.
@jtheletter: The portable, easy-to-hide valuable assets were seized. The house will be there to seize later, and if there really are prosecutable offenses, it's a bit of a gift to the fraudsters to leave them in their house while the charges are percolating.
@RevRagnarok: I second that. You'd need a video of a kitty doing taxes to top that one.
I want to know what happened to the employees who took the bribes.
@MurdockLuniz: I'd say that a large part of your definition is correct... the main thing is "neighborhoods full of similar-looking houses" and usually a "semi-custom" builder at best. Those builders often CALL themselves custom-home builders, but build from a set of predrawn plans more often than not and just do "options" like gaudy fixtures and fake-french-country kitchens... whatever their customers have seen in recent issues of "Architectural" Digest (which is an interior design magazine and should be sued for false advertising in its title.)
At least they reported the income on their taxes. LOL