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Former IRS agent sentenced to prison in investment scam

March 20, 2012
  • Tax forms reviewed by the Internal Revenue Service
Tax forms reviewed by the Internal Revenue Service (Daniel Acker / Bloomberg…)

A former Internal Revenue Service agent was sentenced to nearly three years in federal prison after pleading guilty to charges related to an investment scheme that caused victims to lose more than $8 million.

George Tannous pleaded guilty in 2008 to charges of conspiracy and filing a false tax return for his role in a scheme that defrauded hundreds of investors in Bidbay.com, which was developing an online auction website. Tannous was Bidbay’s president.

U.S. District Judge Dean D. Pregerson sentenced Tannous on Monday to 33 months in prison and ordered him to repay $8.8 million to 218 investors.

Victims were lured into purchasing unregistered shares of Bidbay from 1999 to 2003 by false promises that the company would be acquired by EBay Inc., a move that would inflate the value of Bidbay's private shares. EBay had no such plans, prosecutors said.

Tannous , 55, had previously worked as a revenue agent with the IRS. He left the agency in 1993 and opened a tax-consulting business before launching Bidbay.

According to prosecutors, Tannous failed to disclose to investors in Bidbay that up to 50% of their investments were paid as commissions to telemarketers who solicited investments. Tannous personally received nearly $3 million of investor money, which he failed to report as income in his tax filings, prosecutors said.

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