A former Internal Revenue Service revenue agent has been sentenced to nearly three years in prison for his involvement with a scam that bilked investors out of more than $8 million by persuading them to buy unregistered securities in various Internet companies.

George Tannous, 55, of Lake View Terrace, Calif., was sentenced Monday to 33 months in prison for the scheme, which bilked investors across the country. In addition to the prison term, U.S. District Court Judge Dean D. Pregerson ordered Tannous to pay total restitution of $8,797,201 to 218 victims.

Tannous pleaded guilty in May of 2008, to a two-count Information charging him with conspiracy and subscription to a false tax return.  The charges related to Tannous’ participation in a scheme to defraud investors nationwide through material misrepresentations and the concealment of material facts in the sale of investments in Bidbay.com Inc., AskGT.com Inc., and related companies from 1999 through 2003.

Documents filed with the court outlined a scheme in which Tannous and three of his co-conspirators solicited victims to purchase unregistered stock in Bidbay.com and several related companies.  Tannous was the president of Bidbay.  Bidbay was in the business of developing and marketing an Internet auction site.  According to the plea agreement, victims were lured by false statements that Bidbay.com would soon be acquired by eBay.

However, Tannous failed to disclose that Bidbay.com and the related companies paid sales commissions of up to 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. 

Tannous also failed to disclose to investors that one of his co-conspirators was a convicted felon awaiting sentencing on unrelated fraud charges, according to court documents.  That co-conspirator, De Elroy Beeler, Jr., was sentenced to 36 months in custody in 2002.  Upon his release from custody in 2005, Beeler returned to telemarketing and is awaiting sentencing in the related case.

The investigation and prosecution of Tannous was conducted by IRS-Criminal Investigation and the Federal Bureau of Investigation, in conjunction with the U.S. Attorney’s Office for the Central District of California.

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