Russell Cole once called his extravagant Deerfield home “the house that Best Buy built,” according to federal court documents that outline how more than $31 million allegedly was swindled from the national retail giant.
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.
The Coles have not been charged with a crime, and through their lawyer they denied any wrongdoing.
The alleged fraud against Best Buy is outlined in search-warrant affidavits federal investigators filed in Chicago and Minneapolis and in the case against a Minnesota man who pleaded guilty last month to related federal charges.
The alleged scheme centered on the way a Deerfield company called Chip Factory—with Cole as president and his wife as owner—bid on supplying computer parts to Best Buy, federal authorities said.
Abby Cole began the company in 1988 in the basement of her Arlington Heights home, according to a 1996 Tribune article that called her “an unlikely high-tech success story.” She recalled the early hectic days of starting the business, which bought and sold computer chips.
“It was a one-man band,” she said. “I was everything.”
After its humble beginnings the Chip Factory took off and had a staff of 15, according to the Tribune article.
The Coles reported about $15.5 million on their income taxes from 2003 to 2007. Investigators say in the documents that about $14.2 million of that income was derived from fraud.
In Deerfield, the Coles’ lives of luxury did not go unnoticed.
“They didn’t come off as snobby,” said neighbor Micky Baer, who watched one evening as the fleet of cars was loaded onto flatbed trucks and hauled away. “They were nice, friendly people who had a lot of expensive things.”
The Coles bought their Kenmore Avenue property and an adjoining lot in 2006 for $850,000, tearing down a modest house and building the home for $1.9 million, according to court documents and property records.
The couple’s Chip Factory business folded when Best Buy, based in Richfield, Minn., discovered the alleged fraud and stopped doing business with the Coles, court documents say. After a yearlong internal investigation, Best Buy alerted federal investigators in July.
“We were pretty outraged when we discovered it,” said spokeswoman Susan Busch.
On thousands of occasions from July 2003 to August 2007, Chip Factory submitted winning low bids to supply Best Buy with computer parts, but later fraudulently charged the company a much higher price using an online bidding system, according to investigators.
Vendors sold the parts to Best Buy through an online system overseen by a third company, National Parts, according to court documents.
“When Best Buy solicited bids for computer parts, Chip Factory would submit fraudulently low bids with no intention of providing the parts at the bid price,” court documents say. “Indeed, contrary to its representation, Chip Factory often did not even have the parts available to ship.”
When National Parts issued a purchase order through the same online bidding system, Chip Factory changed the price to a much higher amount, according to documents.
Even though Best Buy and National Parts officials sometimes questioned price discrepancies, those concerns were smoothed over by a Best Buy employee who received money and gifts from the Coles, officials alleged.
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.
Former Best Buy employee Robert Paul Bossany of Prior Lake, Minn., managed the purchase of parts from outside vendors. He pleaded guilty Jan. 29 to charges of conspiracy to commit mail fraud and money laundering. He was fired Oct. 2, Best Buy said.
The U.S. attorney’s offices in Minneapolis and Chicago declined to comment.
Bossany is cooperating in exchange for a recommendation of leniency from prosecutors, his lawyer, Daniel Scott, said. Scott estimated that Bossany took $100,000 in cash and gifts from the Coles.
Chicago attorney Shelly B. Kulwin said the Coles “did not engage in a fraud against Best Buy. … We intend, at this point, to present evidence to the contrary if they’re ever charged on these allegations.”
He described the Coles as upstanding citizens who give to charity and have two children in elementary school.
“It’s very, very difficult,” Kulwin said. “Their home was raided with their children present.”
The Coles still live in the home, but the government has filed paperwork to place a lien on it.
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