In one of the biggest corporate fraud cases in Minnesota history, an Illinois couple was found guilty Thursday of defrauding Best Buy out of $41.6 million and failing to pay taxes on their ill-gotten gains.

Russell and Abby Cole, who owned and operated a company that sold computer repair parts to Best Buy, systematically overbilled the Richfield-based retail giant for four years through an online auction program. Their company, Chip Factory, worked closely with Best Buy insider Robert Bossany to conceal the fraud, the jury found.

Bossany received weekly and biweekly checks from Chip Factory between May 2003 and August 2007 as well as a Harley Davidson motorcycle and Yamaha ATV. He pleaded guilty in 2009 of one count of mail fraud conspiracy and one count of money laundering.

Although both Coles were accused of sending Bossany checks and trying to cover up for it, only Russell Cole, 50, was found guilty of it.

Abby Cole, 53, started Chip Factory out of her home in 1988 when she was a single mother, and remained its CEO. She was portrayed as less involved in the day to day operations because she was busy raising the couple's two young children.

But the jury believed that both Coles created "fluff sheets" and "padding" in a concerted effort to avoid paying taxes on the money they made overbilling Best Buy, which was Chip Factory's sole source of income.

The IRS estimated the Coles owed $3.3 million in federal income taxes from 2004 and 2007, including $1.8 million for parts Russell Cole sold on eBay.

The case was a victory for U.S. Attorney B. Todd Jones, who co-chairs a nationwide, interagency task force created last year by President Obama to investigate and prosecute financial crimes. Assistant U.S. Attorneys Nicole Engisch and William Otteson prosecuted the case.

"We will vigorously pursue individuals who target our corporate citizens for illicit personal gain," Jones said in a statement. "Contrary to the mistaken belief of some, greed is not a business virtue we value in Minnesota."

Federal agents from the IRS, FBI and U.S. Postal Service spent two years investigating the case after Best Buy brought it to them.

A Best Buy operations manager discovered the billing discrepancies with Chip Factory in July 20, 2007, and they soon learned the trail led back to Bossany, the retailer's liaison between the computer parts vendors and Best Buy repair centers across the country.

"While we are grateful that we can put this trial behind us, we remain dismayed that a few individuals were able to perpetrate such a significant fraud against us," said Best Buy spokeswoman Susan Busch in a statement.

The 17-day trial stretched across four weeks, as jurors listened to secretly recorded conversations.

The Coles face a maximum of 20 years in prison for conspiring to commit mail and wire fraud in relation to the Best Buy scheme. They also face up to five years for conspiring to defraud the United States, and up to five years each on four counts of income tax evasion. Additionally, Russell Cole faces a maximum penalty of 20 years on each of the 17 counts of mail and wire fraud as well as for conspiracy to commit money laundering.

Jackie Crosby • 612-673-7335