Andrew Albert, 49, convinced at least three investors to give him about $590,000 for a luxury shopping site, according to Manhattan District Attorney Cyrus R. Vance, Jr., who announced an indictment on charges of Grand Larceny in the Second Degree, Scheme to Defraud in the First Degree and Criminal Tax Fraud in the Third Degree. “Andrew Albert falsely told investors that his shopping website would feature a virtual street akin to famous retail boulevards like Madison Avenue or Rodeo Drive,” Mr. Vance said in a statement. “In reality, the company he created served as nothing more than a bank account that the defendant used to pay for his personal expenses and lavish lifestyle.”
On1ave.com, the website Mr. Albert and his partner at the time, Prada PR vice pres Melissa Skoog, were allegedly building and which The New York Observer reported on in 2008, appears to be long-stale. A simple HTML page says “Welcome to a new & exciting way to shop, socialize and live. On1Ave, A Brand New World. Opening Summer 2009.”
According to documents filed in court, ALBERT formed a company called Virtual Etail Group LLC (“VEG”) in June 2008. As ALBERT told prospective investors, VEG was going to develop, launch and operate a new high-end shopping website called ON1AVE.com. Using an online avatar, visitors to the website were to “walk” down a virtual street, shop in the stores – which would be linked to actual stores, such as The Gap, Prada, and Ralph Lauren – and “try on” the clothes using avatars programmed with the shopper’s measurements before purchasing.
Great idea! GIVE HIM MONEY GIVE HIM MONEY.
In total, ALBERT raised approximately $590,000 from investors, which was deposited into a VEG bank account that the defendant opened in June 2008 and on which he remains the sole signatory. What the investors did not know was that the defendant had no intention of developing the website ON1AVE.com or any other business under VEG. As soon as the first investment came into the VEG account, ALBERT began to transfer tens of thousands of dollars to an account in the name of Equation Entertainment LLC (“Equation”), a nearly defunct media consulting business that Albert had formed in 2004.
According to documents filed in court, for several years, ALBERT had used the Equation account as a personal checking account, using it to pay for rent, utilities, clothing, health and beauty expenditures, groceries, restaurants, and other personal expenses. In the fall of 2008, around the time that the third VEG investor came in, the defendant and his wife moved from a small apartment in Greenwich Village to a large loft in Tribeca that cost approximately $2,000 more in rent a month. ALBERT used more than $51,000 of VEG money to renovate and furnish the apartment. He also spent approximately $12,000 of VEG money on moving and storage expenses.
Whether Mr. Albert is convicted or not, the story holds some good tips for angels and VCs. Investors, does your portfolio include a criminal? Watch for these warning signs:
- When you repeatedly ask for a financial accounting and progress report, does your founder ignore your inquiries by simply reassuring you that the project “is moving forward”?
- Is your founder not filing his tax returns?
- Does your founder spend more than $9,000 on “hair and makeup expenses?
- … in addition to $6,700 on his or her dog?