Government: Harrison took out company funds for personal benefit

The United States government rested its case against Greg Harrison on Thursday, following testimony from an IRS revenue officer that staffing companies owned by the Greensboro businessman failed to pay nearly $16 million in payroll taxes to the federal government over a five-year period, and that $6.2 million was transferred from staffing company accounts over the years to entities for Harrison’s benefit, including homes, movie productions, a yacht and other businesses.

What the testimony didn’t explicitly point out but what is deducible through basic math is that those transactions still leave almost $10 million unaccounted.

Evidence introduced by the government during Revenue Officer Edward Coakley’s testimony further eroded the defendant’s position, including a workers compensation audit performed by AIG for one of Harrison’s companies, Hobbs Staffing Services, for a period in 2004 and 2005. The court had previously heard testimony on Wednesday from Revenue Officer Crystal Peoples, who closed a collections case against Harrison in 2006 after he told her that Hobbs Staffing Services had sold its assets and ceased to employ workers in 2002.

Coakley testified that the external audit reported that the company paid about $60 million in wages during that period. That figure corresponded within 99.358 percent accuracy with the government’s own report on wages paid for the same period based on data extracted from the company’s Navision accounting software, which was seized by the federal government as part of its investigation.

To assist in his testimony, Coakley referred to two boxes of bank transfer documents for Harrison’s dozens of staffing companies, individual accounts and other businesses, as well as a thick binder of business articles of incorporation filed with various state governments.

Coakley said he had reviewed all of the documents, and presented aggregate transfer charts to show movement of funds from the staffing companies to entities that the government asserts as being to Harrison’s benefit: $1.6 million from for US Labor to a business account for the movie Home of the Giants; $1.1 million from US Labor to business accounts for the movie National Lampoon’s Pucked; $1.1 million from Compensation Management to Green Ideas N Motion, a company owned by Harrison; $820,046 from US Labor to Shining Properties, owned by Harrison; $743,350 from Hobbs Staffing Services and US Labor to two companies doing business as Extreme Fitness (not covered in the trial was the business failure of the fitness center, as reported in the Jamestown News in 2009); $437,500 from the staffing companies to cover a down payment on the yacht Columbo; $369,000 from the staffing companies to cover the down payment on a South Carolina beach house.

Coakley testified that transfers from Harrison’s personal accounts to the staffing companies were insignificant, in comparison.

The government introduced two loan documents that hinted at a deliberate attempt to throw off federal investigators and others. One of the government’s exhibits was a 2005 letter in the files of IndyMac Bank related to the purchase of the South Carolina beach house that was signed by a former financial analyst for the staffing companies indicating that Harrison had loaned the businesses $2 million. Coakley testified that he would have expected to find transactions from Harrison’s personal bank accounts to the business accounts totaling $2 million, but did not.

Similarly, the government introduced a 2006 loan statement by Patrick Henry National Bank indicating that US Staffing Services Holding Corp. owed Harrison $4.8 million. Considering that 14 months had elapsed between the time the purported $2 million debt was recorded and the $4.8 million loan was referenced, Coakley testified that he would have expected to see a $2.8 million transfer of funds from Harrison’s personal accounts to the business accounts during that period. He did not.

Following Coakley’s testimony, Judge James A. Beaty sent the jury out. Before the judge got around to recessing for lunch, counsel for the government and the defendant approached the bench, followed by an episode of courtroom confusion and controversy.

Public defender Tom Cochran frantically searched the gallery for Jessica Cox, a lawyer who represents one of the witnesses who has been observing the trial. Another audience member said she might be upstairs in the lounge. The judge sent out a marshal to find her, and she eventually returned.

Cochran told the judge that Cox had approached him during the break and told him that a juror had been seen speaking with a reporter. Cox said she had been told by Diona Slaughter, who is Harrison’s ex-wife, that this reporter had been seen speaking to a juror. Slaughter told the judge that as she had been driving away from the federal building on Wednesday evening she observed this reporter speaking to a juror on the street.

In fact, this reporter had been speaking to another courtroom observer who had been sitting in the gallery during the afternoon session of court. The judge instructed that if the allegation were true, this reporter could be held in contempt of court and informed him of his right to remain silent and right to seek representation of counsel. This reporter gave an explanation, which the judge said he accepted. During the break, the judge said he would have security review surveillance video to confirm the presence of the observer this reporter had spoken to and would interview jurors about the matter.

When the trial resumed in the afternoon, Judge Beaty said he had confirmed that the observer had been in court on Wednesday, and that the court found no credence to the allegation that a juror had been contacted by a reporter, and would make no further inquiry with the jury on the matter.

Beaty then turned his attention to Cox. He said a security officer had spoken to her about speaking too loudly in court and that she had been observed making a friendly gesture to the defendant. He cautioned her that as a member of the public she “should not have anything to do with this trial,” and ordered her to sit apart from Slaughter and others who appear to be supporting the defendant.

“Ms. Cox, I’m talking to you,” Beaty said.

The defense chose not to cross-examine Coakley, the revenue officer who presented the IRS’ master summary of its investigation of Harrison. The government rested its case.

The defense called its first three witnesses: Mo Caldwell, Lou Ann Shaw and Trevor Jefferson. The testimony of the three former employees of Harrison’s staffing companies reinforced a theme highlighted earlier by the defense — that they had little contact with Harrison, and most of their dealings were with former partners Ray McDaniel and Mark Griffin, who were running the day-to-day operations of the companies.

Caldwell, who was hired by Harrison in 1994 to develop new branches, testified that by 2002 McDaniel and Griffin were running the company as a committee. Caldwell said the committee terminated him against Harrison’s wishes when the company restructured as US Staff Holding Corp.

Shaw, who worked at a staffing company in Gastonia that was acquired by one of Harrison’s companies, said that she did not report directly to the defendant until his company, Compensation Management, took back the staffing company assets from McDaniel and Griffin in 2008.

Both Shaw and Jefferson, who worked as director of corporate sales for Harrison’s companies, gave testimony that spoke to the value they added to the enterprises. Shaw testified that the most important part of the staffing business is the relationship between the customer and the agency.

The prosecution seemed happy to build on that theme.

“You’re a customer person,” prosecutor Frank Chut said.

“Yes,” Shaw responded.

“That’s the heart of the business.”


Jefferson testified that he was hired away from a competing staffing agency in the early 2000s after he swiped some accounts from Harrison’s staffing companies.

“They were small, home grown,” Jefferson said of Harrison's operatioin. “That was a good thing…. We created a strategy from which to grow the company, to capture additional markets and expand geography.

“We were tremendously successful in growing, expanding market share and geography, and capturing some pretty significant accounts,” he added.

Jefferson testified that he devised the expansion strategy with McDaniel and Griffin in 2003. Harrison was not directly involved.

“He was not around a lot,” Jefferson said. “Greg was the person Mark and Ray would go to when they needed business advice, funding or more money.”

Jefferson also testified that a plan to roll out state subsidiaries in 2004 was devised by Griffin, McDaniel and him. That testimony could help Harrison by lessening the impression that the almost constant mutation of corporate entities served a purpose of hiding assets from the IRS.

Oddly, Cochran asked both Jefferson and Shaw about the 2007 raid by Immigration and Customs Enforcement on a Fresh Del Monte Produce plant in Portland, Ore. whose workers were supplied by the staffing companies while they were under McDaniel and Griffin’s control.

“That was my account,” Jefferson said. “I sold it. That was a $40 million book of business. That was my largest and the company’s largest account.”

Shaw testified that losing the Del Monte account knocked out a significant chunk of the company’s sales, and hurt its reputation.

“In my territories, we didn’t lose any clients,” she said. “We had to do damage control…. We were doing the right thing. We did E-verify. We did I-9s.”

Shaw added that after the raid, the staffing company’s corporate offices started requiring branches to copy all I-9 forms, which verify the identity of all employees and eligibility to work, and send them by Federal Express to the federal government.

The trial resumes on Monday.


Mo Caldwell said...

You need to listen better,Mark Griffin and Ray McDaniel were running it in 2002. That was my testimony.

Jordan Green said...

Mo, I wrote that you testified that McDaniel and Griffin were running the companies by 2004. I've revised that to "by 2002," based on your comment. I presume that they continued to run the companies through 2004 until they acquired control of them in 2006. Is there an importance to the distinction between 2002 and 2004 that I'm missing?

Mo Caldwell said...

As I testified, I was terminated in 2002 and was not there in 2004. Therefore I could not speak about 2004. But they were in control of the company in 2002.The committee had control of the company and all decisions.

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