The United States government put its star witness on the stand yesterday to testify in the tax evasion trial of Greensboro businessman Greg Harrison.
Crystal Peoples, a 32-year career employee with the Internal Revenue Service with 26 years of experience as a revenue officer, testified that in June 2006 she was assigned to collect delinquent taxes and civil penalties from Hobbs Staffing Services, a company owned by Harrison.
Peoples said she presented a “final demand” letter to Harrison on June 27, 2006 threatening to seize and sell Hobbs Staffing Services’ assets if the company did not pay over to the government $756,988 – an amount that included unpaid payroll taxes from 2002 and civil penalties. She testified that before pursuing the delinquent taxes, she pulled quarterly reports on file with the NC Employment Security Commission and confirmed that the company paid millions of dollars in wages for a number of years.
Reviewing a case history report, Peoples testified, “It looks like they were not making deposits with the federal government, but they were making payments with the state.”
Peoples’ testimony was sometimes difficult to follow, but suggested a number of contradictions in Harrison’s representations to the federal government. The ordeal of getting the matter sorted out through a total of four personal meetings and four telephone conversations gave the impression of a hall of mirrors, as Peoples described it.
Peoples testified that Harrison told her the company stopped maintaining payroll and sold its business to another company in 2002, and that she confronted him with the fact that state records indicated otherwise.
Contradicting Harrison’s assertion that the company was no longer handling payroll, Peoples said she located a record created by the employment security commission for a company bearing the same employer identification number, or EIN, as Hobbs Staffing Services that was checked off as “active.”
Peoples testified that Harrison told her by way of explanation that he allowed a new company use EIN. She researched the number in IRS records, and found that three payroll tax deposits totaling $475,826 had been made under the number. The discovery presented a new wrinkle.
“I was trying to let Mr. Harrison know that these deposits were made in this quarter, and we needed to know who made them if he didn’t make them.”
Peoples said she asked Harrison for the EIN number of the company that had purportedly bought out Hobbs Staffing. When she researched the number, 57-1024567 through IRS records, she found IHT Grand Strand Inc., a company established in South Carolina in 1995. She testified that through her research she concluded that the unclaimed deposits could not have been paid by the South Carolina company.
Reading from a Summary of Taxpayer Contact report dated Aug. 29, 2006, Peoples recited, “This case is getting stranger by the minute.”
Asked to explain the report, Peoples testified, “It was strange that all these deposits were made, and they didn’t belong to the taxpayer.”
Prior to Peoples’ testimony, the court heard from Billie Baggett, who is Harrison’s mother. Baggett testified that she owns IHT Grand Strand Inc. and recited the last four digits of her company’s EIN number from memory: 4567.
Asked by prosecutor Frank Chut if she ever purchased any of her son’s staffing companies, Baggett responded, “No, Sir.”
Baggett did not look at her son as she left the witness stand, but stopped briefly at the prosecution table, smiling at Chut and whispering something to him.
Ultimately, Harrison’s tax difficulties were resolved when he presented the revenue officer with a 2002 employer quarterly federal tax return for Hobbs Staffing Services with a box checked off indicating that the business did not have to file returns in the future. Peoples testified that the check-off closed out the business for the IRS’ purposes of attempting to collect payroll taxes and that it was consistent with a “final return,” which is typically filed when a business has been sold and no longer employs anyone.
The government’s trial brief alleges that “Harrison made a series of false statements and provided false documents” to Peoples that caused her to close the investigation.
A former chief executive officer and former controller who worked for Harrison have testified that the staffing companies operated under the aegis of Hobbs Staffing Services and US Labor until 2004, when US Staff Holding Corp. was formed as an umbrella, and state subsidiaries were gradually rolled out.
Tom Cochran, the public defender representing Harrison, gamely attempted to poke holes in Peoples’ testimony. He asked her to read from one of her contact reports filed shortly after visiting Harrison’s office on Swing Road in Greensboro.
“I have higher priority cases,” Peoples had written.
“The day that I wrote that I may have had another case that I needed to get right on,” Peoples explained on the stand.
Cochran also noted that Peoples’ testimony that she had hand-delivered letters to Harrison contradicted documentation indicating that they were sent through certified mail and confirmed for delivery.
Among the other witnesses called by the government yesterday was Mark Gleason, a high school friend of Harrison’s who later worked periodically for his ventures. He testified that he now owns two staffing businesses of his own.
Gleason’s testimony was mostly notable for providing a sense of how Harrison used friends as nominee officers with the result that public records for companies controlled by him often did not bear his name.
Chut asked Gleason if he served as president, controlled payroll, directed the activities of employees and received payment from the proceeds of the sale of a company called US Staffing of SC.
“No,” Gleason answered.
“Why did you sign documents as president?” Chut asked.
“Was asked,” Gleason replied.
“Who asked you?”
“As I recall, Greg Harrison.”
Chut showed Gleason a copy of a factoring, or funding agreement between US Staffing of SC and GrandSouth Bank containing Gleason’s signature, along with that of bank vice president Doug Corriher.
On cross-examination, Cochran asked, “Now, Mr. Gleason, did you have problems with taxes with regard to one of your companies?”
Judge James A. Beaty sustained an objection by the prosecution.
Gleason was not allowed to answer.