Greensboro staffing exec sentenced to 12 years for tax fraud

UPDATE: US Attorney Ripley Rand says in a prepared statement: "Greg Harrison used a foundation of fraud and deceit to build his reputation as a successful businessman and prominent local citizen, but appearances, no matter how polished, cannot overwhelm the truth. The substantial sentence handed down today shatters the Harrison myth and represents justice appropriate to his shameless thievery."

ORIGINAL STORY: Greg Harrison, a Greensboro businessman who operated a series of staffing companies over the past two decades and went on to finance two feature-length films, was sentenced today to 12 years in federal prison and ordered to repay $43.3 million as restitution to the US government related to his conviction last December for tax fraud.

Harrison, who maintains his innocence, publicly apologized to his family, including a daughter born two weeks earlier, describing personal tragedy and hardship at the time of his arrest, and defending his record as a businessman in remarks to US District Court Judge James A. Beaty Jr.

“I’ve put them in a terrible position; they’ve depended on me,” Harrison said in a halting voice. “I’m extremely hurt by what’s happened to my family and also to those employees.  

“I hope that my legacy is not defined by these incidents,” he concluded. 

The judge said he would recommend that Harrison be housed at the facility closest to his family, likely FCI Butner, a low-medium-security federal prison. 

Assistant US Attorney Frank Chut asked the judge to sentence Harrison at the high end of the sentencing guidelines. 

“This is an enormously serious offense involving $43 million that belonged to the people of the United States that was converted to this man’s personal use for his lifestyle,” Chut said. 

The prosecutor said Harrison hurt permanent employees who worked for him and were shocked to discover many years later that no Social Security taxes had been reported for their years of employment, and that he placed three controllers in legal jeopardy by tryng to get them to collude with him in perpetrating fraud. 

Even more egregious, Chut said, was the impact of Harrison’s actions on “the folks that worked for him as temporary employees and got no benefits because of his failure to pay that Social Security. These are people that clean cars at Greensboro Auto Auction. They’re working people that work low-wage jobs. Their ability to know about and fix that problem is extremely limited.” 

Harrison responded to Chut’s assertion that he had victimized permanent employees by noting that two of the former controllers currently work for companies that hold licenses with his staffing licensing company and one is employed in a commercial finance company he co-founded. 

“These are companies I established that employ people,” he said. 

Harrison’s fiancée, mother, ex-wife, sister, business associates and other family and friends, roughly 30 in all, crowded into the gallery in a show of support. Solomon Wisenberg, one of two defense lawyers, said the judge had received numerous letters attesting to Harrison’s generosity to friends and associates, and to his devotion to family. 

“It’s not just that he’s a churchgoing man, which is important,” Wisenberg said. “It’s not just never speaking a bad word against others, which is important. It’s not just the charitable contributions, which are important. It’s the kind of life he has led since he was a little boy. When he was young he befriended a little kid who was unpopular who had been injured. On his first day at UNCG he literally gave the shirt off his back to someone who needed it.” 

Chut argued that Harrison had displayed utter contempt for the law and even for the court. 

“Mr. Harrison ran an extensive series of staffing companies over the years,” Chut said. “He was a prominent citizen of his community. There may be other people who are tempted by the trust fund that is payroll taxes. This sentence needs to show the other people what the consequences are and give them a good deterrent. 

“Mr. Harrison’s continued conduct and concealment indicates he is a continued danger to society because he may try to defraud the government by not paying his taxes again,” the prosecutor continued. “This conduct was not just a fringe part of his life; this was central to who he is.” 

The judge expressed skepticism about Harrison’s supposed generosity. 

“A large part of his good works may be derived from criminal activities,” he said. 

Wisenberg responded, “Mr. Harrison didn’t grow up in opulence. He inherited money when he was a young man, and he has had money for a long time. Since he was a very young man, Mr. Harrison has taken the time — he’s always taken the time, he’s been consistent with that — to talk to people, to deal with people, giving people a place to stay. People he barely knows he’s giving business advice to.” 

The 47-year-old staffing executive came into a significant inheritance when he turned 18 from a settlement of a plane crash that took the life of his father in the early 1970s. He bought a staffing company in Greensboro from his mother in the late 1980s. A decade later his staffing operations underwent a rapid expansion, eventually operating in about a dozen states. By the mid-2000s, Harrison was investing in a company that staged boxing matches, nightclubs such as Much in downtown Greensboro, and two feature movies: The National Lampoon’s Pucked and Home of the Giants

He also had set up a company to refine and export gold from West Africa. An account sheet provided to two women with investments in Home of the Giants estimated Harrison’s net worth at $33.7 million in 2006. 

Harrison’s fortunes turned the following year when the IRS opened a criminal investigation on him. The light brown color of Harrison’s hair has given way to a solid gray in the nine months he has sat in federal detention awaiting sentencing after a jury convicted him last December of corrupt endeavor to obstruct the IRS. Last week, he told the judge about how one of his daughters had been born with a heart defect in June 2010 and was hospitalized at Brenner Children’s Hospital. Harrison and his fiancée brought their daughter home in November but had to confine her to a room of her own for her safety. Harrison said he asked his lawyer at the time to explain the situation to the government. But when agents with the IRS raided his house, Harrison said they ignored his pleas and went into the room anyway. 

The next day, he said, his daughter contracted a high fever and her heart rate accelerated. She later died from “a severe infection of her entire body.” 

“The doctor was very surprised and wanted to know what caused this, but I could not tell him that there was a raid because my attorney told me it might negatively affect the trial,” Harrison said with evident distress in his voice. “We did everything right. We did everything we were supposed to…. I know the government had a pre-trial motion not to let this information come into the trial, but I believe there was an abuse of power by the government just to make an example out of me.” 

Judge Beaty said he found it “out of the ordinary” that a defendant would use his speaking time to focus on what someone else had done to him and even go so far as to attribute the loss of the child to the government’s investigation of the case. 

The judge said the 12-year sentence reflected the need to promote respect for the law, adding that the court took into consideration Harrison’s charitable giving, both before and during the period of his crimes, and the challenging time the defendant experienced in 2010. 

“He absolutely maintains his innocence for the same reason he said today,” Wisenberg said after the hearing. “He had no intention to defraud the government, and he had turned over the companies to other individuals who had the responsibility to file and pay payroll tax.” 

Many friends have steadfastly declared Harrison’s innocence, and a woman in the gallery expressed anger to this reporter about YES! Weekly’s coverage of the case. 

Asked if she wanted to comment on the sentencing, Billie Baggett, the defendant’s mother, grasped this reporter by the arm and said, “Can you be nice? Is it possible for you to be nice? You need to take into consideration that he has children. He has a 15- and a 16-year-old.” 

As to Harrison’s professed innocence, the defendant introduced an Interim Management Agreement into evidence during the final stretch of the trial indicating that he had transferred control of the staffing companies to business partners Mark Griffin and Ray McDaniel. But McDaniel testified that the signature was not his, calling the agreement a “false document.” After several hours of deliberation the jury asked for clarification on the document, suggesting their final judgment on the case rested on its validity. Eventually they returned a verdict of guilty on all counts. 

Today Wisenberg said he planned to file an affidavit providing evidence that the document is not false, even as he made it clear that he was not attempting to retry the case. 

In a filing last month the government said Harrison had falsified his income to pre-trial services, accusing the defendant of “rather extraordinary and persistent attempts to mislead and defraud this court.” 

“The defendant necessarily proffered falsehoods so that the court would appoint counsel,” McLellan argued today. 

Wisenberg responded that Harrison “did not believe he was making false representation about his ability to retain counsel.” 

The public defender’s withdrawal from the case and Harrison’s subsequent decision to replace him with two of the best lawyers in Washington, DC and Winston-Salem raised eyebrows. Wisenberg is a former prosecutor in the Whitewater/Lewinsky investigation of President Clinton and an expert on white-collar crime, while David Freedman has represented high-profile North Carolina clients such as NC Rep. Larry Womble and former Durham County District Attorney Mike Nifong. 

“He’s not funding his own defense,” Wisenburg said in an interview. “Beyond that, I’m not going to say.” 

The government also persuaded the judge to find that Harrison had “failed to report criminally derived proceeds,” had used “sophisticated means” in his criminal offenses and had been an “organizer or leader” of an endeavor involving criminal activity, in addition to presenting false testimony. It was not clear whether the findings — known as “enhancements” and used to score points to help determine a sentencing range for a defendant — actually affected Harrison’s sentence. 

McLellan argued that the court saw evidence of fraud by Harrison, noting that an officer with a commercial financing company testified that he asked Harrison for proof that payroll taxes were being paid, and that Harrison in turn provided a document forged by a friend named Michael Brooks. A former seventh-grade math teacher from England, Brooks met Harrison while playing soccer and joined the staffing companies as a financial analyst. He left the staffing companies in 2006 to become a full-time professional poker player and has since returned to England. 

The prosecutor argued that Harrison’s creation of fictitious business entities made the crime one of sophisticated means. 

Harrison also lied to an IRS revenue officer and gave her a tax ID number “to convince her that he did not own the company anymore, and that, in fact, his mother owned the company,” McLellan said. “The court heard the testimony of his mother that she did not purchase a North Carolina company owned by her son. This was an elaborate ruse on the part of the defendant to put the revenue officer off the scent. And it succeeded because she actually closed the case.” 

Wisenberg protested, “Virtually any tax fraud includes a cover-up or a lie, but that doesn’t make it sophisticated means.” 

As to whether Harrison led or organized criminal activity involving other participants, McLellan cited Brooks’ role in forging the document to allow Harrison access to funds, some of which were diverted to personal uses instead of being used to pay taxes. He also argued that Doug Corriher, an officer with GrandSouth Bank, provided funds to Harrison’s companies “knowing that the payroll obligations were not being met.” He added that Mark Gleason and brothers Joey and Matthew Medaloni were “straw owners” of companies that were organized by Harrison. Gleason is a longtime associate of Harrison’s in the staffing business. The Medalonis have operated a string of nightclubs in Greensboro over the past decade. 

“They didn’t try this case as a conspiracy,” Wisenberg objected. 

Beaty ruled that there was sufficient evidence to establish that Harrison led an organized criminal activity with Brooks, but not with the other four individuals. 

Brooks testified that he agreed to forge the document because Greg had been “a very good friend for a long time,” and was someone he trusted. Brooks added that he believed Harrison was behind on payments and needed to buy more time before payments came in from staffing clients.

No comments: