UPDATE: Judge Carlton Tilley agreed to break Medaloni's $50,000 fine up into four equal installments to be paid over the next 12 months.
Medaloni did not speak to reporters after the sentencing.
Davis North, one of Medaloni's lawyers, said his client is ready to move on.
"Joey's been a great asset to Greensboro," North said. "He made an error in judgment and is going on with his life. Most people would say Greensboro is a much better place because of the things that Joey did to develop downtown. It's worse now when he's out of it. It was better off when he was running things."
During the hearing Clifton told the judge that Medaloni could lose his boat captain and piloting licenses as a result of the conviction. Afterward the lawyer told reporters that Medaloni has been living in Greensboro and working for family members since he was indicted. Medaloni operates a wine bar on Chapman Street called the Tasting Room that is owned by his brother, Matthew. He has also leant his name to a line of wines, and is trying to establish a winery.
Clifton called his client a "serial entrepreneur."
ORIGINAL POST: A federal judge has sentenced former Greensboro nightclub owner Joey Medaloni to four years of probation and imposed a $50,000 fine for falsifying income reports to obtain loans.
US District Court Judge Carlton Tilley credited Medaloni's contributions to the community, alluding to his role in revitalizing downtown Greensboro, and assistance to the federal government in the prosecution of staffing agency executive Greg Harrison in his remarks before handing down the sentence in federal court today in Greensboro.
Tilley said he received several character letters from Medaloni's supporters, but the defendant withdrew one of them after the judge complained that it contained conclusions that were not supported by facts in the pre-sentencing report and factual basis report that accompanied Medaloni's guilty plea. The judge did not reveal the identity of the author of the letter, explaining that he did not want to embarass the person.
Former Mayor Keith Holliday and Milton Kern, a prominent downtown developer, attended the sentencing. Holliday declined to comment after the court session.
Medaloni has worked as a boat captain and pilot since selling his Greensboro nightclubs the N Club and Much/Heaven in 2006 and 2007, respectively. His lawyer, Christopher Clifton, told Tilley that Medaloni is a talented pilot, adding that his client's relationship with Harrison came about because Medaloni piloted planes for Harrison.
Harrison is awaiting sentencing following conviction for 63 counts of impeding the Internal Revenue Service and failing to pay payroll taxes. Assistant US Attorney Frank Chut, who prosecuted Medaloni, is also the lead prosecutor in Harrison's case.
Tilley said he was torn by two conflicting sentiments.
"What you did was very wrong," the judge said. "You took positive steps to produce fraudulent documents in order to obtain loans for significant amounts. And at least three lending institutions did advance you substantial amounts of money."
Medaloni pleaded guilty to federal loan fraud.
The government said Medaloni “suffered substantial business losses” in his operation of the N Club, the Red Room, Much and Heaven in 2003 and 2004, but by submitting falsified IRS tax returns he obtained a loan in August 2005 for $996,000 from Truliant Federal Credit Union, which he used to retire $782,230 in debt to another lending institution and keep $206,233.
"You do seem to be sincere when you say you are sorry," the judge said. "The loans were repaid timely. You made contributions to the community as well as to yourself,
and to the government. For those reasons I think probation is appropriate in this case."
Medaloni expressed contrition before receiving his sentence.
"I'd like to tell you I'm absolutely embarrassed and I take full responsibility," he told the judge. "I'm truly sorry. If I could go back I would never do it again, and I'll never do it again."
The judge asked Medaloni to consider what conequences his action might have had were he unable to repay the loans.
"You did pay those loans in a timely fashion," Tilley said. "But that's because your businesses were successful. What position do you think the court would be in if the economy had bottomed out, as it did, leaving you unable to pay back those loans."
Medaloni said he wished he could give an answer, but he could not. The judge said that was probably the best response the defendant could have given.
Clifton asked the judge if Medaloni's fine could be broken up into two payment installments. The judge said he wants to discuss that further when the court reconvenes at 2 p.m. today.
Showing posts with label Joey Medaloni. Show all posts
Showing posts with label Joey Medaloni. Show all posts
Medaloni sentencing postponed to March
The sentencing of one-time Greensboro nightlife king Joey Medaloni has been postponed to March 22.
Medaloni pleaded guilty to federal loan fraud in December 2010. The defendant admitted to falsifying income statements to qualify for a bank loan. The government acknowledged that Medaloni repaid the loan in its entirety.
The defendant could face up to 30 years in prison and a maximum fine of $1 million, according to the plea agreement. The maximum fine is greater than the amount of fraudulent loan.
The sentencing had been scheduled for today in federal court in Greensboro. This is the fifth time the sentencing has been postponed. The last two postponements have come on the heels of sealed orders filed by the court in response to sealed motions. It’s not clear whether the sealed motions were filed by the defendant or the government.
Back story on Medaloni.
Medaloni is a friend and business associate of Greg Harrison, a staffing executive convicted in December of 63 counts of obstructing the Internal Revenue Service, failing to pay payroll taxes and failing to pay individual income taxes. Harrison awaits sentencing in April.
Prosecutor Frank Chut is handling both Medaloni and Harrison's cases.
Medaloni pleaded guilty to federal loan fraud in December 2010. The defendant admitted to falsifying income statements to qualify for a bank loan. The government acknowledged that Medaloni repaid the loan in its entirety.
The defendant could face up to 30 years in prison and a maximum fine of $1 million, according to the plea agreement. The maximum fine is greater than the amount of fraudulent loan.
The sentencing had been scheduled for today in federal court in Greensboro. This is the fifth time the sentencing has been postponed. The last two postponements have come on the heels of sealed orders filed by the court in response to sealed motions. It’s not clear whether the sealed motions were filed by the defendant or the government.
Back story on Medaloni.
Medaloni is a friend and business associate of Greg Harrison, a staffing executive convicted in December of 63 counts of obstructing the Internal Revenue Service, failing to pay payroll taxes and failing to pay individual income taxes. Harrison awaits sentencing in April.
Prosecutor Frank Chut is handling both Medaloni and Harrison's cases.
Anatomy of a shadowy national staffing conglomerate
Three days of testimony in the tax evasion trial of Greensboro businessman Greg Harrison have sketched a picture of a shadowy national staffing network operating at the height of what passed for a boom in the last decade. (Previous reporting: 1 and 2)
Involved in brokering the labor of people who often earned no more than minimum wage, Harrison’s staffing agencies provided a degree of removal for client companies seeking to minimize their commitment to their workforce. Through almost continual restructuring, the companies presented a kaleidoscopic front that threw off revenue officers with the Internal Revenue Service for years, while also lowering the business’ public profile to near invisibility while employing thousands of workers.
“In a grand business sense, you think of [temporary employees] as inventory,” testified Robert Patterson, who was formerly employed as a controller for Harrison.
The labor of temporary employees financed opulent lifestyles by those in control of the staffing companies, who — at least from the outside — appeared to have performed little work of their own.
At the top of the pyramid was Greg Harrison, who, former employees testified, was often not involved in day-to-day operations even while maintaining responsibility for payroll and controlling the movement of funds. Robert Patterson and Toni Johnson, who served as controllers for Harrison’s staffing network in the period of late 2004 through 2006, testified that McDaniel and Griffin ran the companies on a day-to-day basis. At the company headquarters in Greensboro, salaried permanent employees handled back-office functions and raked in profits from client companies.
Harrison's staffing enterprises were far from iconic, and branding was not part of his strategy. If anything, it was the opposite. From the late 1990s when Harrison took the small staffing company inherited from his mother and went on a national buying binge, the empire operated under two corporations, but did business under a completely different trade name, USA Staffing.
In 2004, the conglomerate restructured without interrupting operations. US Staff Holding Corp. was one of the new companies. Under its umbrella, state subsidiaries were incorporated in at least eight states. The names morphed again in 2005 and 2006, when ownership changed hands, and yet again in 2008 when Harrison bought back the assets. Despite having once employed thousands of employees across the country and billed clients millions of dollars, even acquaintances sometimes have difficulty naming the staffing companies. The dizzying proliferation and evolution of corporate names seems to promote confusion.
Ray McDaniel, who served as chief operating officer for Harrison’s staffing companies, testified on Monday that when staffing companies bill their clients, they typically mark up total wages paid to temporary workers by 28 to 38 percent.
“The markup is the profit and the payroll tax burden associated with it,” McDaniel said.
In the case of Harrison’s companies, the government alleges, the payroll taxes were often not paid and instead the proceeds were diverted into personal uses such as luxury homes, a yacht and movie production.
As early as December 2004, Harrison’s staffing companies provided workers to a Fresh Del Monte Produce packing plant in Portland, Ore., according to a weekly revenue report introduced into evidence by the government on Monday. The account was significant enough to receive its own line item under a list of branch offices. Fresh Del Monte Produce accounted for such a significant portion of the staffing company’s Portland business that it maintained an office on the premises of the packing plant. In the course of acquiring the assets of Harrison’s staffing businesses, McDaniel and Griffin would take over the Del Monte contract in 2006.
“In the case of Del Monte, we singled those out because they had such large volume,” McDaniel testified on Monday.
McDaniel and Griffin formed StaffCo Management Group in 2005. By November 2006, they had acquired the assets of Harrison’s staffing businesses. Harrison has confirmed to YES! Weekly that he served as a creditor to the company and as a member of its board.
“Mr. Harrison didn’t want to be in the staffing business anymore, didn’t want to have anything to do with it,” public defender Tom Cochran argued in his opening statement. “He wanted to be a lender.”
(Background on Harrison’s investments in nightclubs and movies)
Documents introduced into evidence on Tuesday establish that Harrison loaned McDaniel and Griffin $1.5 million over a six-month period that coincided with the launch of StaffCo. McDaniel testified that the two also obtained a $7.5 million loan from a New York company called BHC, adding that $3.7 million was handed over to Harrison to pay for the asset purchase of the staffing business.
A 2007 Triad Business Journal article by Michelle Cater Rash quotes staffing firm consultant Bruce Steinberg as saying that StaffCo was expected to be one of the largest privately held staffing companies in the country.
StaffCo operated under the trade name American Staffing Resources, which was the name of a Pennsylvania-based staffing company it had acquired.
Immigration and Customs Enforcement raided Fresh Del Monte Produce and American Staffing Resources in Portland, Ore. in June 2007. An affidavit filed by ICE Special Agent Maximillian L. Trimm citing an interview with Jose Ortega-Milian, a former maintenance manager and supervisor, sheds some light on labor conditions at Del Monte at the time the staffing companies controlled first by Harrison and then by McDaniel and Griffin handled payroll and hiring.
Upwards of 100 of StaffCo’s employees were detained. Fresh Del Monte Produce withdrew its business, accounting for $30 million in annual revenue to the staffing company. National news about the raid had an adverse impact on the company’s reputation, McDaniel testified.
“That was the beginning of the end of StaffCo,” McDaniel testified. “We never recovered.”
Two of StaffCo’s lenders declared default, McDaniel said. Harrison ended up buying back 70 percent of the company’s assets. McDaniel and Griffin broke up the remaining 30 percent among themselves, creating smaller staffing companies in Tennessee and Georgia.
Harrison incorporated Compensation Management Inc. and Compensation Management Inc. of Iowa, and later, IHT of SC to operate the staffing businesses acquired in the wake of StaffCo’s dissolution. Julie Akers, who was promoted to controller at StaffCo in the fall of 2006, followed the transfer of assets, helping wind down StaffCo’s business and then working for Harrison at Compensation Management Inc. and the other companies.
Akers testified that IHT of SC was formed in the spring of 2009 because two prospective clients were considering bringing new accounts with significant volume to the staffing companies, but wanted to avoid association with American Staffing Resources and its successor because of the negative publicity surrounding the 2007 immigration raid in Oregon.
Prosecutor Frank Chut asked Akers about the similarity between the name IHT of SC and the company owned by Billie Baggett, Harrison’s mother. That company is called Innovative Hiring Technologies and is located in South Carolina.
“It was our understanding that eventually she was going to retire, and the two companies could be rolled together,” Akers testified.
Harrison is accused by the government of lying to an IRS revenue officer after being presented with a $756,988 tax bill by telling her that he had sold the business in August 2002 and had no payroll after that. Harrison allegedly provided Revenue Officer Crystal Peoples with the tax identification number for a company called IHT Inc.
The government’s trial brief details the alleged attempt to throw off the IRS:
Akers testified on Wednesday that Baggett had no involvement with Compensation Management Inc., Compensation Management Inc. of Iowa or IHT of SC, the three companies operated by Harrison in 2008 and 2009. Baggett is also expected to testify as a government witness.
Akers testified that the staffing companies after Harrison bought back the business operated first at an address on Muirs Chapel Road in Greensboro, then at an on South Swing Road, and finally at a third location in High Point. Akers said Harrison did not maintain an office at the High Point location and was not involved in the day-to-day operations of the business. Yet Harrison controlled funding to the companies, and Akers said she would have to call him to get him to release funds to make payroll.
Annual reports filed with the NC Secretary of State’s office for Compensation Management Inc. list Michael Brooks as the company’s president. Virginia Linke, who worked as payroll manager for StaffCo and then for Compensation Management Inc. testified on Wednesday that Brooks had no involvement with the company despite his title.
Describing Harrison’s role, Linke said, “He basically controlled the funds.”
The trial is expected to last two weeks. Among 34 potential witnesses the government has said it is considering calling to the stand is Joey Medaloni, a former Greensboro nightclub owner who has been convicted of loan fraud. Originally set for September, Medaloni’s sentence has been postponed to Feb. 12, 2012.
Another potential witness is Phil Smoot, a local filmmaker who served as unit production manager for National Lampoon’s Pucked, a 2006 movie financed in part by Harrison and that starred Jon Bon Jovi.
Harrison’s former business partner, Mark Griffin, might also testify, but US Attorney Ripley Rand has written in a letter that “Griffin suffers from stage four brain cancer and is undergoing debilitating treatment.”
Harrison has given notice that he might take the stand himself. Throughout the trial, the defendant has dressed impeccably, maintained good posture, taking notes, conferring frequently with his lawyer and listening closely to testimony. On Wednesday, after he passed through the gate from the gallery to the court, he clasped the two panels between his forefinger and thumb, taking care to align them perfectly, in contrast to prosecutors and other court personnel who left them ajar.
A motion filed by Rand attempting to limit the scope of the defendant’s questions to government witnesses provides a different picture of Greg Harrison:
Involved in brokering the labor of people who often earned no more than minimum wage, Harrison’s staffing agencies provided a degree of removal for client companies seeking to minimize their commitment to their workforce. Through almost continual restructuring, the companies presented a kaleidoscopic front that threw off revenue officers with the Internal Revenue Service for years, while also lowering the business’ public profile to near invisibility while employing thousands of workers.
“In a grand business sense, you think of [temporary employees] as inventory,” testified Robert Patterson, who was formerly employed as a controller for Harrison.
The labor of temporary employees financed opulent lifestyles by those in control of the staffing companies, who — at least from the outside — appeared to have performed little work of their own.
At the top of the pyramid was Greg Harrison, who, former employees testified, was often not involved in day-to-day operations even while maintaining responsibility for payroll and controlling the movement of funds. Robert Patterson and Toni Johnson, who served as controllers for Harrison’s staffing network in the period of late 2004 through 2006, testified that McDaniel and Griffin ran the companies on a day-to-day basis. At the company headquarters in Greensboro, salaried permanent employees handled back-office functions and raked in profits from client companies.
Harrison's staffing enterprises were far from iconic, and branding was not part of his strategy. If anything, it was the opposite. From the late 1990s when Harrison took the small staffing company inherited from his mother and went on a national buying binge, the empire operated under two corporations, but did business under a completely different trade name, USA Staffing.
In 2004, the conglomerate restructured without interrupting operations. US Staff Holding Corp. was one of the new companies. Under its umbrella, state subsidiaries were incorporated in at least eight states. The names morphed again in 2005 and 2006, when ownership changed hands, and yet again in 2008 when Harrison bought back the assets. Despite having once employed thousands of employees across the country and billed clients millions of dollars, even acquaintances sometimes have difficulty naming the staffing companies. The dizzying proliferation and evolution of corporate names seems to promote confusion.
Ray McDaniel, who served as chief operating officer for Harrison’s staffing companies, testified on Monday that when staffing companies bill their clients, they typically mark up total wages paid to temporary workers by 28 to 38 percent.
“The markup is the profit and the payroll tax burden associated with it,” McDaniel said.
In the case of Harrison’s companies, the government alleges, the payroll taxes were often not paid and instead the proceeds were diverted into personal uses such as luxury homes, a yacht and movie production.
As early as December 2004, Harrison’s staffing companies provided workers to a Fresh Del Monte Produce packing plant in Portland, Ore., according to a weekly revenue report introduced into evidence by the government on Monday. The account was significant enough to receive its own line item under a list of branch offices. Fresh Del Monte Produce accounted for such a significant portion of the staffing company’s Portland business that it maintained an office on the premises of the packing plant. In the course of acquiring the assets of Harrison’s staffing businesses, McDaniel and Griffin would take over the Del Monte contract in 2006.
“In the case of Del Monte, we singled those out because they had such large volume,” McDaniel testified on Monday.
McDaniel and Griffin formed StaffCo Management Group in 2005. By November 2006, they had acquired the assets of Harrison’s staffing businesses. Harrison has confirmed to YES! Weekly that he served as a creditor to the company and as a member of its board.
“Mr. Harrison didn’t want to be in the staffing business anymore, didn’t want to have anything to do with it,” public defender Tom Cochran argued in his opening statement. “He wanted to be a lender.”
(Background on Harrison’s investments in nightclubs and movies)
Documents introduced into evidence on Tuesday establish that Harrison loaned McDaniel and Griffin $1.5 million over a six-month period that coincided with the launch of StaffCo. McDaniel testified that the two also obtained a $7.5 million loan from a New York company called BHC, adding that $3.7 million was handed over to Harrison to pay for the asset purchase of the staffing business.
A 2007 Triad Business Journal article by Michelle Cater Rash quotes staffing firm consultant Bruce Steinberg as saying that StaffCo was expected to be one of the largest privately held staffing companies in the country.
StaffCo operated under the trade name American Staffing Resources, which was the name of a Pennsylvania-based staffing company it had acquired.
Immigration and Customs Enforcement raided Fresh Del Monte Produce and American Staffing Resources in Portland, Ore. in June 2007. An affidavit filed by ICE Special Agent Maximillian L. Trimm citing an interview with Jose Ortega-Milian, a former maintenance manager and supervisor, sheds some light on labor conditions at Del Monte at the time the staffing companies controlled first by Harrison and then by McDaniel and Griffin handled payroll and hiring.
Ortega stated that there were between 25-30 juveniles employed at FDMP, and that anyone with common sense could tell they were minors. He also stated that the FDMP managers knew that they were minors by their appearance.
Ortega stated that during his time at FDMP, he heard various complaints from the other workers that were not being paid for the hours they worked. He stated that FDMP avoided paying overtime, and wouldn’t allow anyone to be paid for more than 40 hours in a work week, although they were required to work well over 40 hours in a given week. He further stated that they were reluctant to complain, because of their illegal immigration status.
Ortega stated that [there] were several factors that contributed to unsafe conditions at FDMP that included: forklift operators were not certified or trained properly; the electrical components were unsafe and exposed; unqualified people were running various dangerous machinery with no training and little instruction. Ortega also stated that during the course of a typical work shift, there was constant yelling by the supervisors to the production staff that included threats of being fired if they did not work as hard as expected….
Ortega stated that he estimated that between 80%-90% of the production workers were undocumented illegal aliens from countries other than the United States.
Ortega estimated that the staff was split between 50% Mexican nationals and 50% Guatemalan nationals, and of those workers, approximately 75% were female.
During several conversations with Zarazua, Freddy LNU and Sanchez during Ortega’s period of employment at FDMP, when the hypothetical scenario of immigration agents showing up at FDMP to execute an immigration raid was posed, everyone agreed that American Staffing Resources would “take the hit” due to the fact that they did the actual hiring, and that FDMP managers could just claim ignorance of their knowledge of the production workers’ illegal status. Ortega stated that he was present during these conversations and that they were sporadic and occurred several times while he was working at the FDMP facility. Ortega stated that all of the managers were aware that almost none of the employees spoke, and were reluctant to report pay discrepancy issues to management, because it was visually obvious, and often talked about.
Upwards of 100 of StaffCo’s employees were detained. Fresh Del Monte Produce withdrew its business, accounting for $30 million in annual revenue to the staffing company. National news about the raid had an adverse impact on the company’s reputation, McDaniel testified.
“That was the beginning of the end of StaffCo,” McDaniel testified. “We never recovered.”
Two of StaffCo’s lenders declared default, McDaniel said. Harrison ended up buying back 70 percent of the company’s assets. McDaniel and Griffin broke up the remaining 30 percent among themselves, creating smaller staffing companies in Tennessee and Georgia.
Harrison incorporated Compensation Management Inc. and Compensation Management Inc. of Iowa, and later, IHT of SC to operate the staffing businesses acquired in the wake of StaffCo’s dissolution. Julie Akers, who was promoted to controller at StaffCo in the fall of 2006, followed the transfer of assets, helping wind down StaffCo’s business and then working for Harrison at Compensation Management Inc. and the other companies.
Akers testified that IHT of SC was formed in the spring of 2009 because two prospective clients were considering bringing new accounts with significant volume to the staffing companies, but wanted to avoid association with American Staffing Resources and its successor because of the negative publicity surrounding the 2007 immigration raid in Oregon.
Prosecutor Frank Chut asked Akers about the similarity between the name IHT of SC and the company owned by Billie Baggett, Harrison’s mother. That company is called Innovative Hiring Technologies and is located in South Carolina.
“It was our understanding that eventually she was going to retire, and the two companies could be rolled together,” Akers testified.
Harrison is accused by the government of lying to an IRS revenue officer after being presented with a $756,988 tax bill by telling her that he had sold the business in August 2002 and had no payroll after that. Harrison allegedly provided Revenue Officer Crystal Peoples with the tax identification number for a company called IHT Inc.
The government’s trial brief details the alleged attempt to throw off the IRS:
RO Peoples examined electronic records for IHT Inc. and determined that it had filed payroll tax returns and paid taxes for the period at issue. After some further attempts to resolve the confused situation, the RO closed her case on defendant Harrison. In fact, the 57-1024567 tax identification number actually belonged to a staffing company called IHT Grand Strand operated in South Carolina by Billie Baggett, defendant Harrison’s mother.
Akers testified on Wednesday that Baggett had no involvement with Compensation Management Inc., Compensation Management Inc. of Iowa or IHT of SC, the three companies operated by Harrison in 2008 and 2009. Baggett is also expected to testify as a government witness.
Akers testified that the staffing companies after Harrison bought back the business operated first at an address on Muirs Chapel Road in Greensboro, then at an on South Swing Road, and finally at a third location in High Point. Akers said Harrison did not maintain an office at the High Point location and was not involved in the day-to-day operations of the business. Yet Harrison controlled funding to the companies, and Akers said she would have to call him to get him to release funds to make payroll.
Annual reports filed with the NC Secretary of State’s office for Compensation Management Inc. list Michael Brooks as the company’s president. Virginia Linke, who worked as payroll manager for StaffCo and then for Compensation Management Inc. testified on Wednesday that Brooks had no involvement with the company despite his title.
Describing Harrison’s role, Linke said, “He basically controlled the funds.”
The trial is expected to last two weeks. Among 34 potential witnesses the government has said it is considering calling to the stand is Joey Medaloni, a former Greensboro nightclub owner who has been convicted of loan fraud. Originally set for September, Medaloni’s sentence has been postponed to Feb. 12, 2012.
Another potential witness is Phil Smoot, a local filmmaker who served as unit production manager for National Lampoon’s Pucked, a 2006 movie financed in part by Harrison and that starred Jon Bon Jovi.
Harrison’s former business partner, Mark Griffin, might also testify, but US Attorney Ripley Rand has written in a letter that “Griffin suffers from stage four brain cancer and is undergoing debilitating treatment.”
Harrison has given notice that he might take the stand himself. Throughout the trial, the defendant has dressed impeccably, maintained good posture, taking notes, conferring frequently with his lawyer and listening closely to testimony. On Wednesday, after he passed through the gate from the gallery to the court, he clasped the two panels between his forefinger and thumb, taking care to align them perfectly, in contrast to prosecutors and other court personnel who left them ajar.
A motion filed by Rand attempting to limit the scope of the defendant’s questions to government witnesses provides a different picture of Greg Harrison:
During the Rule 15 deposition ordered by the court, the defendant conducted extensive improper cross-examination of the witness about irrelevant personal matters. Over the government’s repeated objections, the defendant tried to make the witness admit to supposedly improper relationships with various women, and questioned him at length about photographs of himself and others taken at nightclubs featuring nude female dancing.
By his determinedly salacious line of questioning, the defendant forced a witness, whose direct testimony dealt with his business dealings with the defendant, to confront irrelevant sexual innuendo in the form of cross-examination. Among other things, the defendant presented the witness with purported exhibits of e-mails between himself and various women and questioned the witness on the nature of his relationships with them. The defendant also presented the witness with photographs of the witness and others with “showgirls,” and demanded detail of the evenings the witness spent at various nightclubs. When pressed to justify such lines of questioning, the defendant claimed purpose of “impeachment.”
A one-time nightclub king pleads guilty to loan fraud
Last month, an assistant city attorney wrote that Greensboro’s nightlife “is now drawing people in greater numbers than ever seen before. They consist of the residents of Greensboro, the large student body attending school here and the population of the surrounding region that come into our city to enjoy the atmosphere and amenities.”
The major players in the downtown club scene, which centers on South Elm Street, are Rocco Scarfone and Paul Talley, but Joey Medaloni created the scene in the late 1990s. Ask anyone who lived in Greensboro before 2000, and they’ll tell you that downtown was a ghost town before Medaloni arrived on the scene, that the place pretty much shut down after 5 p.m. Medaloni was celebrated by Mayor Keith Holliday (who reportedly showed up at the man’s plea hearing today) and other civic leaders as a leading driver’s in downtown’s economic development.
As best I can tell, Medaloni created the template for what passes for an entertainment industry in downtown: boom-boom dance music with pretensions of elegance; irony that the N Club (a former Medaloni holding) has drawn scrutiny from elected officials and Downtown Greensboro Inc., the very types that once celebrated it, for the violence of its patrons.
Dance music is a low-overhead enterprise, requiring the employment of a DJ and ample security to deal with high volume crowds. Live music — the calling card of hallowed venues such as the Cat’s Cradle in Carrboro and the Orange Peel in Asheville, which have lifted a plethora of smaller clubs in their wakes — is an investment with a slower return. It requires paying multiple musicians and a closer attention to sound production. Live music is a more labor intensive process all around, but while it’s profit margin is thinner, its rewards are a sense of community and more loyal patronage base.
So, what does it say about Greensboro and an entertainment industry with regional draw that Medaloni has pleaded guilty to loan fraud after reporting what a factual basis document terms “substantial business losses” in the early to mid-2000s?
A plea agreement signed by Medaloni on Dec. 30 indicates an agreement to plead guilty to two counts of federal fraud, including making false statements to a bank and making a monetary transaction with the proceeds of illegal activity.
Medaloni could face up to 30 years of prison time for the first count and a fine of as much as $1 million, but could qualify for supervised release after five years.
Factual basis document filed by US Attorney's Office:
A key question unanswered by the feds' investigation: What was the source of income that allowed Medaloni to retire debt on loans for which he was not actually qualified?
The major players in the downtown club scene, which centers on South Elm Street, are Rocco Scarfone and Paul Talley, but Joey Medaloni created the scene in the late 1990s. Ask anyone who lived in Greensboro before 2000, and they’ll tell you that downtown was a ghost town before Medaloni arrived on the scene, that the place pretty much shut down after 5 p.m. Medaloni was celebrated by Mayor Keith Holliday (who reportedly showed up at the man’s plea hearing today) and other civic leaders as a leading driver’s in downtown’s economic development.
As best I can tell, Medaloni created the template for what passes for an entertainment industry in downtown: boom-boom dance music with pretensions of elegance; irony that the N Club (a former Medaloni holding) has drawn scrutiny from elected officials and Downtown Greensboro Inc., the very types that once celebrated it, for the violence of its patrons.
Dance music is a low-overhead enterprise, requiring the employment of a DJ and ample security to deal with high volume crowds. Live music — the calling card of hallowed venues such as the Cat’s Cradle in Carrboro and the Orange Peel in Asheville, which have lifted a plethora of smaller clubs in their wakes — is an investment with a slower return. It requires paying multiple musicians and a closer attention to sound production. Live music is a more labor intensive process all around, but while it’s profit margin is thinner, its rewards are a sense of community and more loyal patronage base.
So, what does it say about Greensboro and an entertainment industry with regional draw that Medaloni has pleaded guilty to loan fraud after reporting what a factual basis document terms “substantial business losses” in the early to mid-2000s?
A plea agreement signed by Medaloni on Dec. 30 indicates an agreement to plead guilty to two counts of federal fraud, including making false statements to a bank and making a monetary transaction with the proceeds of illegal activity.
Medaloni could face up to 30 years of prison time for the first count and a fine of as much as $1 million, but could qualify for supervised release after five years.
Factual basis document filed by US Attorney's Office:
Joey Angelo Medaloni operated nightclubs and restaurants in downtown Greensboro, in the Middle District of North Carolina, including the N Club, Red Room, Much Restaurant and Heaven Bar. Joey Medaloni operated the N Club and Red Room through North Carolina corporation Medaloni Inc. He operated Much restaurant and Heaven bar through North Carolina corporation Lafamiglia Inc. Accountant Fabian Covington prepared 2003 and 2004 forms 1120S US income tax returns for an S corporation forro Medaloni Inc. and 2004 forms 1040 US individual income tax returns for Joey A. Medaloni. These returns were prepared with documents provided by Joey Angelo Medaloni. The returns were filed with the IRS and showed that Medaloni Inc. and Lafamiglia Inc. had suffered substantial business losses.
Defendant Joey Angelo Medaloni also did business through a company known as Entourage LLC. Joey Angelo Medaloni owed $782,229.92 to Carolina Bank for previous loans. To pay off these loans and to obtain funds for his personal use, Joey Angelo Medaloni applied through Entourage LLC and personally for a loan in the amount of $996,000.00 from Truliant Federal Credit Union. Truliant was at the time engaged in the credit union business in interstate and foreign commerce and was insured by the National Credit Union Administration. As part of the loan application, Joey Angelo Medaloni provided 2003 and 2004 forms 1120 United States corporation tax returns for Medaloni Inc., 2004 form 1120 US corporate tax returns for Lafamiglia Inc. and 2003 form 1040 US individual form 1040 US individual tax return for himself. These tax returns showed that the companies, as well as Joey Angelo Medaloni, personally had significant positive income — contrary to the losses shown on the returns filed with the IRS. Truliant relied on these returns in deciding to make the loan to Joey Angelo Medaloni and Entourage LLC.
In particular, the positive cash flow on the returns filed by Joey Angelo Medaloni lead Truliant to believe that the loan application should be granted. Truliant distributed the amount of $782,229.92, which was paid to Carolina Bank to pay off prior loans. The amount of $206,232.58 which remained of the loan proceeds was paid by the attorney closing the loan by check maid payable to Entourage LLC. Joey Angelo Medaloni took this check and deposited it in his personal account at Bank of America. He then conducted the following further transactions with the proceeds:
1. Joey Angelo Medaloni wrote a check in the amount of $10,562.00 on his Bank of America account to pay off a loan;
2. Joey Angelo Medaloni wrote a check in the amount of $12,375 to his accountant Fabian Covington;
3. Joey Angelo Medaloni transferred $100,000.00 to his Bank of America savings account; and
4. Joey Angelo Medaloni transferred $67,000.00 to a second personal checking account at Bank of America in his own name.
Bank of America NA was at the time of the above transactions insured by the Federal Deposit Insurance Corporation.
The tax returns provided to Truliant were prepared at Joey Medaloni's request by a friend whose initials are MB. All of the false returns bear the signature of T. Hillian as the preparer. Medaloni provided the information to MB for the false returns. These returns were not filed with the IRS and were created for the specific purpose of inducing Truliant to make the loan.
Defendant Joey Angelo Medaloni also induced a second loan using false tax returns provided by MB at Joey Medaloni's request. In October 2005, Joey Angelo Medaloni induced Carolina Bank to loan him and Medaloni Inc. the amount of $314,034.07 to refinance a loan on a boat. Carolina Bank was at the time of the loan a bank engaged in the banking business in interstate and foreign commerce whose deposits were insured by the Federal Deposit Insurance Corporation. When Carolina bank requested tax returns to establish Joey Angelo Medaloni's income and the income of Medaloni Inc., Joey Angelo Medaloni or one of his associates on his behalf provided the bank with false 2004 Form 1040 US individual income tax return for Joey Angelo Medaloni and a 2004 Form 1120 US corporate income tax return fro Medaloni Inc. Both of these returns had been prepared by MB and substantially overstated the income of Joey Angelo Medaloni and Medaloni Inc. Carolina Bank relied on the tax returns to determine that Joey Angelo Medaloni and Medaloni Inc. had income to support the loan.
Defendant Joey Angelo Medaloni induced a further loan in 2006 using false tax returns. In July 2006, Joey Angelo Medaloni provided First Merit Bank NA with false 2004 and 2005 Forms 1040 US individual income tax returns to induce the bank to make a loan in the amount of $967,975.00 for the purchase of an aircraft in the name of Medaloni Air LLC. First Merit Bank NA at the time of the loan was a bank engaged in the banking business in interstate and foreign commerce whose deposits were insured by the Federal Deposit Insurance Corporation. Again, these returns were prepared by MB and overstated the income of Joey Angelo Medaloni. The bank relied on these returns and made the loan for the purchase of the aircraft.
Defendant Joey Medaloni or companies controlled by him repaid the loans described above. The Truliant loan was paid in full by Joey Angelo Medaloni or companies controlled by him in 2007. The Carolina Bank boat loan was repaid in 2007. The First Merit NA aircraft loan was repaid in 2006. Defendant Joey Angelo Medaloni had previously made regular payments on the above described loans. Joey Angelo Medaloni or companies controlled by him repaid the above described loans prior to the beginning of the government's investigation.
A key question unanswered by the feds' investigation: What was the source of income that allowed Medaloni to retire debt on loans for which he was not actually qualified?
Greg Harrison pleads poverty
Lots of people contend that they’re owed money by Greg Harrison, a Greensboro temporary agency executive whose expansionist aims were chronicled in a 2003 Business Journal article. Add the federal government to the list.
In 2007, US District Court Judge James A. Beaty entered a civil judgment against Harrison for $350,134 on behalf of Temporary Services Insurance of the Cayman Islands.
The company filed a federal lawsuit against Harrison the following year to try to collect on the judgment. In 2009, National Union Fire Insurance of Pittsburgh, PA joined the lawsuit after obtaining a judgment from a federal judge ordering Harrison and his companies to pay back $5.9 million.
The federal government alleges that Harrison tried to throw off the Internal Revenue Service by providing agents with an Employee Identification Number, or EIN, for a company that purportedly purchased one of his companies. The agents determined that the EIN was for a company in Myrtle Beach, SC that was owned by Harrison’s mother, and that, in fact, she did not purchase the company from her son and was not paying payroll taxes.
A lawyer for the National Union Fire Insurance wrote in a legal filing earlier this year that through discovery the plaintiff obtained a 1099 Form issued to Harrison by one of his staffing companies, StaffCo, that “reveals that defendant Harrison personally received $540,300 in 2007 from StaffCo. This payment represents proceeds from the sale of US Staff-Holding to StaffCo, such that the payment should have gone to US Staff-Holding, and then to its creditors, such as plaintiffs, not defendant Harrison personally.”
By March 2010, Harrison was representing himself.
Rebuffing efforts by his creditors to expand discovery, Harrison wrote in a legal filing: “Plaintiff is well aware that the corporate entities made defendant in this case are either totally without funds to defend themselves or have not been in existence for a number of years. Plaintiff is also well aware that as to the defendant Harrison, no funds or assets exist from which a judgment could be paid even if plaintiff were successful in the prosecution of this case. Further that defendant Harrison currently has some $11 million of judgments against him personally. Additonally, the defendant Harrison does not have funds with which to defend himself in this case and, therefore, is proceeding as a pro se litigant.”
The frustration was evident in a responsive filing by David A. Senter, lawyer for the plaintiffs.
“The need for further discovery is a direct result of defendant Harrison’s efforts to hide the ball and thwart legitimate areas of inquiry as well as his downright untruthfulness,” he wrote.
By September, the parties had agreed to dismiss the lawsuit with each side taking responsibility for their own legal bills.
Harrison once owned temporary staffing companies in at least nine states. He was once an investor in the Much-Heaven nightclub in downtown Greensboro and National Lampoon’s Pucked, starring Jon Bon Jovi. Now, with the federal government claiming he failed to pay $15.1 million in payroll taxes, he turning to the state to pick up the tab for his legal defense.
Joey Medaloni, who once owned Much and other downtown nightclubs, has similarly fallen on hard times. He is accused in a federal indictment of falsifying his tax returns by inflating his income to obtain loans totaling $2.3 million. The lead prosecutor in both Medaloni and Harrison’s cases is Assistant US Attorney Frank J. Chut.
On Monday, US Magistrate Judge Trevor Sharp appointed a public defender to represent Harrison, finding that the defendant “had demonstrated eligibility for appointment of counsel at government expense.”
Harrison will be represented by the same lawyer who handled a case for Randolph Kilfoil, a member of the Latin Kings, this past summer.
Harrison’s plea hearing is scheduled for Jan. 3 in federal court in Greensboro. His trial is set for Jan. 10.
In 2007, US District Court Judge James A. Beaty entered a civil judgment against Harrison for $350,134 on behalf of Temporary Services Insurance of the Cayman Islands.
The company filed a federal lawsuit against Harrison the following year to try to collect on the judgment. In 2009, National Union Fire Insurance of Pittsburgh, PA joined the lawsuit after obtaining a judgment from a federal judge ordering Harrison and his companies to pay back $5.9 million.
The federal government alleges that Harrison tried to throw off the Internal Revenue Service by providing agents with an Employee Identification Number, or EIN, for a company that purportedly purchased one of his companies. The agents determined that the EIN was for a company in Myrtle Beach, SC that was owned by Harrison’s mother, and that, in fact, she did not purchase the company from her son and was not paying payroll taxes.
A lawyer for the National Union Fire Insurance wrote in a legal filing earlier this year that through discovery the plaintiff obtained a 1099 Form issued to Harrison by one of his staffing companies, StaffCo, that “reveals that defendant Harrison personally received $540,300 in 2007 from StaffCo. This payment represents proceeds from the sale of US Staff-Holding to StaffCo, such that the payment should have gone to US Staff-Holding, and then to its creditors, such as plaintiffs, not defendant Harrison personally.”
By March 2010, Harrison was representing himself.
Rebuffing efforts by his creditors to expand discovery, Harrison wrote in a legal filing: “Plaintiff is well aware that the corporate entities made defendant in this case are either totally without funds to defend themselves or have not been in existence for a number of years. Plaintiff is also well aware that as to the defendant Harrison, no funds or assets exist from which a judgment could be paid even if plaintiff were successful in the prosecution of this case. Further that defendant Harrison currently has some $11 million of judgments against him personally. Additonally, the defendant Harrison does not have funds with which to defend himself in this case and, therefore, is proceeding as a pro se litigant.”
The frustration was evident in a responsive filing by David A. Senter, lawyer for the plaintiffs.
“The need for further discovery is a direct result of defendant Harrison’s efforts to hide the ball and thwart legitimate areas of inquiry as well as his downright untruthfulness,” he wrote.
By September, the parties had agreed to dismiss the lawsuit with each side taking responsibility for their own legal bills.
Harrison once owned temporary staffing companies in at least nine states. He was once an investor in the Much-Heaven nightclub in downtown Greensboro and National Lampoon’s Pucked, starring Jon Bon Jovi. Now, with the federal government claiming he failed to pay $15.1 million in payroll taxes, he turning to the state to pick up the tab for his legal defense.
Joey Medaloni, who once owned Much and other downtown nightclubs, has similarly fallen on hard times. He is accused in a federal indictment of falsifying his tax returns by inflating his income to obtain loans totaling $2.3 million. The lead prosecutor in both Medaloni and Harrison’s cases is Assistant US Attorney Frank J. Chut.
On Monday, US Magistrate Judge Trevor Sharp appointed a public defender to represent Harrison, finding that the defendant “had demonstrated eligibility for appointment of counsel at government expense.”
Harrison will be represented by the same lawyer who handled a case for Randolph Kilfoil, a member of the Latin Kings, this past summer.
Harrison’s plea hearing is scheduled for Jan. 3 in federal court in Greensboro. His trial is set for Jan. 10.
Indictment against Medaloni expanded
A new superceding indictment filed on Tuesday broadens allegations of loan fraud already made against Joey Medaloni, who is credited with developing Greensboro's downtown nightlife scene beginning in the late 1990s.
The new indictment accuses Medaloni of providing falsified tax returns that inflated his income to First Merit Bank to secure a loan in the amount of $967,975 to Medaloni Air in July or August 2006, and of providing falsified tax returns to Carolina Bank to obtain a loan valued at $314,034 in October 2005.
The original indictment alleges Medaloni obtained a loan for $996,000 from Truliant Federal Credit Union in August 2005 through similar means.
Medaloni is linked to Rocco Scarfone and Greg Harrison through investments in Greensboro nightclubs. In 2006, Medaloni sold the N Club to Rocco Scarfone, who has recently been under fire for violence associated with his nightclubs, and sold Much/Heaven to a partnership that included Greg Harrison, Dr. Lenin Peters and Scarfone. In late 2008, Scarfone resigned from the partnership responsible for Much and Heaven.
In a preview of events to come, Scarfone filed an affidavit in 2008 alluding to statement allegedly made by Medaloni that he was under investigation by the IRS. According to Scarfone, Medaloni had approached Scarfone about allowing his younger brother join a venture related to Childress Vineyards, but cautioned that Joey Medaloni's name could not be associated with it because of the federal investigation.
The new indictment accuses Medaloni of providing falsified tax returns that inflated his income to First Merit Bank to secure a loan in the amount of $967,975 to Medaloni Air in July or August 2006, and of providing falsified tax returns to Carolina Bank to obtain a loan valued at $314,034 in October 2005.
The original indictment alleges Medaloni obtained a loan for $996,000 from Truliant Federal Credit Union in August 2005 through similar means.
Medaloni is linked to Rocco Scarfone and Greg Harrison through investments in Greensboro nightclubs. In 2006, Medaloni sold the N Club to Rocco Scarfone, who has recently been under fire for violence associated with his nightclubs, and sold Much/Heaven to a partnership that included Greg Harrison, Dr. Lenin Peters and Scarfone. In late 2008, Scarfone resigned from the partnership responsible for Much and Heaven.
In a preview of events to come, Scarfone filed an affidavit in 2008 alluding to statement allegedly made by Medaloni that he was under investigation by the IRS. According to Scarfone, Medaloni had approached Scarfone about allowing his younger brother join a venture related to Childress Vineyards, but cautioned that Joey Medaloni's name could not be associated with it because of the federal investigation.
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