A New York creditor has asked the NC Business Court to appoint a receiver to take control of staffing companies believed to be controlled by Greg Harrison for the purpose of collecting on a $7.5 million debt.
The Dec. 22 motion by BHC Interim Funding II LP came on the heels of a jury verdict two days earlier finding Harrison guilty of failing to pay payroll taxes in the amount of almost $16 million over a five-year period, and of corruptly endeavoring to obstruct federal revenue laws.
The plaintiff loaned $7.5 million to Greensboro staffing company called StaffCo in late 2006. The company defaulted after a 2007 immigration raid on its largest client, Del Monte, in Portland, Ore., and Harrison bought the assets. As part of the purchase, a new company set up by Harrison called Compensation Management assumed the debt. Compensation Management transferred its assets to another company, IHT of SC, which in turn went out of business in 2010. The plaintiff alleges that by that time the assets had been transferred to a new company called Global Labor that licenses a group of staffing companies stretching from Pennsylvania to Florida.
Citing North Carolina statute, BHC asserts that a receiver may be appointed before judgment when the assets “are in danger of being lost, or materially injured or impaired.” The plaintiff argued in a Dec. 22 brief that “Harrison/CMI/Global Labor will surely try to transfer the assets to a new company. They have hidden and diverted the assets in the past, and there is every reason to think that they will do so in the future.”
Prosecutor Frank Chut said in closing arguments before a jury found Harrison guilty on 63 counts of tax evasion that the defendant mislead federal revenue agents who confronted him about unpaid payroll taxes and created fraudulent documents to mislead investigators, engaging in “a pattern of deception that goes even to this courtroom.”
Harrison is currently in detention facing sentencing in April.
Another prosecutor said he could face 10 years in prison for the crime.
Global Labor and other defendants have 20 days to file an objection to the motion. Judge James L. Gale, special superior court judge for complex business cases, will likely hold a hearing before making an order in the case.
The fraud alleged by BHC as a private creditor appears to run concurrently with Harrison’s efforts to avoid paying federal taxes, involving the same continuously shifting constellation of business entities that appear to have created a shell game to confuse those seeking to collect money owed. Although the charges on which Harrison was convicted itemized almost $16 million in unpaid payroll taxes, prosecutor Jeffrey McLellan said that the actual amount is closer to $40 million, but some of the funds were outside of the statute of limitations. Additionally, Harrison has a total of $25.7 million in court-ordered judgments against him.
Plaintiff BHC’s brief alleges that Gerald Pell, a lawyer who has long represented Harrison in business matters, appointed Harrison president and William Ray as the sole director of Global Labor in August 2008.
“Harrison, with the assistance of Pell, controlled Global Labor and set up an elaborate corporate structure, including contracts with licensees, to operate the former assets of StaffCo,” the brief reads. “Harrison also controlled the banking relationship with GrandSouth Bank, the new lender set up to factor accounts for Global Labor and its licensees. Harrison identified and allocated the former accounts of StaffCo/CMI in order to secure financing from GrandSouth Bank. By relying on the customers of StaffCo/ CMI, Harrison needed only $700 to capitalize Global Labor.”
It is unclear whether Harrison’s conviction will disrupt the financing arrangement, which is structured so that funds from GrandSouth Bank to the licensees are routed through Global Labor.
“Per our bank president, we have no comment,” said Doug Corriher, a vice president of the bank. “Our dealings are with our clients and not with you.”
David Puryear, the Greensboro lawyer who represents Global Labor, declined to comment on Tuesday except to say, “The response is what will be in our filing.”
The lawsuit also names as defendants a number of licensee companies, including Hire Alternatives, a staffing company operated by Pete Pappas with branches in Greensboro, Wilmington and Raleigh; Integrated Staffing Solutions, a staffing company operated by Lou Ann Shaw in Gastonia; Temporary Personnel Solutions, a staffing company operated by Mark Gleason with branches in Jacksonville and Pensacola, Fla., and in Pennsylvania and Virginia; and Strategic Insource Solutions, a staffing company operated by Trevor Jefferson in Greensboro.
Jefferson said in an e-mail on Monday that he does not give the motion to appoint a receiver much chance of success. If it were to be approved, he said, “it would have no effect on my business whatsoever.”
The plaintiff’s brief accuses Ray of deception in stating during a deposition that “Global Labor was originally formed because of the belief that there was a substantial field of business available in the personnel industry, and because CMI and StaffCo had been run so poorly there was a substantial question as to their ability to succeed.”
The brief states, “The ‘substantial field of business available’ was in fact the assets of CMI under the control of Harrison. Real capital was not required because Harrison simply took the active accounts of CMI and placed them under a set of bogus licensees. As part of this scheme, Harrison set up various corporations that he controlled from behind the scenes through his friends and associates.”
The plaintiffs quote from the minutes of a March 2009 special shareholders meeting for Global Labor that was filed under seal on Dec. 22: “The consultant announced that the purpose of the meeting was to discuss a new concept for the running of the company. Mr. Harrison proposed the company split its customer base into territories and become a licensor to a group of longstanding and loyal employees who would operate a staffing business in the territories as independently owned entities and licensees.”
BHC alleges that in exchange for access to the territories, each licensee agreed to pledge 100 percent of its stock to Global Labor, agreed to an irrevocable proxy allowing Global Labor to vote the stock of the licensee for its benefit, to irrevocably appoint Global Labor legal control of any transfer of assets, to not to compete with Global Labor in the event of a termination and to transfer all business back to Global Labor if their contracts were ended.
The plaintiff contends that Global Labor receives $15,000 to $20,000 per month in royalty payments from the licensees, or from $180,000 to $240,000 per year. The brief characterizes Global Labor as Harrison’s “personal ATM,” indicating that a review of Global Labor’s bank records reveals personal charges by Harrison to Microsoft Xbox, Xpress Lube and Sports Authority, along with a withdrawal of $6,700 from August 2010 through February 2011.
BHC also accuses Harrison of forging the signature of Michael Brooks on an asset purchase agreement that shifted the staffing businesses from Compensation Management to Global Labor. An English-born soccer player, Brooks worked as a financial analyst for Harrison from 2002 to 2006. Since that time, he said in a deposition, he has earned a living as a professional poker player. He said that until BHC’s lawyers gave him a copy he had never seen the asset purchase agreement bearing his signature as president of Compensation Management.
Brooks testified in a deposition that Harrison asked him to be the owner of Compensation Management in 2008, after he had left the staffing business. He signed incorporation papers, even though he never actually owned the company or received any money from it. Brooks said Harrison “told me he wasn’t able to take a position at that time because there was a lien against him, and he asked me if I would take the position up for him. I asked him if that was something that was okay to do and he said, yes, it was.”
“Why would you agree to do that?” one of BHC lawyers asked Brooks.
“Because Greg and I had been friends since 2000,” Brooks replied. “He’s someone I’ve known for longer than anybody since I’ve been over here, someone I’d always trusted, and I had no reason to not trust him. So he asked me to sign it and I signed it.”