JK Harris goes under
GOOSE CREEK -- National tax- representation firm JK Harris & Co. suspended all operations Thursday, putting more than 100 local residents out of work, and is preparing for the possible liquidation of the firm's assets.
JK Harris & Co. seeks bankruptcy protection, published 10/08/11
JK Harris at a crossroads; CEO of tax rep firm hopes cash infusion can help end bankruptcy, published 11/30/11
Company founder and Chief Executive Officer John K. Harris had been attempting to restructure and possibly sell the business and two affiliates under Chapter 11 bankruptcy protection since October, and recently employed about 135 people at the company's headquarters in Goose Creek. Employees were told in an email at 4:30 p.m. that they could return Friday to pack up their personal belongings.
"This is truly the most devastating event I have been forced to deal with in my 58 years on this earth," Harris said in the email to employees. "I am not sure it will reach that level for all of you, but I know that for some of you
it will be as personally devastating for you as it is for me."
About 30 employees were previously laid off in October, and they must pursue their unpaid wages as creditors in the bankruptcy case. The employees affected by Thursday's shut-down are in a similar position, owed about two weeks' pay.
More than 5,000 customers who had hired the company to try to resolve their federal tax debts also are left in the lurch by the shutdown.
Harris said the company was unable to secure additional funding from its primary lender in order to keep operating while seeking a buyer, and will ask the court to convert the case to a Chapter 7 bankruptcy, which means that instead of restructuring, the company could be shut down and its assets sold.
JK Harris & Co. once advertised that it could resolve people's tax debts for "pennies on the dollar," but the nationwide firm was dogged by cash-flow problems and the cost of large settlements related to multiple claims that it misled consumers. In case after case, attorneys general complained that the company told consumers it could resolve their tax problems, and took their payments, when no such relief was possible for those particular clients.
The company sought bankruptcy protection to head off an attempt by the Texas attorney general's office, related to such consumer claims, to force the company into receivership.
In emails to employees, vendors and clients Thursday afternoon, Harris blamed the situation on the refusal of the company's largest creditor, RAI Credit of New Jersey, to provide additional financing during the restructuring effort. At the time of the bankruptcy filing, RAI was owed nearly $11.9 million, and the JK Harris companies had assets worth about $3.8 million.
Attempts to reach RAI officials for comment after normal business hours were unsuccessful.
Along with RAI and the employees who were previously laid off, the company's creditors include vendors and consumers, including those who were slated to get millions of dollars in compensation from previously agreed-upon legal settlements. Together, the unsecured creditors are owed about $20 million.
The next step for JK Harris & Co. is expected to be a Jan. 10 bankruptcy court hearing, where the company will ask a judge to appoint a trustee.
Reach David Slade at 937-5552.