The founder of JK Harris & Co. improperly withdrew millions from the insolvent firm when it was operating, then deleted computer files and refused to swear to the accuracy of financial records after shutting down, a trustee alleges.
In U.S. Bankruptcy Court filings, appointed trustee Michelle Vieira is seeking a nearly $4.8 million judgment against John K. Harris, and additional sanctions aimed at forcing Harris to provide information under penalty of perjury.
Harris, 58, is founder of the Goose Creek-based tax-resolution business, which was driven to bankruptcy by consumer complaints.
JK Harris & Co. and several associated businesses shut down in January, months after seeking bankruptcy protection to escape an attempt by the Texas attorney general to force the company into receivership over consumer-related restitution payments and fines.
Vieira said she would not comment on the litigation, but in a 42-page filing Wednesday she spelled out the alleged difficulty she has had getting information needed to secure assets and repay creditors.
For example, Vieira’s motion said it took the threat of a complaint to the court and a visit to Harris to get him to turn over his company cellphone and computer in January. Then, “it became apparent that Harris had completely removed all information from the telephone and he continued to refuse to provide the password to the computer,” the motion alleges.
“He continued to refuse to provide the password until ... April 10, 2012, at which time he finally provided the password, which was ‘password.’”
A forensic expert later determined that 26,537 files had been deleted from the computer, according to the motion, and those files “contained keywords such as ‘distribution’, ‘draw’, ‘jk salary’, ‘new company’, ‘offshore’ and ‘withdrawal.’?”
In a related complaint, the trustee’s office alleges that Harris improperly took nearly $4.8 million out of JK Harris and related companies while they were insolvent, from 2004 until they shut down, in violation of South Carolina corporate law.
The trustee wants a judgment against Harris for at least that amount, but Harris has recently testified that he has no money, and has made it his practice to keep no assets in his own name.
In a related civil suit, involving a $355,972 judgment against Harris for unpaid rent at JK Harris & Co’s former offices, Harris testified in April before Charleston County Judge Mikell R. Scarborough that his assets amounted to about $400 in the bank and a boat with an overdue loan.
“Did I squirrel away any money?” Harris said during testimony. “No. I’m too ethical to do anything like that.”
Scarborough ordered Harris to turn the boat over to his former landlord’s law firm.
“You can’t get blood from a turnip,” Harris said after a hearing.
He testified that he now earns about $1,500 a week consulting for several companies in Florida, and gives most of the money to his ex-girlfriend and his estranged wife.
Katie Monoc, attorney for former landlord Rivergate Center I LLC, told Scarborough that she plans to subpoena bank officials and Harris’ family members at a future hearing.
“I have reason to believe money has been transferred,” she told the judge.
The latest bankruptcy court filings by the trustee say that Harris has refused to file standard bankruptcy paperwork, which requires sworn statements about finances.
The Post and Courier was unable to reach Harris’ attorney by telephone and email. Harris could not be reached on his last known phone number, and has testified that he now has no fixed address.
JK Harris was a nationwide tax-resolution firm once known for ads telling people that it could resolve their tax debts for pennies on the dollar. The company faced numerous complaints from state attorneys general over the years, mostly related to consumers who said they paid the company for services they didn’t receive.
When the company went under, most of the settlements reached over consumer complaints were left unpaid, part of a pile of debts exceeding $20 million.
Also, more than 100 employees weren’t paid for their last weeks of work, according to court filings, and thousands of clients who counted on the company to resolve their tax problems were left in limbo.
Some employees said the resulting stain on the company’s name has harmed their efforts to seek new jobs.
“The employees who did their work honorably and with an intention of helping people every day do not deserve to be impugned by whatever the failing of the namesake owner may have been,” said former employee Rene Barrett, in an email to the newspaper.
Former employee Leah McLaughlin said she worked for JK Harris for nearly nine years, obtained an IRS enrolled agent’s license, and helped many clients sort out their tax problems.
“Even with the negative stories in the media and the stigma that now surrounds JK Harris & Company, I am still proud of the work I did while employed with JK Harris, and will continue to remain proud of my accomplishments, no matter where the future may lead me.”
What remained of the company, consisting primarily of its client list, was purchased by Resolute Tax Services, which agreed to pay 15 percent of revenues or $1 million, whichever is greater, for all of the assets.
Reach David Slade at 937-5552 or Twitter @DSladeNews.-