Thursday, April 18, 2024

NC trend: The case of the missing $25 million in Fayetteville

This was no boardroom. They were just Muzzy and Chris, shooting the bull, talking business outside the office. Square-jawed with thinning hair, Muzzy, a prominent Texas businessman, preferred the nickname rhyming with Buzzy to Mouzon Bass III.

He owned or had stakes in more than a dozen enterprises, including Fayetteville-headquartered EbenConcepts, now known as eBen, which provided employee benefits and human resource services to companies in North Carolina, Georgia, Texas and Virginia.

Christopher Scott Harrison was CFO with a $300,000 annual salary and a majority stake in EbenConcepts. He had a penchant for fine things, like timepieces. His $1.2-million Fayetteville home on Forest Creek Drive featured two-story, square brick pillars and an ornate grandfather clock in the foyer. Harrison now awaits sentencing this spring in federal court for financial wrongdoing. 

“Muzzy and Chris would sit at Muzzy’s kitchen table and talk about how things were going, the financials and all that,” says an EbenConcepts executive. “That’s why Muzzy is so angry. It wasn’t just an employee relationship. He was a friend.”

Between 2012 and 2018, Harrison withdrew $25 million from EbenConcepts in a stunningly simple scheme of purchasing personal items and reporting them as business expenses, which led to him underreporting his income, according to court records. He had help from the company controller, according to a person familiar with the matter.

Now, based on court records, company sources, state and federal investigators and others, EbenConcepts appears to be a textbook case of fraud, playing out over years and motivated by a time-worn impulse. “Money,” says a Bass acquaintance familiar with the company, “is thicker than friendship sometimes.” 

Chris Harrison

Harrison’s scheme and subsequent prosecution paint a detailed look inside the American justice system. He was targeted by the Internal Revenue Service’s criminal division, rather than the Federal Bureau of Investigation or other agencies more often associated with crime. 

If Harrison goes to prison, it won’t be because he stole $25 million of his company’s money. Rather it’s because he failed to pay $6 million in taxes that U.S. Eastern District Attorney Michael Easley Jr. in Raleigh says he would have owed if he earned and reported it legally.

Such prosecutions have long been a weapon against those who commit financial crimes. Gangster Al Capone famously escaped punishment for countless murders and mayhem, but he couldn’t escape the IRS. He went to prison in 1931 for tax evasion.  

Closer to home, similar tactics were used to nail Tar Heel moonshiners who otherwise laughed off $50 fines and weeklong jail sentences. “One thing I learned when I was in the U.S. Attorney’s Office was that there were a lot of prosecutions in the 1920s and 1930s, where bootleggers didn’t pay tax on their alcohol,” says Ripley Rand, who later became a Superior Court judge.  

That’s how the state came to have three federal court districts. With so many cases coming out of western North Carolina, “the federal government created a third district,” says Rand. “Federal law enforcement follows the money, and that’s why today, a lot of the investigations get started because of some other wrong-doing like embezzlement, but end up with the IRS when it follows the money.”

Rand, a partner in Raleigh’s Womble Bond Dickinson’s law firm, is Harrison’s defense attorney. He says the U.S. Bankruptcy Court found that Harrison withdrew money from the company, and charged expenses, that were “constructive dividends” based on his majority ownership at the time. Rand declines to discuss other details of the case. Harrison, who is in his mid-50s, pleaded guilty in January to willfully filing a false tax return. He faces as much as three years in prison, restitution to the IRS, and a possible fine, according to the U.S. Attorney’s Office.

Sabrina Hooten, the former company comptroller, has been accused in civil court documents of taking nearly $2 million from Orchestrate HR, another part of Bass’ holding company. She has not been charged with a crime. 

“You don’t brag about the 4-inch-fish,” says an EbenConcepts officer, who adds that an IRS investigator told him the agency didn’t have the resources to pursue smaller cases.  The agents also say being too aggressive in cases like Harrison’s might jeopardize bankruptcy settlements.

EbenConcepts remains healthy, says Senior Vice President David Smith, who is based in Raleigh. “No client money was ever taken,” he says. “Last year was one of our best years ever.” The company has about 100 employees and expects revenue of $20 million this year. 

EbenConcepts, rebranded as eBen in 2021, dates to 1999. Harrison joined the business in 2002, and worked his way into Bass’ confidence. 

From 2012 to 2018, Harrison “began to lavishly spend company funds for his own benefit,” Easley says. Over the years, he traveled to New York to buy a $145,000 Rolex watch, an $85,000 Tiffany bracelet and a $100,000 Cartier necklace of diamonds for
his wife.

In the meantime, contractors installed a $300,000 swimming pool in the backyard of his Fayetteville home. 

In Dallas, the IRS, by September 2019, was working in conjunction with the Secret Service, piecing together accusations against Hooten, the controller.

Bass, knowing that she and Harrison were privy to the company’s trade secrets, internal data and attorney-client dealings, filed a lawsuit to shut her up. Using information from that lawsuit, the Secret Service moved in, accusing Harrison and Hooten of using company credit cards to buy personal goods, usually coding them as “travel” or “office” expenses. In addition to protecting the president, the Secret Service investigates counterfeiting, credit-card fraud and other crimes.

Harrison was accused of buying $2.2 million in jewelry in four years, secreting it at his Fayetteville home, uninsured to avoid detection. Court documents show his wife,  Brandy, has refused to return the bling.

In December 2019, a month after Hooten was hit with Bass’s restraining order, Harrison filed for bankruptcy in North Carolina. 

The noose tightened during the federal bankruptcy hearings in Judge Stephani Humrickhouse’s court in the Eastern District of North Carolina. Harrison initially cited memory lapses about details of trips to New York to buy jewelry. Humrickhouse replied that Harrison’s remorse and promises to make amends to creditors and the IRS struck her as hollow, “too little, too late.” 

Mouzon “Muzzy” Bass

During the month he filed for bankruptcy, he’d converted 3.46 million American Express “Platinum Card” credit-card points to his own use. He’d racked up those points by claiming personal purchases as business expenses, then used them to buy Christmas gifts for friends and family, the judge noted.

If Harrison’s case springs unusual, it might be because much of it stems from his bankruptcy filing, in which he conceded he owed the IRS millions that he couldn’t pay. He said he didn’t realize how much the long history of withdrawals from EbenConcepts totaled. 

In Dallas, the Texas businessman who once chatted over coffee with Harrison, is now sole owner of Eben. Muzzy Bass notes that the bankruptcy court awarded him and his companies $30 million in judgments.

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