A Greensboro staffing agency executive whose opulent lifestyle once included the adornments of luxurious homes, a yacht and the financing of movies and nightclubs has been reduced to answering charges of tax evasion in federal court with the assistance of a public defender.

Greg Harrison, whose career as owner and financer of a shadowy national network of staffing agencies has been punctuated with investments in nightclubs and movies in the Piedmont Triad, is accused by the US government of failing to pay almost $16 million in payroll taxes and deliberately obstructing the Internal Revenue Service, along with failing to pay personal income taxes.

As an indication of the case’s importance, the government has brought in a trial attorney from the US Justice Department’s tax division in Washington to assist with prosecution. Against a team of four prosecutors, Harrison is being represented by a public defender.

An order by a US magistrate for the Middle Court of North Carolina last December indicated that Harrison has “demonstrated eligibility for appointment of counsel at government expense.” Representing himself as a defendant in a recent lawsuit, Harrison stated in a motion that creditors were “well aware” that he has “no funds or assets.”

The tax evasion trial is expected to last another one or two weeks.

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 the prosecution before the trial began shows another side of the defendant. Seeking to limit the scope of the defense’s questions to government witnesses during cross-examination, US Attorney Ripley Rand said in a motion that during depositions, Harrison tried to make a 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,” Rand wrote. “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 defen dant claimed purpose of ‘impeachment.’” Harrison and his lawyer have declined to comment to the press during the trial.

Despite the court’s finding that Harrison is eligible for legal representation at government expense, an asset purchase agreement dated January 2009 records that Compensation Management Inc., a company controlled by Harrison, transferred assets valued at $7.5 million to Global Labor Inc., another company set up by Harrison. The document lists business locations across the Carolinas, and in Florida, Georgia, Pennsylvania and Virginia. Global Labor Inc. holds licensing agreements with various companies, including Hire Alternatives in Greensboro, to operate the staffing agencies.

Harrison is also accused of willfully failing to file individual income tax returns for three years, despite earning $651,594 in one of those years, 2005, in compensation for his executive duties as owner of his staffing empire.

Prosecutor Frank Chut told a jury in his opening statement to expect former employees of Greg Harrison’s staffing companies and revenue officers of the Internal Revenue Service to testify that the businessman failed to pay federal payroll taxes for his companies for several years, and then lied to revenue officers and falsified documents to cover his tracks. Chut said the prosecution will also prove that Harrison stiffed the government on his personal income taxes. “You will see documents where the IRS acknowledges that he paid taxes,” public defender Thomas Cochran promised the jury.

Harrison inherited a staffing business from his mother in the 1990s, and expanded it into a national chain. In the next decade he began investing in a nightclub complex in downtown Greensboro that passed from the control of Joey Medaloni to Rocco Scarfone. (Medaloni pleaded guilty to loan fraud in a separate federal case, and is scheduled for sentencing in February.) Harrison also helped finance National Lampoon’s Pucked, a movie starring Jon Bon Jovi that was filmed in the Triad, and is named as one of the film’s producers.

Phil Smoot, the unit production manager for Pucked, testified on Monday that one of Harrison’s staffing companies handled payroll services for the actors and crew, but did not directly hire them or cover labor costs. Smoot said he became concerned that the markup for payroll services was significantly higher than what was typically applied to film productions. He said the additional costs threatened to create “quite a bit of overage” in the film budget, and authored a “stern memo” to Harrison and other executive producers to that effect. Medaloni is also listed as one of the government’s potential witnesses.

The government lays out the facts behind its charge that Harrison “corruptly endeavored to obstruct the due administration of the internal revenue laws” in the trial brief. The prosecution alleges that Harrison lied to an IRS revenue officer in 2006 by telling her that he had sold his staffing business and provided her with falsified forms claiming that his company no longer had to file tax returns. When the revenue officer requested a tax identification number for the company that purportedly acquired Harrison’s business, he allegedly provided her with the tax identification number of a staffing company owned by the defendant’s mother in North Carolina. The trial brief states that Billie Baggett is expected to testify that she never purchased any company from her son. The government promises to prove through bank records and witness testimony that “Harrison took millions of dollars withheld from his employees’ paychecks and, instead of paying that money to the IRS, used those funds to pay for (1) his palatial personal residence in Greensboro, North Carolina, (2) a luxury beach house near Myrtle Beach, South Carolina, (3) the purchase of a yacht,” and funding two movies, including Pucked and a second one called Home of the Giants.

Harrison’s financial liabilities have been mounting since at least 2007. That year US District Court Judge James A. Beaty, the same judge who is presiding over the criminal trial, entered a civil judgment against Harrison for $350,134 on behalf of Temporary Services Insurance. The company filed suit in 2008 to try to collect on the judgment. In 2009, National Union Fire Insurance of Pittsburgh joined the lawsuit after obtaining a judgment from a federal judge ordering Harrison and his companies to pay back $5.9 million.

More recently, in 2010, the New York Supreme Court ordered Harrison and one of his companies to pay a creditor $8.5 million.

All told, Harrison’s financial liabilities, including alleged back taxes owed to the IRS and court-ordered judgments, totals $41.7 million.

Ray McDaniel, a former chief operating officer for Harrison’s companies, testified as the government’s first witness that when he received his paycheck, federal payroll taxes had been withheld. Years later, he received a letter from the Social Security Administration acknowledging how much he had earned and contributed to the fund over the years, and it showed zeroes for three years that he had been employed with Harrison.

“Yeah, it was surprising,” McDaniel said.

“It was disturbing… because I had worked and received wages.”

McDaniel said he confronted Harrison about the discrepancy, but his boss brushed aside his concern, telling him he should take his W2 forms to the Social Security office and they would likely correct the report.

Two other employees, both controllers, have also testified that they received Social Security letters indicating no earnings or contributions from their work for Harrison’s companies.

These figures do not include payroll taxes for a much vaster pool of employees — temporary workers.

McDaniel testified that when staffing companies bill their clients, they typically mark up total wages paid to temporary workers by 28 to 38 percent. That markup is supposed to cover profit, administrative overhead and payroll taxes.

Four different controllers have testified that they prepared quarterly federal payroll tax returns, known as 941s, for dozens of companies controlled by Harrison. On all but a couple occasions they handed them over to Harrison with the assurance that deposits would be made to the IRS. One former controller, Julie Akers, who was left with the responsibility for making deposits during the period of 2008 and 2009, testified that Harrison authorized the release of just enough money to cover payroll but not enough to make deposits for payroll taxes.

On one occasion, she said she asked for funds to pay the taxes, but Harrison denied the request. Eventually, she started filing returns with IRS without making deposits because “at this point it was the right thing to do.” On yet another occasion, Akers testified that Harrison gave her permission to write a check to the IRS for $145,693, but there were insufficient funds in the company account to cover it. The company’s president and vice president resigned in the aftermath, she said.

The government has given notice that it might call as many as 34 witnesses. Testimony, often in mind-numbing detail covering almost a decade of operations by dozens of companies, so far suggests that the government has documentary and testimonial evidence to cover every stage of the process of preparing, filing, auditing and recording payroll taxes and pinpointing where the process broke down.

Accountant Michael Wright with the firm Dixon Hughes Goodman firm testified that he determined that Harrison’s companies owed $13 million in payroll taxes based on information from the companies’ own records.

CJ Beckham, an IRS investigator, testified that Harrison’s companies repeatedly failed to file payroll tax returns and make payments.

Michael Anderson, a computer investigative specialist with the IRS, testified that the government seized a hard drive from Harrison’s companies and made a copy of its Microsoft Navision program, a 30-Gigabyte file, that includes all the companies payroll tax reports, which are determined by feeding in employee hours and wages. He gave testimony about wages and corresponding payroll taxes for each company over several quarters, itemizing how much money should have been turned over to the IRS.

The government has pledged in its trial brief to prove that Harrison “knew he had an obligation to pay over employment taxes for his staffing companies in 2004-2006 and in 2008-2009, but willfully failed to do so.”

The government’s witnesses have given ample evidence to support that position in testimony over the past week.

To underscore the notion that Harrison clearly understood his tax obligations, the government introduced as evidence a USA Staffing employee handbook bearing Harrison’s signature as president. The prosecutor asked former controller Samantha Lee Hooker to read aloud from a passage stating that the company matched employees’ contributions to Social Security and unemployment insurance.

Robert Patterson, another former controller, testified that he was brought into recalibrate the companies’ accounting as Hobbs Staffing and US Labor were split into state subsidiaries, even as consolidated administrative functions remained basically unchanged at the longtime headquarters on South Swing Road in Greensboro.

Patterson said he became alarmed on one occasion when he observed in the company’s general ledger that tax liabilities had continued to grow with no payment offsets for Hobbs Staffing and US Labor. He went to Harrison’s office to share his discovery.

“He told me those were the old companies, and the old companies weren’t my concern,” Patterson testified. “I was to be concerned with the new company roll-outs, and that if there were any problems with the old companies he would take care of it.”

Little is known about the staffing agencies owned and controlled by Harrison, but one of the companies made national headlines while it was controlled by two former business partners. Douglas Corriher, the vice president of a South Carolina bank that has provided financing for Harrison’s staffing ventures, stated in a commercial loan memo that the business moved to a new company formed by Harrison’s former partners in 2006 “due to the loss of workman’s compensation insurance,” but that when Harrison’s company obtained a new policy, the old partners refused to transfer the business back.

The company formed by Harrison’s former partners, StaffCo, eventually failed after federal Immigration and Customs Enforcement raided the Fresh Del Monte Produce packing plant, and ICE detained upwards of a hundred of the staffing agency’s employees for violations of immigration law. After StaffCo went into foreclosure, Harrison bought back the assets. A special investigator with wrote in an affidavit that a former maintenance manager and supervisor reported to him that employees were forced to work overtime without pay, verbally abused and subjected to dangerous working conditions, adding that the packing plant employed children.

Harrison’s staffing agencies provided a degree of removal for client companies seeking to minimize their commitments to their workforces. Through almost continual restructuring, the companies have 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. And even as corporate ownership entities proliferated like kudzu, the companies often operated under completely different trade names, further obscuring the inner workings of Harrison’s staffing empire.

“The lights flicked off one night as one company and came back on the next day as another,” testified Ray McDaniel, a former chief operating officer for Harrison who was one of the owners of StaffCo.