Judge reviewing search warrant that OK’d FBI, IRS raid on HR Comp

July 01--A federal judge is weighing a petition by HR Comp Staffing LLC (HR Comp) to void a search warrant and return 32 boxes of documents and records seized from its Knoxville office by the FBI and IRS in a May raid. No one has been charged with a crime.

It is unusual, but not unheard of, for a search warrant to be challenged in court before criminal charges are filed.

In previously filed written documents, HR Comp says the search warrant was unconstitutional, overly broad, and obtained on the basis of incomplete information provided by the IRS and on other "unfounded allegations."

In a brief hearing on Monday, U.S. Magistrate Judge Bruce Guyton, who issued the search warrant, heard oral arguments but gave no immediate decision.

HR Comp is a professional employer organization (PEO) business based in Knoxville. It is also the center of a group of affiliated entities, each with a name beginning with "HR Comp."

In written pleadings, HR Comp says the loss of its records has caused "severe disruption to the operation of the businesses", including "the loss of numerous clients" and loss of revenue, which in turn have "resulted in large-scale layoffs at the various HR Comp entities"

And that has "directly impacted the financial well-being of numerous (HR Comp). employees and their families."

Additionally, the seized documents are "replete with attorney-client privileged information," John Owings, one of HR Comp's lawyers, told Guyton.

"We wish to have that material returned," Owings said. HR Comp has asked Guyton for a full evidentiary hearing on the issues it has raised.

Assistant U.S. Attorney Frank M. Dale Jr. said the warrant "was not overly broad. or executed too broadly either."

Any potentially privileged material, he said, is being reviewed independently to determine if his office can even see it.

Dale said that if HR Comp is granted some of the things it has asked for in its motion, the firm would, in effect, be allowed to interfere with the criminal investigation.

According to federal court documents, agents who raided the HR Comp office were seeking evidence of conspiracy, wire fraud, and tax evasion. During the raid, an in-house attorney for the firm admitted to one of the raiding agents that he had sent to a client certificates of insurance coverage that he knew were bogus, according to the documents. He also stated that another HR Comp employee did the same.

HR Comp has been a high-profile and politically connected firm and has sponsored several charitable events. It has been represented by lobbyist Tom Ingram, a political consultant to Gov. Bill Haslam.

In 2012, HR Comp's owner Andrea Rudd, who was then Andrea Ball, stood with Haslam at a ceremonial signing of legislation.

The legislation gave the Tennessee Department of Commerce and Insurance the authority to regulate the PEO industry.

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