How this payroll services firm owner defrauded small businesses of $15.8M

KNOXVILLE, Tenn. — A Powell woman who pleaded guilty to ripping off small businesses was sentenced Wednesday to serve eight years in federal prison and ordered to pay more than $15 million in restitution.

A judge sentenced 38-year-old Andrea Rudd to serve 60 months for tax evasion and 36 months for mail and wire fraud after she pleaded guilty to the charges in April.

Assistant U.S. Attorney Frank Dale wrote in court records that Rudd, as owner of a payroll services firm, HR Comp, LLC, took money from small businesses to cover payroll taxes and workers’ compensation insurance that she instead pocketed.

Dale said Rudd stole $10.4 million in payroll tax money and another $5.4 million in insurance premiums that she “used to maintain a lavish and self-indulgent lifestyle” from 2010 to October 2015.

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Among that extravagant spending was money Rudd — then Andrea Ball — paid for the lobbying services of the Ingram Group, which is headed up by longtime lobbyist and political strategist Tom Ingram. He ran Gov. Bill Haslam’s campaign for governor and served as a paid consultant to Haslam.

In May 2012, Rudd and her then-husband, Chris Ball, wound up in a photo with Haslam as he signed off on a law regulating staff leasing companies. Rudd was in trouble with the state for operating her firm without a license and had already been accused of fraud involving payroll services in another state.

Emails later showed Ingram regularly contacted Haslam’s chief of staff about Rudd’s fights with state agencies over her business. The Ingram Group denied organizing Rudd’s appearance at the Haslam bill signing, and Haslam said he had no idea who invited Rudd and her husband.

Of the $15,776,417 that Rudd is ordered to pay in restitution, roughly $10 million will go to the Internal Revenue Service, according to a U.S. District Court news release.

Rudd operated under HR Comp as well as a slew of subsidiaries, all professional employer organization (PEO) businesses, according to the release. PEOs provide clients with various human resource services.

The IRS Criminal Investigation division and the FBI were involved in the investigation, which began in 2013 when a California worker was killed on the job. His employer subsequently discovered HR Comp had faked insurance papers, leading authorities to raid the business and seize documents in 2014.

But it was when Rudd’s mentor in financial deceit — Zebbie Joe Usher III — struck his own plea deal in 2014 for a similar rip-off of small businesses via his Service Provider Group firm that the probe heated up, resulting in Rudd’s own confession.

Usher was left alone at the defense table in 2015 when his conman partners, Toby Steven Fanning and Philip Edward Lawrence, committed suicide within a week of each other as indictments against them loomed.

Fanning killed himself in his Knoxville backyard. Lawrence, a well-known outdoorsman, shot himself in a cemetery near Lenoir City Park.

The trio had robbed businesses of nearly $30 million. Usher is serving a 70-month federal prison term.

Contributing: Jamie Satterfield, Knoxville (Tenn.) News-Sentinel. ​​​​​​Follow Travis Dorman on Twitter: @travdorman