Tennessee Payroll Provider Sentenced to 8 Years for $15.8 Million Fraud

A Powell, Tennessee, 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.

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.

Following her prison sentence, Rudd will be supervised by U.S. Probation for three years.

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 federal authorities to raid the business and seize documents in 2014.

The HR Comp raid came about 16 months after the raid of Service Provider Group, a PEO in Turkey Creek. The CEO of that company, Zebbie Joe Usher III, served as a mentor to Rudd before she learned his ways and struck out on her own.

Usher ultimately pleaded guilty in a similar tax fraud scheme. He was sentenced in 2015 to 70 months in prison and ordered to pay nearly $30 million in restitution to the IRS.

Two other SPG executives accused of profiting from that 3-year scam committed suicide with the span of a week before they could be charged.

Toby Fanning -- SPG's chief financial officer who exposed the scam to the IRS -- killed himself in the backyard of his West Knox County home. Philip Lawrence, the company's chief operating officer, shot himself in a cemetery near Lenoir City Park.

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