In two previous stories about former Alabama Speaker of the House Mac McCutcheon, 1819 News described his work as a consultant for QBR LLC. Chris McCutcheon, Mac’s son, was the CFO and part owner of QBR. 1819 News showed that Mac McCutcheon earned at least $90,000 as a consultant for QBR.
When John Hornbuckle and Chris McCutcheon founded QBR LLC in 2011, they had every reason to believe the medical testing company would be a resounding success. John Hornbuckle brought 20 years of experience in the medical testing field to the table. Chris McCutcheon brought his extensive political connections. In particular, Chris’ father, Mac McCutcheon, joined as a consultant to help the fledgling business deal with troublesome legal or regulatory issues until QBR was “operational,” as Mac McCutcheon put it in an email to 1819 News.
Mac McCutcheon delivered the Service Providers Agreement to the Attorney General for legal review. He arranged a meeting with a top official at Blue Cross Blue Shield (BCBS) of Alabama to smooth the way to market the services of an important client of QBR, and he sponsored HJR 171, designating April 2013 as neuropathy awareness month. Neuropathy was a core business of QBR LLC. This kind of political access seemed to guarantee smooth sailing for the company. However, what happened in the following years cannot be called success.
The relationship between the two co-founders soured, and they ended up litigating a settlement before parting ways. On March 24, Hornbuckle bought out Chris McCutcheon for $160,000. But it did not end there. On the same day as this settlement, Chris McCutcheon filed a Qui Tam lawsuit with the federal Department of Justice. The new Federal Attorney for Northern Alabama, Jay Town, decided to pursue it.
As a result, Hornbuckle and most of the business partners of QBR were indicted for fraud. Chris McCutcheon was not. The story of how Chris McCutcheon walked away with all the money and Hornbuckle all of the blame is long and complicated. This article hopes to shed some light on the issue.
QBR LLC
The division of labor within QBR was clear. John Hornbuckle became CEO because he had experience in the medical diagnostics service industry and would handle day-to-day operations. Chris McCutcheon, as CFO, would be involved in the operational and financial decisions of the company. Hornbuckle focused on finding partners and clients, while McCutcheon handled payroll and the vendors. Chris McCutcheon was a minority owner with 49% of the shares, but he effectively leveraged his position to help his own family. Chris McCutcheon brought his father on board as a consultant. He also convinced Hornbuckle to turn QBR’s books over to the accounting firm run by his wife and father-in-law.
In his Qui Tam filing, Chris McCutcheon said, at first, he worked part-time for the firm because QBR did not have enough revenue to support two full-time salaries. He took another full-time job and completed his tasks for QBR in the evenings and weekends. In January 2013, the company was doing well enough to pay him a full-time salary. He continued to draw a full-time salary through November 2013 and left full-time work in December 2013. In his legal statement from 2017, McCutcheon asserts that, as early as September 2013, he raised concerns that QBRs marketing procedures violated federal law. When Hornbuckle rejected these arguments, he said he moved to part-time employment in December 2013. “He retained only payroll functions and had no input at all into the day-to-day operations of the business.”
In his lawsuit from August 2016 against Hornbuckle, Chris McCutcheon argues that Hornbuckle “began to exclude McCutcheon from QBR and otherwise thwart McCutcheon’s expectation of involvement in the business as well as his expectation of a return on his investment. Among other things, Hornbuckle locked McCutcheon out of the business premises, he ceased all communication with McCutcheon and made hiring and financial decisions without consulting McCutcheon.”
However, this is not how Hornbuckle saw it. In his deposition, Hornbuckle argued that “McCutcheon has breached his fiduciary and contractual duties to Hornbuckle and QBR and has engaged in a pattern of wrongful conduct that has adversely and materially affected QBR’s business. He has frequently and consistently used QBR’s funds for personal expenses such as his children’s school tuition, extravagant personal vacations, and even a family trip to see the BCS National Championship, without the knowledge of or required consent of its other member, Hornbuckle, and without reimbursing QBR, causing QBR to incur unnecessary indebtedness that has hampered QBR’s operations.”
1819 News has obtained financial documents which support Hornbuckle’s assertions.
“Pump and Dump”
By December 2013, Hornbuckle realized he had to act in light of his CFO’s move to part-time work. He immediately hired an outside accountant from the firm run by McCutcheon’s father-in-law and wife to take over the bookkeeping. On February 18, the new accountant sent this unsettling note: “OK, the good news is Peachtree has activity in it through February 7. The bad news is the cash account hasn’t been reconciled since 10/31/13. So, your cash balance is showing >$200k negative, which isn’t accurate. Your bank balance at 1/31/14 was $56k, so likely you’re missing a lot of deposits and possibly some other expenses. So, what I would do is ask Chris to update Peachtree to make sure it matches any activity that has been either through the bank or initiated but hasn’t yet hit the bank.”
Hornbuckle faced a $144,000 discrepancy in his accounting. In other words, the bookkeeping was in shambles.
Hornbuckle also learned that his CFO had used the company’s American Express Card to pay for a family vacation to Las Vegas a month earlier.
1819 New has obtained documents detailing the trip, which cost more than $9,000.
On Dec. 12, 2013, Chris McCutcheon purchased five tickets on Delta Air Lines using the QBR LLC American Express card for his family, including his wife and two kids.
All five flew to Las Vegas on Jan. 1, 2014. Chris and a guest flew on to Los Angeles for a college football game at a cost of $1,864.10 each. The three other tickets cost $1,163.58 each.
In addition, AMEX charged each ticket a $39 fee. The airfare totaled $7,413.94
In addition to that, Chris McCutcheon used the company AMEX card for the following charges during the Las Vegas/Los Angeles trip:
01/03/2014 Venetian Showroom Las Vegas — $303
01/01/2014 Bellagio Café Las Vegas — $190.26
01/03/2014 Buddy’s VS Las Vegas — $257.55
01/05/2014 Venetian Palazzo Las Vegas — $1,043.58
01/07/2014 National Car Rental in Inglewood, Cali. — $515.12
Total: $2,309.51
Cost of Las Vegas/Los Angeles trip: $9,723.45
Later that month, on Jan. 20, 2014, Chris McCutcheon made a payment of $3,550 to Madison Academy in Madison. This is an apparent tuition payment for his children.
Document5 AMEX Dec 2013 on Scribd
1819 News has asked Chris McCutcheon why he used the company’s American Express cards for personal expenses and whether he reimbursed the company. Hornbuckle asserts that he did not. Chris McCutcheon did not respond to 1819 News.
For the rest of 2014, email records show that Hornbuckle and Chris McCutcheon remained in contact to discuss the business. Both men appeared to want to make things work somehow.
But after trying to make sense of the books for nine months, the outside accountant had had enough of Chris McCutcheon’s participation in the firm. In an email from Sept. 19, 2014, the accountant writes:
“You’re kidding me, right? Your pleading ignorance on this? National championship costs. Vacation rentals, limos. 10’s of thousands of dollars. You complained to me OVER AND OVER about how Chris had run this company’s debt up by paying amex bills. Personal Expenses I’ve sent this information to you several times. You caught him lying to you several times. He sends you the breakout and you’re “ok” with it? Really? I’m not buying it. Several months ago, I told you I was out if Chris was going to be back in any role with the company. Last week you told me he wants back in ... I am going to take all my files and update them to the remote servers you have everything I’ve saved and done. I’ll send my final bill after I’ve done that.”
The outside accountant was not around in 2015 when Chris McCutcheon booked two different trips for his wife and daughter.
In February 2015, they flew to Dallas.
02/02/2015 American Airlines Ticket, Janell McCutcheon, Huntsville to Dallas — $295.20
02/02/2015 American Airlines Ticket, daughter, Huntsville to Dallas — $295.20
Total: $590.40
In June 2015, they traveled to New York City, spending most of their stay at the London NYC, a five-star hotel. The trip cost $6,500.
06/17/2015 Delta Air Line ticket from Huntsville to JFK for Janell McCutcheon — $1,546.70
06/17/2015 Delta Air Line Ticket Huntsville to JFK for his daughter — $910.60
06/16/2015 AMEX Travel Hotel — $3,244.82
06/20/2015 Ticketmaster New York Yankees NY NY — $515.30
06/29/2015 Conrad Hotel NY NY — $288.93
07/04/2015 Parking Newark Liberty Park — $58.00
07/10/2015 London NYC —$8.90
Total: $6,572.75
Hornbuckle’s willingness to keep working with Chris McCutcheon in 2014 and 2015 made sense for one important business reason: the connection to Mac McCutcheon was worth more than his son's spending habits. In 2015, Hornbuckle sought the politician’s aid in two different matters. First, a proposed rule change by Blue Cross Blue Shield of Alabama would have adversely impacted QBR’s business.
Second, Hornbuckle asked Mac McCutcheon’s help with a business proposal whereby QBR would act as a consultant to BCBS of Alabama.
But by the end of 2015, Hornbuckle and Chris McCutcheon were on bad terms. Hornbuckle locked him out of the office. Chris McCutcheon sent a text threatening to shoot out the office's windows.
Hornbuckle summed up his view in his lawsuit: Chris McCutcheon "purposely planned the pump and dump of the company. Vegas, BCS, Family. Internal Spread sheet, paying child tuition/AX while asking CEO to deposit $10K of his own money."
In 2016, Chris McCutcheon hired Bartley Lofton, a well-connected and self-styled super lawyer, to sue Hornbuckle. The CEO responded, and they eventually settled.
Qui Tam
On March 24, 2017, Hornbuckle agreed to pay Chris McCutcheon $160,000 for his share of the company. Hornbuckle thought this ended a troublesome relationship and the beginning of a second chance for the business. Hornbuckle did not realize that his troubles had only just begun. Bartley Lofton, McCutcheon's lawyer, specialized in Qui Tam lawsuit. The same day of the settlement, Chris McCutcheon filed a Qui Tam federal lawsuit against Hornbuckle with the Department of Justice. The new Federal Attorney for Northern Alabama, Jay Town, decided to run with it.
A Qui Tam lawsuit represents the claim of the filer, called the Relator that he knows of wrongdoing by a person or company. The Relator requests the Department of Justice to investigate the claim. The name of the Relator remains secret. The accused cannot learn who the accuser is. If the DOJ pursues the matter, the Relator, in this case, the former CFO of the QBR, would be entitled to a financial reward.
1819 News has asked Chris McCutcheon if he received a financial reward from the federal government and how much.
Chris McCutcheon's Qui Tam asserts that as early as Sept. 13, 2013, McCutcheon raised concerns with Hornbuckle that the commission-based marketing arrangements might not comply with federal law. According to McCutcheon, Hornbuckle refused to modify the QBR business model.
If CFO McCutcheon was already worried in 2013 about the legality of the business, his conduct both before and after the September 13 meeting could best be described as peculiar. As detailed in two previous articles in 1819 News, Chris McCutcheon employed his father, former speaker of the house, Mac McCutcheon, as a consultant. The elder McCutcheon sent the service providers agreement — in effect, the marketing plan — to the Attorney General of Alabama's office for legal review. If that review came back positive, then what concerns did Chris McCutcheon have? And if the review came back negative, why did McCutcheon and his father stay with QBR? Why did both McCutcheons stay with QBR for so long?
1819 News has posed these questions to Chris McCutcheon.
If he was worried about the legality of the marketing arrangements of QBR, why did he continue to draw a salary of $2,400 a month? And why did he spend thousands of the company's money on personal expenses? Why would he use company credit cards to pay for a trip to Las Vegas or private school tuition if he had reservations about the origins of those very same funds?
In the same Qui Tam, Chris McCutcheon asserts that "he has not been an active participant in the business operations of QBR since December 2013." He said he "retained only payroll functions and had no input at all into the day-to-day operations of the business." The email correspondence between Hornbuckle and Chris McCutcheon indicates the two intended to work together in the two years following December 2013.
What is clear is that Chris McCutcheon walked away from QBR none the poorer. John Hornbuckle is facing time in federal prison.
Bryan Dawson is the president and CEO of 1819 News
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