TaxMasters and CEO Cox Ordered to Pay Penalty of $195 Million

AccountingWEB Staff
 
In 2010, Texas Attorney General Greg Abbott filed a lawsuit against TaxMasters and CEO Patrick Cox, stating that some of the company's claims were false. In his television ads, Cox fraudulently promised consumers that TaxMasters could walk clients through audits, settle tax disputes, and recover property seized by the IRS.
 
On March 30, after an eight-day trial, TaxMasters was ordered by a Texas jury to pay $195 million – $113 million in customer restitution, $81 million in civil penalties, and $1 million in attorney fees. 
 
On March 30, after an eight-day trial, TaxMasters was ordered by a Texas jury to pay $195 million – $113 million in customer restitution, $81 million in civil penalties, and $1 million in attorney fees.
TaxMasters led clients to believe the firm would start working on their cases immediately. In reality, no work was done until clients' fees were paid in full. This often resulted in clients missing IRS deadlines, according to Abbott.
 
The company also hid policy terms, according to Abbott, who reported receiving more than 1,000 customer complaints.
 
"While the TaxMasters' CEO made hollow promises about fighting for taxpayers and their pocketbooks in television ads, the evidence proved that the firm didn't even bother to show up when it came time to fulfill those promises, but instead, misled and defrauded customers," Abbott said in a statement on March 30.
 
Abbott also criticized the company for attempting to delay the Travis County trial by filing for Chapter 11 bankruptcy just a day before the trial was due to begin. 
 
On March 19, TaxMasters lodged its Chapter 11 bankruptcy petition in US Bankruptcy Court in Houston, listing assets of less than $50,000 and liabilities between $1 million and $10 million. The company said its unsecured creditors can expect to see some recovery.
 
Related article:

You may like these other stories...

Being an accountant doesn't mean you're giving investment advice to clients. However, at tax time, accountants often have to deal with the results of any investment advice clients obtained during the year—the...
Anti Burger Kings: Seven US companies shrinking tax the old-fashioned wayBurger King’s decision to combine with Canadian donut shop Tim Hortons is renewing controversy over the lengths some US companies will go to...
A new report released on Tuesday found that the US airline industry receives nearly $1 billion in tax breaks annually from states for jet fuel.The study, conducted by UNITE HERE International Union, a labor union that...

Already a member? log in here.

Upcoming CPE Webinars

Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 10
Transfer your knowledge and experience to prepare your team for the challenges and opportunities of an accounting career.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.
Sep 26
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.