SARASOTA, Fla. (CN) - Nine former customers claim Jackson Hewitt Tax Services sold franchises to a felon who proceeded to bilk them in Ponzi schemes. Jackson Hewitt negligently hired Daniel L. Prewett, who'd pleaded guilty to 12 counts of grand larceny and insurance fraud in 1987, according to two complaints in Sarasota County Court.
Prewett, who is not defendant, is in federal prison, the plaintiff say. In the old case, federal prosecutors charged him with selling at least 19 people fake insurance policies taking their premium payments, according to the new complaints.
In his first go-round, Prewett, who was an independent financial consultant in New York, collected the premiums though the insurance company he claimed to work with did not exist and no valid policies were ever issued, the plaintiffs in the new case say.
Seven years later, Prewett, using the alias "Allan Scott," bought two Jackson Hewitt franchises in Sarasota, according to the complaint.
"Had Jackson Hewitt performed a background investigation, it would have revealed [it] was dealing with Prewett and not 'Allan Scott,'" the complaint filed on behalf of seven people states.
"Further," the seven plaintiffs say, "representatives of Jackson Hewitt were familiar with Prewett and knew that he, not someone named Allan Scott, was at all relevant times, in charge of the franchise."
After securing the franchises, Prewett aka Scott formed three corporations to promote tax, financial and real estate investments, the complaint states.
The plaintiffs say Jackson Hewitt learned about at least one of Prewett's entities, Jackson Hewitt Investment Services, and demanded he change the name because it sounded like an affiliated service and was confusing customers.
The plaintiffs say Jackson Hewitt should have taken decisive action because Prewitt's acts violated the company's franchise agreement, which prohibits a franchisee from operating multiple businesses out of the franchise without permission.
Even after representatives of the parent company visited the offices, they allowed Prewett to continue to use their resources to target his victims, the plaintiffs say.
The seven plaintiffs seek damages of at least $15,000 apiece for fraud, civil conspiracy and negligence.
Their lead counsel is Robert E. Turffs of Sarasota.
In a the second complaint, Peter and Kathleen Kaufman, also of Sarasota, said they hired Prewett to prepare their personal and business tax returns over a 4-year period, beginning in 2003.
In 2006, the IRS audited the couple, and only then, they say, did they learn that Prewett filed their returns late, failed to prepay tax through payroll withholding, and filed an inaccurate tax return.
As a result, the Kaufmans say, they were slapped with more than $127,000 in penalties.
The Kaufmans say Prewett promised to repay them, but before he could, he was arrested on federal charges, including money laundering to fraud.
Prewett pleaded guilty to the charges and is in federal prison, the Kaufmans say.They seek compensatory and punitive damages. They are represented by Ryan M. Cardoso, of Tampa.
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.