CHICAGO (CN) – California is the proper venue for a trial pitting the Federal Trade Commission against a Golden State company that allegedly promises to relieve consumers’ tax debts only to overcharge for bogus services, an Illinois federal judge ruled.
American Tax Relief, which claims to have helped thousands of consumers settle their delinquent tax debts with the Internal Revenue Service, is currently in receivership and winding down its business per a court order.
A Chicago federal judge issued a temporary restraining order and preliminary injunction after the FTC filed suit against the Beverly Hills-based company; its owners, Alexander Seung Hahn and his wife, Joo Hyun Park; and Park’s parents, who allegedly profited from the company.
The commission’s lawsuit, which alleges violations of the Federal Trade Commission Act, deceptive trade practices and false advertising, explains that American Tax Relief began advertising its services to customers in October 1999.
Though very few clients who called the company’s toll-free number actually qualified for debt relief, the FTC claims American Tax Relief reported otherwise and then charged exorbitant fees, sometimes $25,000 or more, that would supposedly, but often did not, cover all service costs.
American Tax Relief only explained its cancellation policy with a letter to customers after they had already signed up, according to the complaint. And the customers had just five days from the date of the letter to cancel. While most overlooked this fine print, the cancellation period had often already expired by the time of the letter’s receipt.
Ultimately, however, American Tax Relief did not provide the tax relief services it promised, even to those who paid the heavy fees, according to the FTC. The company allegedly blamed customers for its failure by falsely accusing them of failing to provide truthful information. It then charged them additional fees, at times withdrawing more funds than what they actually authorized.
U.S. District Judge Ronald Guzman ruled that American Tax Relief can transfer the case to the Central District of California, since it will be convenient to the parties and witnesses.
Although the FTC has an office in California, it argued that transfer would be inconvenient because its larger Chicago office will litigate the matter regardless of venue.
But Guzman said American Tax Relief’s counterargument was more compelling.
“Defendants argue that they all reside in California, ATR’s principal place of business is in California and the receiver who has stepped into the shoes of ATR is located California,” the 15-page decision states.
Requiring the court-appointed receiver to travel to Chicago raises the cost of litigation for American Tax Relief, and that cost ultimately depletes the company’s assets, which could otherwise be preserved for future forfeiture.
Guzman also rejected the FTC’s argument to keep the case in Illinois since American Tax Relief had victims there.
“Not only were there over five times as many consumers subjected to the alleged fraudulent business practices in California than Illinois, but also California has a greater interest in the litigation because ATR is a California company, all of ATR’s employees were California residents and most if not all of the business decisions, correspondence with clients, analysis of clients’ financial information and collection of payments that form the basis of the purported fraud allegations occurred in California,” he wrote.