AUSTIN (CN) – A Travis County jury returned a $195 million verdict against TaxMasters and and its founder-CEO Patrick Cox, for more than 110,000 deceptive trade violations, the Texas Attorney General’s Office said.
Cox has advertised his Houston-based TaxMasters for several years on late-night television, touting his staff of “former IRS agents and tax professionals that have helped many people.”
On Friday, a Travis County jury found that the company, its predecessors and Cox violated the Texas Deceptive Trade Practices Act more than 110,000 times by, among other things, misleading customers about the terms of their service contracts, failing to disclose a no-refunds policy and falsely claiming that employees would immediately begin work on a case.
Prosecutors said TaxMasters did not actually start to work on a case until its customers paid in full, even if the delayed response meant the taxpayers would miss IRS deadlines.
Attorney Greg Abbott said in a statement: “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 their customers.”
The state’s enforcement action, filed in May 2010, said the so-called “tax resolution” firm misled customers by aggressively advertising its services to federal taxpayers who received notice from the IRS of an audit, garnishment, lien, levy or tax deficiency.
Texas accused the firm of failing to contact and consult with the IRS on clients’ behalf, and failing to appear at IRS proceedings or postpone or stop a wage or bank account garnishment or stop a levy or lien against a client’s property.
The Attorney General’s Office said it has received 891 consumer complaints against Taxmasters since 2005.
TaxMasters filed for Chapter 11 bankruptcy protection the day before the trial began. Cox asked to delay the trial, but the request was denied, according to the bankruptcy petition.
Of the $195 million awarded, more $113 million is to go to customers as restitution, $81 million will go toward civil penalties, and more than $1 million to attorneys’ fees.