HOUSTON (CN) - A tax prep company offered a customer $1,200 to not talk to a reporter about what it "had fraudulently taken from her refund," the Texas attorney general claims in court.
Texas sued LBS Tax Services aka Loanbuysell Tax Services aka Loanbuysell Inc., in Harris County Court.
The company has three Houston offices.
LBS "aggressively" targets consumers by soliciting them at Wal-Mart, and handing out flyers in downtown Houston, the attorney general says.
"Their advertisements guarantee the 'maximum tax refund allowed' for a fee only $75," the complaint states. "However, during preparation of consumers' returns, defendant asks the consumers to sign acknowledgements stating that the fee increases based on the number of forms needed
"Consumers are understandably surprised to later learn, after receiving their refund from the IRS, that defendant has withheld hundreds of dollars more from consumers' tax refunds than the amount originally quoted and defendant refuses to detail the charges or refund the difference.
"Defendant has used this scheme to fraudulent obtain thousands of dollars from consumers all over Harris County." (Citations to exhibits omitted.)
LBS kept $896 from one customer's refund, gave another one $2,000 less than it had promised, and ripped off enough people that reporters began to take notice, the attorney general says.
"News outlets in defendant's home state of Florida, as well as two in Houston have published reports detailing the fraudulent practices defendant uses," the complaint states. "Defendant has even used more unscrupulous practices to avoid investigation and prosecution during the busy tax season.
"Defendant offered one consumer $1,200 almost 50 percent more than it had fraudulently taken from her refund, if she would not talk to Emily Akin, an investigative reporter for Fox 26 News.
"Defendant's agents refuse to provide their last name to consumers and will attempt to settle to keep consumers quiet." (Citations to exhibits omitted.)
LBS agents are also incompetent, as they "made numerous serious errors on returns either through incompetence or intentional fraud to increase the value of a refund," Texas says.
"Errors contained on returns prepared by LBS Tax Services include: (1) mischaracterizing the race of a dependent as American Indian; (2) mischaracterizing a three-year dependent as being permanently and totally disabled due to mental illness; (3) incorrectly stating that a minor dependent receives social security insurance or disability payments; (4) incorrectly stating that a minor dependant's parents are deceased despite the tax payer being the parent of the dependent; and (5) reporting an incorrect amount of Earned Income," the complaint states.
"Moreover, some consumers have received notice since defendant's filing on their behalf that the consumers owe the IRS money." (Citations to exhibits omitted.)
Despite the media attention and law enforcement inquiries, LBS continues to operate, the attorney general says.
Texas wants the company's assets frozen pending trial.
It also wants LBS ordered to disgorge all money it has fraudulently taken from customers, and pay them restitution.
And it seeks civil penalties of up to it $20,000 for each violation of the Deceptive Trade Practices Act, and up to $250,000 for each instance of elder abuse.
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