TaxMasters Inc., a Texas-based tax advisory firm, has been sentenced to pay $195 million in restitution and civil penalties for defrauding its clients. About $119 million will be used to pay back defrauded consumers. Their CEO and founder, Patrick Cox, has been ordered to pay $46 million of the verdict handed down by the Texas jury personally.
The lawsuit that resulted in this verdict was filed by Attorney General Greg Abbott approximately two years ago when he received over 1,000 complaints from customers. After an investigation, Abbott’s office found that the company had committed more than 110,000 violations of Texas’ Deceptive Trade Practices Act.
TaxMasters, Inc. advertized that they could help their customers deal with IRS audits and disputes. They also said that they could help recover seized property but none of these things were actually done until the client paid all of their fees. This caused clients to miss IRS deadlines. The company also mislead customers about their contract and did not explain to them that there was a no-refunds policy.