TaxMasters penalized $195 million for defrauding customers

Tax advisory firm TaxMasters and its CEO Patrick Cox must cough up $195 million in civil penalties for defrauding consumers nationwide, a Texas jury ruled Friday, according to Reuters.

The jury in Texas’ Travis County found that TaxMasters, a Houston-based firm that had flooded television with its advertising in recent years, misled customers about contract terms, failed to alert customers to its no-refunds policy and sometimes caused customers to miss IRS deadlines because it didn’t start work on their taxes immediately after promising it would, CNN Money reported.

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"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," Texas Attorney General Greg Abbott said in a statement, according to Reuters.

The jury in ordered TaxMasters to pay $149 million, including penalties and restitution, and Cox to pay $46 million, CNN Money reported. Of the $195 million, $113 million is to be returned to customers, $81 million is earmarked for civil penalties and $1 million is to cover attorney fees, Abbott said, according to Reuters.

It is not clear how much of the judgment can be collected since TaxMasters filed for Chapter 11 bankruptcy a day before the trial was due to begin, Reuters reported. The Texas attorney general's office described the move as "an apparent effort to avoid the state's enforcement action,” CNN Money reported.

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