JK Harris & Co. sued by Texas attorney general

Chris Rizo Apr. 13, 2009, 1:33pm

Greg Abbott (R)

AUSTIN, Texas (Legal Newsline)-Texas Attorney General Greg Abbott on Monday sued JK Harris & Company for allegedly misrepresenting their ability to help Texans resolve their tax troubles.

Authorities allege that JK Harris & Company failed to provide Texans promised services, misrepresented its employees' qualifications, overstated its ability to reduce debts that customers owe to the Internal Revenue Service, and accepted prepaid fees from customers whose tax liabilities the Charleston, S.C.-based firm should have at least known it could not reduce.

"The defendants are charged with unlawfully misrepresenting - and overstating - their ability to reduce unpaid debts that taxpayers owe to the IRS," Abbott said in a statement. "Struggling Texans who paid large, upfront fees were told that their unpaid taxes could be resolved for pennies on the dollar.

Named defendants in the case are JK Harris LLC, JKH Financial Recovery Systems LLC, and Professional Fee Financing Associates, along with the firms' owners, John K. Harris and Charles R. Harris, Jr.

The attorney general's office alleges that the defendants flouted the state Deceptive Trade Practices Act. Abbott is seeking an injunction to bar the company from doing business in the Lone Star State in addition to penalties, fees and restitution for Texas consumers.

The AG's office said the company's advertising claimed the firm could settle customers' unpaid tax obligations for a fraction of what was owed. The company charged pre-paid fees of $2,000 to $5,000 for its services, which largely relied upon the Internal Revenue Service's Offer-in-Compromise program rather than on its own footwork.

JK Harris allegedly charged consumers upfront for their services without determining if they qualified for the OIC program, the attorney general said.

In June, JK Harris & Co. agreed to pay $1.5 million in restitution and change its advertising, under an agreement with 18 state attorneys general.

At the time, JK Harris denied any wrongdoing, and said the agreement comes at the betterment of the tax debt consulting industry.

"We are pleased that we have been able to reach an agreement with the states," Josh Baker, JK Harris' director of communications, said at the time. "We have made every effort to cooperate with them and believe the agreement we have reached will make our company and our industry stronger."

States participating in the judgment were Arkansas, Arizona, California, Connecticut, Florida, Illinois, Maine, Michigan, Minnesota, New York, North Carolina, Ohio, Pennsylvania, South Dakota, Tennessee, Vermont, and West Virginia.

From Legal Newsline: Reach staff reporter Chris Rizo at chrisrizo@legalnewsline.com.

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