JK Harris must pay $800K in Texas

Abbott

HOUSTON (Legal Newsline) - South Carolina-based income tax consulting firm JK Harris & Company must pay $800,000 in refunds to its Texas customers, the Texas Attorney General's Office said Tuesday. Attorney General Greg Abbott said the judgment also applies to two related companies, JKH Financial Recovery Systems, LLC, and Professional Fee Financing Associates. The company has offices in Fort Worth and Arlington. In April 2009, the State charged JK Harris with "materially misrepresenting" their ability to help Texans resolve their unpaid federal income tax obligations. The court-approved agreement also imposed significant injunctive relief and ordered the defendants to reimburse the State for investigative and court costs and attorneys' fees. "Under the court order, JK Harris and its related companies must reform the way it does business -- and provide restitution to Texas taxpayers who were harmed by the defendants' unlawful conduct," Abbott said in a statement. "Taxpayers from across the state complained to the Attorney General's Office about the defendants' misconduct. The agreement seeks to resolve past problems, reimburse Texans who paid for services that were not actually rendered, and prevent additional misconduct in the future." In addition to the agreement's financial penalties, the court ordered the company to reform several of its business practices and to improve disclosures to its clients. For example, the company must clearly disclose, in writing, the fact that very few taxpayers qualify for the Internal Revenue Service's Offer in Compromise, or OIC, program. JK Harris also must acknowledge that a taxpayer's future earning potential and equity holdings factor into taxpayers' eligibility for the OIC program -- and thus decrease the likelihood that certain taxpayers will qualify for OIC treatment. The company also must provide its clients written notice that the IRS is likely to continue collection efforts -- including liens, levies and garnishment procedures -- unless and until an OIC is approved. With Tuesday's settlement, Texas joins a list of other states that have settled with the company in recent years, including Arkansas, California, New York, Pennsylvania and West Virginia. Just last week, West Virginia filed contempt proceedings against the company and its owner, John Harris, for allegedly continuing to violate a court order. McGraw filed his petition on Thursday in Kanawha County Circuit Court. In his petition, state Attorney General Darrell McGraw alleges that JK Harris is in violation of an agreed consent order and injunction it entered into with the State in June 2008. This consent order permanently enjoined both JK Harris and John Harris from misrepresenting that consumers qualified or were eligible for OICs unless consumers actually qualified or were eligible. Since the entry of the consent judgment, the attorney general says he has received complaints from consumers that JK Harris falsely represented to them that they qualified for OICs and charged them a hefty fee to negotiate an OIC on their behalf with the IRS. McGraw says some of the consumers did not discover they were ineligible for OICs until they received a notice from the IRS that their bank accounts were being garnished. McGraw's petition asks the court to require JK Harris to stop misrepresenting the services it can offer, provide refunds to the consumers who were misled by the company, and enjoin the company from advertising or conducting business in West Virginia until it has done so. From Legal Newsline: Reach Jessica Karmasek by e-mail at jessica@legalnewsline.com.

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