By Hal M. Bundrick
NEW YORK (MainStreet) Thousands of taxpayers may have to find a new service to help them with their tax returns next year, as one of the nation's largest tax preparation franchises has been shut down by the Justice Department due to extensive charges of fraud.
Instant Tax Service, claiming to be the fourth largest tax return franchise in the nation, was issued a permanent injunction Thursday ordering the company to cease operations. The injunction order, issued by the U.S. District Court for the Southern District of Ohio, also bars Fesum Ogbazion, the sole owner and CEO of ITS Financial, from operating or being involved with any business relating to tax-return preparation.
According to court documents, the company, based in Dayton, Ohio, had nearly 150 franchisees that filed over 100,000 tax returns each year in 2011 and 2012. The IRS says the tax harm caused by Instant Tax Service franchisees in five cities alone for a single tax-filing season was between $10 million and $25 million.
The court found that Ogbazion and franchisees had:
- Filed tax returns for customers without their permission
- Secretly trained and encouraged franchisees to prepare and file tax returns prematurely with paycheck stubs that omitted and understated income and inevitably resulted in the submission of false federal tax returns
- Ripped off primarily low-income customers by marketing false and fraudulent loan products
- Charged phony and exorbitant fees
- Forged customers' signatures on loan checks and used those forged checks to operate Ogbazion's businesses
- Willfully failed to pay over $1 million of their own employment taxes and lied about assets in connection with the collection of those taxes, while hiding money in a secret bank account and defrauding the United States and third-party creditors
"Defendants' harm to the public is extensive and egregious, indeed appalling," the court stated. "This is especially so given the nature of Instant Tax Service's core customer -- the working poor who are particularly vulnerable to [the] Defendants' fraudulent practices."
The court further stated: "Defendants' repeated attempts at trial and in argument to downplay the gravity of their lawlessness was stunning. The court concludes that even today [the] Defendants have not fully recognized their culpability. Ultimately, the nature, scope and gravity of [the] Defendants' offenses, and the unrepentant attitude toward their commission, demonstrate the necessity for a complete injunction putting the Defendants permanently out of business."
The court also determined that, despite their agreement to obey various lending and consumer protection laws during the 2013 tax filing season, Instant Tax Service had violated several of those laws by discriminating against active-duty military personnel on loan applications and by falsely stating that its loans carried no finance charges and an annual percentage rate (APR) of zero.
--Written by Hal M. Bundrick for MainStreet