Texas Charges JK Harris with Misrepresentation

Firm overstates its ability to reduce tax debts, suit alleges

April 13, 2009

JK Harris • Consumer Complaints • Company Response News • Texas Sues JK Harris For Misrepresentation • Missouri Sues JK Harris For Failing To Help Customers • JK Harris Settles Deceptive Ad Charges

Texas Attorney General Greg Abbott today charged JK Harris & Company with misrepresenting their ability to help Texans resolve their unpaid tax obligations. The state charged that JK Harris failed to provide promised services, misrepresented its employees’ professional skills and experience, overstated its ability to reduce debts that customers owe to the Internal Revenue Service, and accepted large, prepaid fees from customers whose tax liabilities the firm knew – or should have 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,” said Attorney General Greg Abbott. “Struggling Texans who paid large, upfront fees were told that their unpaid taxes could be resolved for pennies on the dollar. Today’s enforcement action seeks restitution for the defendants’ Texas customers and a court order enjoining the defendants’ unlawful conduct.”

The suit names JK Harris LLC and related companies, JKH Financial Recovery Systems LLC, and Professional Fee Financing Associates, along with the firms’ owners, John K. Harris and Charles R. Harris, Jr. Citing Texas Deceptive Trade Practices Act violations, the state is seeking an injunction, penalties, fees and restitution for the Texas-based JK Harris customers.

The defendants’ advertising and marketing materials claimed that JK Harris could settle customers’ unpaid tax obligations for pennies on the dollar. JK Harris typically charged $2,000 to $5,000 – paid in advance – for its tax resolution services, which largely relied upon the IRS’ Offer-in-Compromise (OIC) program.

According court documents filed by the state, the defendants charged customers without actually reviewing individual tax files to see whether individual taxpayers were eligible for relief through the OIC program – which is limited to very specific situations. The state’s investigation revealed that few of JK Harris’ customers qualified for OIC relief. Further, the suit charges that the defendants often failed to file their customers’ OIC application forms and frequently took no steps to reduce customers’ tax debts. When customers realized that JK Harris had undertaken little or no action, they frequently demanded refunds – and the defendants often failed to return the customers’ money.

Qualifications

The state’s enforcement action also cites the defendants for misleading customers about JK Harris’ regional employees’ qualifications.

While the defendants’ advertisements claimed that former IRS agents, Certified Public Accountants, lawyers, and other professionals were “available to meet with consumers in 325 locations in 43 states,” investigators discovered that JK Harris’ regional offices are staffed by sales personnel – who are not trained tax experts. As a result, Texas customers who believed they could actually meet with JK Harris tax resolution experts in person were misled.

The Better Business Bureau and the Office of the Attorney General said they have received approximately 1,000 complaints against the company in the past 36 months. Texans considering tax resolution services should research a firm before entering into a contract or paying any fees.

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