(Reuters) - A Texas jury voted to slap $195 million in civil penalties on Friday against the tax advisory firm TaxMasters and its CEO Patrick Cox, who were accused by the state of defrauding consumers.
Houston-based TaxMasters became a household name due to commercials featuring Cox, who promised consumers his firm could walk them through audits, settle tax disputes and recover property seized by the IRS.
It gained more dubious recognition in 2010, when Texas Attorney General Greg Abbott filed a lawsuit saying some of the company's claims were false.
According to Abbott, TaxMasters led consumers to believe it would begin working on a case immediately, when in truth it would delay work until a client's fees were fully paid - even if that meant missing IRS deadlines. The company also hid policy terms, according to Abbott, who reported receiving more than 1,000 customer complaints.
"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," Abbott said in a statement on Friday.
Defense attorneys for TaxMasters or for Cox could not immediately be identified.
The jury, after an eight-day trial, said the company must pay $113 million in customer restitution, $81 million in civil penalties as well as $1 million in attorney fees, Abbott said.
He also criticized the company for attempting to delay the Travis County trial when it filed for Chapter 11 bankruptcy just a day before it was due to begin.
TaxMasters lodged its Chapter 11 bankruptcy petition on March 19 in U.S. Bankruptcy Court in Houston, listing assets of less than $50,000 and liabilities of between $1 million and $10 million. The company said its unsecured creditors can expect to see some recovery.
