Fraud Suits Filed Against Tax Preparer in 4 States
Wednesday, April 4, 2007
The federal government said yesterday that it was trying to shut down more than 125 Jackson Hewitt tax-preparation stores in Georgia, Illinois, Michigan and North Carolina for fraud.
The Justice Department accuses the franchises of bilking the government out of more than $70 million through fraudulent practices such as using phony W-2 forms, bogus deductions and fuel tax credits and false claims regarding the earned income tax credit.
Jackson Hewitt Tax Services is the country's second-largest tax preparer, behind H&R Block. The franchises were either fully or partially owned by Farrukh Sohail, the Justice Department said, and involved "a pervasive and massive series of tax-fraud schemes," according to court filings.
Sohail and other defendants "created, directed, fostered, and maintained a business environment" at the Jackson Hewitt franchises "in which fraudulent tax return preparation is encouraged and flourishes," according to court documents.
Employees were encouraged to ignore telltale signs of fraudulent information and to file claims even when it was obvious customers were using fake W-2 forms or false deductions, the government said. A sample of returns prepared by franchises connected to Sohail found 31 percent contained false information, such as phony earned-income tax credit claims, bogus deductions and fraudulent W-2 forms.
The suits, filed in federal courts in Atlanta, Chicago, Detroit and Raleigh, N.C., also claim that managers and employees at the Jackson Hewitt franchises took kickbacks for filing fraudulent returns.
The suits seek court orders shutting down the franchises.
Ron Brunson, Sohail's attorney, said his client would not voluntarily stop preparing tax returns at the Jackson Hewitt franchises, but was "hoping to work things out" with the Justice Department and IRS.
"I am deeply disturbed by the allegation that a major franchisee of the nation's second-largest tax-preparation firm is intentionally preparing improper tax returns with inflated refunds," IRS Commissioner Mark W. Everson said.
Shares of Jackson Hewitt plunged 18 percent, closing yesterday at $26.50, down $5.90, on the New York Stock Exchange.
A representative of the Parsippany, N.J., company did not immediately return a call seeking a comment.