Attorney General Coakley Stops Tax Relief Company From Misleading Customers
- JK Harris to stop taking consumers money for tax services it fails to perform, pay $1.5 million in restitution

FROM THE OFFICE OF THE ATTORNEY GENERAL

June 12, 2008

BOSTON – A South Carolina tax-relief company that claims to be able to settle consumers’ debt with the IRS for “pennies on the dollar” has agreed to stop misleading consumers about its services and pay $1.5 million in restitution, Attorney General Martha Coakley’s Office announced today.

“This company took advantage of people who paid for tax assistance and, in some instances, profited by taking their money and not giving them any help at all,” said Attorney General Coakley. “This agreement will ensure that this firm is honest with its clients and provides refunds if they are unable to assist them.”

Attorney General Martha Coakley and 17 other state attorneys general entered into a consent judgment with JK Harris and Company, L.L.C of Charleston, South Carolina, and its president, John K. Harris. Suffolk Superior Court Judge Linda E. Giles entered the judgment yesterday. According to the complaint, also filed yesterday, JK Harris did not help consumers with their tax problems as advertised and refused to give refunds when consumers complained that promised services were never completed.

The complaint alleges that JK Harris regularly advertised that it could help people who owed back taxes to the IRS by filing an Offer in Compromise (OIC) on their behalf and consumers would only have to pay a small percentage of what they owed. An OIC is a program implemented by the IRS to assist consumers who owed back taxes as a legitimate alternative to declaring a case not collectible. JK Harris charged money upfront for this service without actually determining if consumers qualified for an OIC or while knowing that consumers in fact didn’t qualify. The IRS accepts only a small number of these kinds of cases. In many cases, JK Harris did not even apply to the IRS to assist consumers as promised, but still refused to give those consumers their money back.

The complaint further alleges that JK Harris regularly advertised that it had more than 450 offices nationwide, including several offices in Massachusetts. Typically the person handling a consumer’s OIC was actually located at the JK Harris home office in Charleston, South Carolina. If a consumer wanted to meet with a JK Harris representative about their file they had to physically travel to Charleston. The other offices were staffed only by sales representatives who could not assist consumers with their tax problems.

JK Harris also claimed that consumers’ files would be handled by “tax experts” or “ex-IRS agents” when in fact the individuals handling the cases did not fit those descriptions and did not have tax expertise. JK Harris case managers changed frequently, and consumers complained that they often had to provide the same information to the company several times.

Under the terms of today’s consent judgment, JK Harris must make clearer disclosures to consumers and refund them if the company is not able to work out a compromise with the IRS. The company must tell consumers under what circumstances they might qualify to reach a compromise with the IRS on back taxes and provide an accurate percentage of how many OIC offers the IRS accepts. The company must also refund consumers money if the IRS does not accept their case.

JK Harris agreed to a number of other reforms to its advertising and sales practices and is barred from offering or performing credit repair services. The judgment also applies to JK Harris Financial Recovery System, L.L.C and Professional Fee Financing Associates, L.L.C both owned by John K. Harris.

Any Massachusetts consumer who filed a complaint with the Massachusetts Attorney General’s Office, the Better Business Bureau or the South Carolina Department of Consumer Affairs or who files a complaint within the next 90 days will be eligible for a partial refund from JK Harris. Consumers can contact the Massachusetts Attorney General’s Consumer Hotline (617) 727-8400.

States participating in the judgment along with Massachusetts are Arkansas, Arizona, California, Connecticut, Florida, Illinois, Maine, Michigan, Minnesota, New York, North Carolina, Ohio, Pennsylvania, South Dakota, Tennessee, Vermont, and West Virginia.

This matter was handled for Massachusetts by Assistant Attorney General Jacqueline Welch of Attorney General Coakley’s Consumer Protection Division.