JK Harris stopped making payments

GOOSE CREEK -- Tough economic times may sound like a growth opportunity for a company that sells tax-dispute resolution services, but officials at JK Harris said the company was not spared by the recession.

And that's why the locally based company, which bills itself as the nation's largest tax representation firm, stopped making payments on a $6 million class-action settlement reached in 2007 with more than 18,000 former clients.

"We weren't in a position to continue making the payments, so the attorneys went back in for a new order," said Heidi Benton, vice president for legal affairs. "If we had the money of course we would pay it, because we don't want this looming over our head."

The company still owes about $4 million toward that settlement. No payments have been made since early last year.

The plaintiffs were people who contacted JK Harris for help negotiating a reduction in tax debt owed to the IRS. In that case and in many others brought by state attorneys general, the company was accused of taking money from clients who did not qualify for the government program known as "offers in compromise."

The settlement specified 16 business practices the company agreed to modify, mainly related to advertising and billing. Despite that agreement, complaints kept coming.

Cleveland Daniels of North Charleston is among former clients upset with JK Harris. He said he ran into a large IRS tax debt after cashing out a retirement fund to comply with a divorce settlement, and sought help from the company about three years ago.

"I seen their commercial on TV - the pretty guy with the jacket," Daniels said. "I paid them about $3,600. After a year and a half of paying them, they said they couldn't help me and have a nice day."

Benton said the company couldn't discuss an individual client's case without a signed release from the client.

The S.C. Department of Consumer Affairs has received 137 complaints about JK Harris in the past three years, according to Carri Grube Lybarker, the acting administrator.

One of those complaints came from Dot Scott, also of North Charleston, who complained to the department about her 2009 experience with JK Harris. Like Daniels, Scott said she saw a company ad and sought help negotiating a reduction in a five-figure federal tax debt.

She said the company accepted her payment, later told her she wouldn't qualify for an "offer in compromise," and balked at returning her money.

"I was unrelenting," said Scott, who is head of the Charleston NAACP. She said she eventually got half her money back.

The complaints by Daniels and Scott came several years too late to have been eligible for the class-action case.

JK Harris spokeswoman Gina Anton said changes were made in 2009 to address procedures that may have led to complaints. She said there have been few complaints since then.

"We analyze a person's tax problems and, from there, present the options available from the IRS," Anton said. "Each step costs a certain amount, and if the client isn't happy they are welcome to cancel the service and ask for a refund, which would be determined on a pro-rata basis."

For those awaiting payment from the class-action settlement, it's unclear when the next check might arrive.

A plan approved last year in a Walterboro courtroom by Circuit Court Judge Perry Buckner calls for JK Harris to resume payments to the settlement fund only after paying down some of the more than $12 million in debt owed to a lender, RAI Credit.

Mario Pacella, a Columbia attorney representing plaintiffs in the class-action case, said the settlement would have been larger to if not for the company's limited finances.

"They paid JK Harris to settle their tax debts for pennies on the dollar," he said of the plaintiffs. "Now, they have gotten pennies on the dollar back from JK Harris."

With RAI Credit standing first in line for any money from JK Harris, he added, the class-action attorneys had little choice but to negotiate new terms after JK Harris stopped making payments.

With heavy debts and an unpaid multi-million-dollar settlement, JK Harris this year agreed to settle another round of consumer complaints. The deal with the Texas attorney general's office will cost the company $1.2 million.

Also, a Tennessee court last month held the company in civil contempt, and assessed costs and penalties, for violating the terms of a 2008 settlement with attorneys general in 18 states.

"It's been unfortunate because the lawsuits tend to stack on top of each other," Anton said.

The company now has about 165 employees in Goose Creek, down from 289 when the company relocated from North Charleston in 2009.