Missouri attorney general files suit against JK Harris

The attorney general of Missouri has filed a lawsuit against a North Charleston company that offers help to taxpayers who owe money to the Internal Revenue Service, alleging that it failed to provide the services it promised and didn't provide refunds to customers who complained.

Missouri Attorney General Jay Nixon filed the lawsuit against JK Harris & Co. in Jefferson County, Mo., on Tuesday.

A JK Harris representative said Wednesday that the company had not received a copy of Nixon's complaint and could not comment on specific allegations.

The lawsuit alleges that JK Harris violated Missouri's Merchandising Practices Act and other state laws and seeks "full restitution" for customers who paid the company for its services but then claimed they did not receive any help from the company in settling their tax bills with the IRS.

The complaint also alleges that a JK Harris subsidiary, Professional Fee Financing Associates LLC, violated the state's Truth in Lending Act and operated in Missouri without registering as a corporation there, and seeks to void all loan agreements Missouri residents made with the company.

The lawsuit also asks the court to order the two companies to pay penalties of $1,000 for each violation and 10 percent of the total amount of restitution.

The lawsuit outlines procedures it said JK Harris describes on its Web site and in other marketing materials to help "anyone who is in a 'crisis situation' with the IRS." According to the complaint, "in most cases" Harris did not follow those procedures.

"After submitting their paperwork multiple times and being shuffled from assigned caseworker to assigned caseworker, consumers requested refunds from JKH," the complaint states. "To date, JKH refuses to issue full refunds to consumers who contracted with and made advance payments for its debt-relief services without receiving said services."

Josh Baker, executive vice president of client advocacy at JK Harris, said Wednesday that the company could not comment on the allegations because it had not been served with the lawsuit.

"What we can say is our customers and their satisfaction are our top priority," he said. "JK Harris has become the nation's largest tax resolution firm ... having served over 225,000 customers since 1997 because of proven results and satisfied customers."

He said the company has worked with more than 1,400 customers in Missouri "and have received four complaints, and we responded promptly to them."

JK Harris was the defendant in another lawsuit filed by Nixon's office, which was settled in 2005. In that settlement, the company neither admitted nor denied any wrongdoing but agreed to pay about $43,000 and change its business practices.

Nixon spokesman John Fougere said Wednesday that the new lawsuit is not related to the previous one, but was filed for "pretty much the same reasons."

In June the company reached a settlement in a similar lawsuit filed by the attorneys general of 18 states. JK Harris denied any wrongdoing but agreed to pay $1.5 million in restitution and change its advertising.

South Carolina Attorney General Henry McMaster originally was part of the task force that filed that lawsuit, but opted out in 2005 after concluding that the company had done nothing illegal.

In an interview published Wednesday by WebCPA.com, an Internet news site for the accounting industry, company founder John K. Harris attributed the attorney generals' involvement to JK Harris' dominance in the tax-settlement industry.

"It happens in every single industry," he said on the site. "Once they grow and become any size, then regulators start looking at the industry. It was an entire industry problem, and we have been the leaders for the last three or four years."

Last year the company reached a similar settlement agreement in a class-action lawsuit filed in Charleston County. Under that settlement, JK Harris agreed to pay $6 million and make a number of changes to its business practices.

The first payments to customers who joined the lawsuit are scheduled to be sent out early next year, according to Mario Pacella of the Strom Law Firm in Columbia, the coordinating counsel for the plaintiffs.

JK Harris provides help to people who owe back taxes to the IRS, through a program known as "offer in compromise," under which the IRS allows some people to settle their tax bills for less than the amount owed.

Reach Michael Buettner at 937-5553 or mbuettner@postandcourier.com.