Infomercial Millionaire files Bankruptcy!

24 replies

TaxMasters Files for Bankruptcy, Dogged by Fraud Suits - Businessweek

TaxMasters Inc. (TAXS), the tax-resolution firm known for its television commercials featuring Chief Executive Officer Patrick Cox, sought bankruptcy protection after coming under fire from multiple states' attorneys general.

The company listed debt of more than $1 million and assets of less than $50,000 in Chapter 11 documents filed yesterday in U.S. Bankruptcy Court in Houston, where it's based.

Johnie Patterson, a lawyer for the company, didn't immediately return a voice-mail message seeking comment on the filing.

TaxMasters, which claims to "solve your tax problems" in its commercials, was sued in 2010 for deceptive trade practices by Texas and Minnesota attorneys general, Greg Abbott and Lori Swanson, according to statements on their websites.

"In the midst of a national economic downturn, TaxMasters used a nationwide marketing campaign to offer services for distressed taxpayers who needed help dealing with the IRS," Abbott said in a May 2010 statement. "A state investigation and nearly 1,000 customer complaints indicate that the defendants routinely misled customers."
Deceiving Information

The commercials, which have been satirized on NBC's "Saturday Night Live," duped unsuspecting citizens into believing that their calls to the tax-relief firm would be answered by one of its "former IRS agents" or tax specialists, according to the attorneys general. Instead of speaking with a highly qualified tax consultant, customers' calls are answered by a salesperson providing deceiving information, the attorneys general contend.

Tax-burdened citizens are misled about the service contract terms, and are talked into paying thousands of dollars up front for a tax "solution," while TaxMasters doesn't disclose its no-refund policy, according to the attorneys general statements. The company also falsely claimed to begin immediately working on the case, which doesn't occur until TaxMasters is paid in full, the AGs said.

"The company gets worried people to pay thousands of dollars by overstating the help it will provide with their tax bills," said Attorney General Swanson in her December 2010 statement.
'Little or No Help'

Swanson said TaxMasters got customers to pay advance fees of as much as $8,000, claiming to be able to reduce their tax load by 90 percent in some cases, "but delivered little or no help." The company spent about $14 million in advertising in 2009, according to the attorneys general statement.

Swanson is seeking restitution for the customers, and civil penalties against TaxMasters. Texas Attorney General Abbott is also seeking restitution and civil penalties of as much as $20,000 for each violation of the Texas Deceptive Trade Practices Act.

Two customers sued the company in September 2010 in Houston seeking authority to represent U.S. customers on a "nationwide basis." The customers seek damages over "TaxMasters' explicit and implicit misrepresentations" and violation of consumer- protection laws and breach of contract, according to the complaint.

TaxMasters said it has between 1,000 and 5,000 creditors. The company estimates that funds will be available for distribution to unsecured creditors. Three affiliates also filed for bankruptcy, two of which will liquidate under chapter 7 of the U.S. Bankruptcy Code. The publicly traded company hit an all time low of 1 cent today.

The case is In re TaxMasters Inc., 12-32065, U.S. Bankruptcy Court, Southern District of Texas (Houston).

To contact the reporter on this story: Michael Bathon in New York at mbathon@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net
#bankruptcy #files #infomercial #millionaire
  • Profile picture of the author CyberAlien
    Lol that video is awesome!!!
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    • Profile picture of the author JSProjects
      Originally Posted by Chase Watts View Post

      Lol that video is awesome!!!
      Ha. It's so pointless and stupid, yet funny.
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  • Profile picture of the author 100k
    Some people make me sick!

    They start up business with the sole purpose of scamming people.

    Disgusting!
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    Rent this space.

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  • Profile picture of the author WebPen
    Geez, what a bunch of Cox, Cox, Cox, Cox, Cox, Cox, Cox
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  • Profile picture of the author Halcyon
    This is fear selling at its worse. Sad thing is that this company is not the only one out there.
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  • Profile picture of the author Michael Ten
    This just shows that unethical practices are a poor long term strategy.
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    • Profile picture of the author Centurian
      Trudeau already been around the bend a few times with the FTC. He's somehow skirted tripping the settlement terms with his latest products.
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  • Profile picture of the author Ashley C
    A company like this is beyond dumb. When you're playing with such large sums of money but aren't going by the books... they ARE going to get found out. Crazy stuff. Unfortunately though, a lot of companies like this don't get caught soon enough.
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  • Profile picture of the author Patrick Batty
    man... they should have really been forced out of business simply based on how garbage their ads were! I could never understand how they could pay so much to RUN their ads but probably about $2 to create them..
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  • Profile picture of the author Mike Ogbin
    This is why the illegitimate business don't stay in long term and end up by destroying their reputation and put them in jail as a result of fraud others that putting trust in his company.

    If he is capable to reduce the taxes why this company files bankruptcy!!.

    Everyone be honest in everything because dishonest stay always dishonest
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    Speedy Up - Jumping game that change your mood and put smile in your face :)
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  • Profile picture of the author russflex
    I hope Russ Dalbey of the Cash Flow Business comes next. I heard his company takes in $2 million a week selling those bogus note manuals and "tutoring" programs.
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    • Profile picture of the author Alan Petersen
      Originally Posted by x3xsolxdierx3x View Post

      Maybe it's just me, but those commercials never resonated with me.
      Same here. That's why I was surprised at how much money the dude was making off those ads which funneled leads to his sales people. They never talked to a tax professionals, folks talked with a high pressure closer.

      I think it was short, to the point, and it was played over and over and over on reputable networks like CNN. Throw in the economic melt-down and he cleaned up for a few years.

      Hopefully he doesn't get to keep his money with this bankruptcy.
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  • Profile picture of the author Randall Magwood
    I used to see their ad on TV all the time. I guess it's quite hard to hide your un-success.
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  • Profile picture of the author comp123
    Banned
    Most of those debt resolution companies do business on the same premise and should be shut down. IMO. They charge people up front fees with a promise of resolving your debts for pennies on the dollar under the guise of a non profit organization. They need to shut them all down if they dont do what they claim to.
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    • Profile picture of the author Emily B
      Very sad how people try to take advantage of each other like that. It just makes me think that phrase, "if it's sounds too good to be true, it probably is."

      I hope he loses all his money and spends the rest of his days in poverty.
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  • Profile picture of the author PeteTheMonetizer
    That's funny.

    I thought it was going to be Kevin Trudeau..
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  • Profile picture of the author misha7878
    These guys are always there to make a profit, never to help anyone other than themselves. No surprise there.
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  • Profile picture of the author Cataclysm1987
    Wow, seriously?

    I thought this guy owned a local CPA firm in the area, come to find out he's a giant international scammer. Crazy!

    Funny. I'm glad this guy got owned in the end.
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    No signature here today!

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    • Profile picture of the author Emily B
      Originally Posted by Cataclysm1987 View Post

      Wow, seriously?

      I thought this guy owned a local CPA firm in the area, come to find out he's a giant international scammer. Crazy!

      Funny. I'm glad this guy got owned in the end.
      Same here, the commercials seem to give off a local-ad impression with how direct they are.
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  • Profile picture of the author Tadresources
    This kind of thing makes me sick. These people were already in a difficult place and this guy took advantage of them. Disgusting. He makes legitimate businesses that market in this manner look suspect also.
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