The federal government has filed eight civil injunction suits in Florida to shutter 192 “Loan Buy Sell Tax Services” Tax Services locations and bar Walner G. Gachette, founder of Orlando-based LBS, seven LBS franchisees and three LBS managers from owning, operating or franchising a tax prep business and preparing returns for others.
The seven franchisees and three managers sued are Douglas Mesadieu, Jean R. Demesmin, Kerny Pierre-Louis, Demetrius Scott, Jason Stinson, Wilfrid Antoine, Jacqueline Nunez, Tonya Chambers, Jehoakim Victor and Lauri Rodriguez.
According to government documents, in 2013 LBS operated at least 239 stores (192 owned by the defendants) in Florida, North Carolina, South Carolina, Georgia, Texas, Tennessee, Alabama and Mississippi, and prepared more than 55,000 federal income tax returns last year. The complaints add that this year some of the defendants’ LBS stores began doing business as Milestone Tax Services, Tax Giant, AWA Tax, Tax Master Xpress, BPTS Tax Services and Nation Tax Services.
The suits allege that the defendants target primarily low-income clients with deceptive and misleading ads, prepared and filed fraudulent returns to inflate refunds and profit through “unconscionable and exorbitant fees.” One case highlighted in the complaints suggests that potential clients can receive a refund of more than $3,000 “per child.”
According to the complaints, the defendants directed LBS preparers to, among other activities:
- Falsely claim or increase the EITC;
- Claim improper filing status;
- Fabricate businesses and related business income and expenses;
- Fabricate Schedule A deductions, particularly for unreimbursed employee business expenses; and,
- Charge deceptive and unconscionable fees.
Among the many examples cited in the eight complaints was the case of a client in Tampa, Fla., who was allegedly waiting at a bus station when an LBS employee approached him and offered to drive him to an LBS store to have his return prepared. According to the complaint, despite knowing that the client did not have a car, LBS reported on the return that the client drove his personal vehicle 30,256 miles for business purposes, resulting in a bogus $17,589 unreimbursed employee business expense claimed on the return.
On another occasion, an LBS preparer allegedly approached another client at a flea market and told her that she had to file a return, showed her a badge and said that he was a police officer and “would not do anything that was wrong.” That preparer allegedly prepared the return and falsely claimed that the client had more than $10,000 in income to qualify for an EITC and subsequent falsely inflated refund.
In other cited cases:
- LBS prepared a return for a $250,000 lottery winner in Houston that allegedly claimed several phony deductions to offset that income, including $30,141 in charitable contributions and $10,279 in unreimbursed employee business expenses, resulting in a bogus claim for a refund of $8,247.
- On the return of one Jacksonville, Fla., client, LBS allegedly falsely reported that the client had a mechanic business, though the customer did not work in 2012 and was in fact denied Social Security disability benefits the following year based on the false income and a proclaimed ability to work.
The IRS reportedly estimates that LBS activities cost the government tens of millions of dollars for the 2012 tax year alone.
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