If you watch cable news with any regularity, you probably recognize this guy:
Patrick Cox, CEO of Tax Masters promises to "get between you and the IRS" and negotiate a settlement of your past due tax bills, often for a fraction of the amount owed. It turns out that Cox has become a multi-millionaire in a very short time, according to ABC News, because of Tax Masters' very simple business model:
"This is a company which is taking advantage of people, and unfortunately when people see it on TV, they do believe in it," said Minnesota Attorney General Lori Swanson, who has accused the company of fraud and deception in a civil action.
The Texas attorney general has filed a similar lawsuit, alleging the company unlawfully "engaged in false, misleading, and deceptive acts and practices."
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The Minnesota attorney general says many of the company's employees are skilled tele-marketers who have little knowledge of the complicated tax issues faced by people who have fallen behind in filing their returns or making tax payments.
"When you call, you think you're talking to a tax professional," said Swanson. "You're really talking to just a salesperson who's trying to get you to sign up."
Now, who do you think are the primary clients of Tax Masters? High-flying CEO's and big time hedge fund managers? Nope. They are ordinary people whose lives are coming apart. A husband dies and the widow has tax debts she never knew about. A divorce, foreclosure or job loss decimates a family's life, and then the IRS starts making threats.
A high-pressure Tax Master salesperson terrifies the prospect by describing the horrific things the IRS is about to do, unless the prospect takes action immediately. The salesperson takes the prospect's credit card number over the phone for an upfront fee of several thousand dollars.
In most cases, that's it. The customer file is thrown in a pile where it may sit for months before anyone gets around to doing anything about it. Tax Masters employs battalions of telemarketers, and only a handful of people to actually call the IRS. There are no CPA's, no tax lawyers, no enrolled agents -- in other words, no one who would be qualified to have an intelligent conversation with the IRS about your tax problems.
A former manager at Tax Masters turned whistle-blower, and his tales of greed and deceit are appalling:
A former manager at Tax Masters, a tax resolution firm now being sued by two different states for alleged deceptive business practices, claims the company cared more about making money than solving its clients' tax problems, and told sales representatives it was okay to lie to potential clients to get their business.
"You make money as fast as you can and it doesn't matter how you do it," said Lloyd Lee, who was head of tax preparation at Tax Masters until he was fired in 2010. "If you have to lie to a client to get money, you do it. That's the way they operated. It was a money machine."
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The emphasis was on sales, not tax preparation, said Lee. Sales representatives outnumbered actual tax preparers by as much as four to one, he added, and almost none of the sales reps had any tax expertise. "Most of them had zero experience," said Lee. "In fact, I did tax returns for several salespeople and a couple of sales managers. If their title is 'Tax Specialist,' they should be able to do a simple 1040 easy. But that wasn't the case."
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As a result, he claims, TaxMasters was a year-and-a-half behind in its tax preparations when he arrived, with the IRS adding interest, and often penalties, as taxpayers waited. "They were 18 months behind in the process because you had all of this work coming in and not enough people to do it," said Lee. "If you sign a contract in January of 2008 and your file doesn't get looked at until November or December of that same year, you've lost a lot of money."
According to Lee, TaxMasters would further delay payment by not forwarding claims to the IRS until clients had paid their TaxMasters bills. The company commonly charges customers from $2,000 to $8,000 to resolve tax debts. Lee also claims that some sales representatives did not disclose hidden costs to customers and would charge customer credit cards before any contract was signed. Asked if he thought that meant customers had been "cheated," Lee said, "Of course, yes."
Tax Masters advertises heavily on Fox, CNN and MSNBC.
ABC News contacted Fox and and CNN requesting comment:
In a statement, CNN said the network was "aware of pending legal activity" and had been told by TaxMasters that it was working to address the claims with the state authorities. "We continue to monitor any activity for developments or resolution, and will further evaluate our relationship as it becomes necessary," the network said in the statement.
Fox News acknowledged receiving viewer complaints. "Anytime we have received a complaint about TaxMasters we forward it to them and tell them they have five working days to resolve the complaint," said a Fox News spokeswoman. While the spokeswoman did not disclose the number or nature of the complaints, she said they have all been resolved.
But what about MSNBC?
I recently saw a Tax Masters spot on MSNBC, and the Tax Masters web site indicates that MSNBC is part of their regular ad schedule.
I sold advertising for local cable, newspapers and direct mail. The general rule is that the publisher is not responsible for claims made by the advertiser, i.e., 'we're like the mailman; we deliver the envelopes, but don't blame us for what's in them.'
But MSNBC, through Keith Olbermann, Ed Schultz and other commentators, savaged Glenn Beck and Fox for their Goldline ads. Goldline sells gold coins at an extremely high markup and sales commission. So even if gold continues to appreciate in value, when you sell your coins you may still take a loss.
MSNBC, with their criticism of Fox, seems to have rewritten the old rule, setting a higher moral bar by implying that the publisher is indeed responsible for the claims of its advertisers.
Now, I know that Glenn Beck personally endorses Goldline, so this is not a perfect comparison in that no one at MSNBC has touted Tax Masters. But still, Tax Masters is a despicable predator.
As a former advertising salesman, I also know that advertising pays the bills. But these cable news networks are hugely profitable. Would it be too much to ask that one of them suspend Tax Master's ads until the litigation is resolved? Even Fox won't run ads for escort services, herbal cancer cures or sex chat lines, presumably because they object to the ethics of those businesses.
I'm going to email this diary to Rachel Maddow, because she repeatedly had the guts to put the spotlight on MSNBC parent company G.E. for paying no taxes on $14 billion in profits. If she's got the brass to tweak the guys who sign her paychecks, I don't think she'd be afraid to tackle Tax Masters.
If you agree with me, would you consider doing the same?