A Texas Appeals Court has ruled that Patrick Cox, the founder and CEO of TaxMasters will not have to account for a $46 million judgment against him. Even after TaxMasters was left bankrupt by a public enforcement action with thousands of violated clients financially damaged, Patrick Cox is still not going to be rightfully forced to face the music. Given the prevalence of tax help scams and schemes, Peter Stephan of the Tax Resolution Institute believes the criminals staining the reputation of a needed industry and hurting American taxpayers in dire straits should be punished and made to pay for the damages.

 TaxMasters CEO Deceptive & Criminal

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Criminal TaxMasters CEO

In 2005, TaxMasters began advertising its tax-resolution services nationwide. With Patrick Cox as its spokesman and majority shareholder, the company used late night commercials and pennies on the dollar tax resolution promises to con thousands of American taxpayers in trouble with the IRS. In 2010, Texas filed a Deceptive Trade Practices Act claim against TaxMasters and the company went bankrupt in 2012.

Beyond any doubt, TaxMasters routinely deceived its customers about its services. Such deception was even noted by the Amarillo-based 7th District Court of Appeals during its ruling. This deception included the imposition of high administrative fees and the acceptance of large initial payments without telling customers the payments were nonrefundable. In other words, the violated clients of TaxMasters paid and paid regardless of whether their cases were properly settled with the IRS.

Jury Convicts TaxMasters CEO

A previous trial court found that Cox and his companies, TaxMasters and TMIRS Enterprises Ltd., had violated the Texas Consumer Protection and Deceptive Trade Practices Act (DTPA) more than 15,000 times. As a result, the defendants were convicted and ordered to pay $31.25 million in penalties and $14.6 million in restitution. Unfortunately, this just ruling did not stand.

Cox appealed, arguing that he did not personally violate the DTPA any more than any other corporation trying to make a profit. The state argued that Cox had been the company’s “guiding spirit,” and that he created and approved the practices that violated the DTPA. Siding with Cox on July 1, 2014, a three-judge appellate panel reversed the decision of the previous court

 Judges Let TaxMasters CEO Walk

Justice Mackey Hancock wrote for the court that, “No Texas court has applied the federal ‘guiding spirit’ doctrine to hold an individual liable under the DTPA for actions taken by a corporation…. Further, the Texas courts that have addressed ‘guiding spirit’ in the context of Texas’ exercise of jurisdiction have required some direct personal action on the part of the person alleged to be the ‘guiding spirit of the corporation…. There is no evidence that Cox ever accepted, directly or indirectly, payment from any customers… All of the evidence reflects that the payments were made directly to TaxMasters. Further, there is no evidence that Cox failed to make any disclosures. Rather, the evidence establishes that only TaxMasters failed to make these disclosures.”

In a moment of incredible hypocrisy and blindness given the role that Cox played in the television claims, the court also claimed that there was no evidence to show that Cox deceived customers by advertising that TaxMasters would “solve your tax problems” for “pennies on the dollar”. In the end, the Texas judges chose to protect the wrong people by splitting legal hairs and ignoring the obvious truth that was seen by a jury of Cox’s peers in the previous decision.

 Protect the American Taxpayer First

The Tax Resolution Institute will not stand by and watch criminals like Patrick Cox continue to stain the reputation of the tax resolution industry. By teaching lawyers, CPAs and enrolled agents how to properly handle tax resolution cases. Peter Stephan is doing his best to turn back the tide of corruption and greed. Hopefully, in the future, the courts will follow suit as well when enforcing judgments against criminals like Patrick Cox.