A federal court order has shut down a Beverly Hills company offering tax relief services after the Federal Trade Commission alleged that the national operation bilked 20,000 consumers out of $100 million by falsely claiming it could reduce people's tax debts.
The FTC said Wednesday that the company, American Tax Relief, used TV, radio and Internet advertising to lure consumers by falsely claiming that it could settle their delinquent federal and state taxes for far less than they owed.
Among other promises, the company allegedly said it could remove tax liens and also stop wage garnishments, bank and tax levies, property seizures and "unbearable monthly payments."
The FTC sued husband-and-wife owners Alexander Seung Hahn and Joo Hyun Park, who allegedly ran the operation since at least 1999, charging upfront fees of up to $25,000. The couple could not be reached for comment, and calls to the company's business office went unanswered.
A Chicago judge last week issued a temporary restraining order against the company that froze the owners' assets and prevents it from accepting customers. A receiver was appointed to manage the company.
Park and Hahn, regulators said, ended up with more than $60 million from the scheme and lived lavishly in multimillion-dollar homes while driving seven luxury cars, including two Porsches and a Ferrari. But the company failed to pay its own taxes and had its California business license suspended last year.
"They strung people along, pushed them deeper into a financial hole," David C. Vladeck, director of the FTC's Bureau of Consumer Protection, said in Chicago on Wednesday. "The game is over. They've been shut down."
The FTC's Midwest office in Chicago usually handles nationwide scams. The trade commission also sued Park's parents after investigators traced about $15 million to them.
American Tax Relief offered an "essentially useless service," Vladeck said, while claiming to have dramatically reduced tax debts for thousands of people. Regulators are hoping to force the company to pay restitution to its victims.
Consumers have filled several online forums with complaints, claiming that the company stopped answering their calls after they sent in thousands of dollars in fees or it charged their credit cards without authorization. Representatives were aggressive and threatening, some wrote.
The website at http://www.americantaxrelief.com is now blank except for a message about the lawsuit that redirects visitors to the FTC website.
The defendants are expected to appear in court the week of Oct. 18, the FTC's Vladeck said.
Customers usually called a toll-free number for a "free consultation," the FTC said. Often, they were informed by salespeople identified as "tax consultants" that they qualified for the "Offer in Compromise" tax relief program — the only Internal Revenue Service program that allows consumers to pay back less in back taxes than the full amount owed.
But few customers were actually eligible for the program, which is available only to taxpayers who have exhausted all other payment options, the FTC said.
American Tax Relief representatives also allegedly promised to erase penalties and interest sparked by late payments. But these so-called penalty abatements are also rarely approved by the IRS, and then only when the late payment is linked to death, serious injury, natural disasters or other significant causes.
The company continued to make deceptive claims even after federal agents executed a criminal search warrant at its Beverly Hills location in April, the FTC said.
While waiting for the company to fix tax problems stemming from his 1999 divorce, Warren Mesler, 45, said his tax bill nearly doubled from $60,000 in 2007 to $118,000 because of penalties and interest. The Wellsville, N.Y., resident paid the company $9,000 after he was told by a representative that he should go to Disney World to celebrate because his tax problems would soon be behind him.
"They made it sound really good, saying they were going to fix the problem in three months," he said. "It's now been three years."