FTC: American Tax Relief ran $60 million scam as owners drove Ferraris
by Oct 6th 2010 4:30PM
The FTC, which is seeking compensation from American Tax Relief for its victims, asked a Chicago federal judge to halt the company's operations and freeze its owners' assets. The FTC lawsuit names names American Tax Relief LLC of Beverly Hills, Calif. and its two co-owners, Alexander Seung Hahn and Joo Hyun Park. Park's parents, Young Soon Park and Il Kon Park, are also named for allegedly holding funds obtained from customers.
"We've made it a top priority to go after scammers who try to exploit the financial hardship of others," said David C. Vladeck, Director of the FTC's Bureau of Consumer Protection, in a statement. "For people having a tough time paying their taxes, the last thing they need is to lose more money to a fraud."
According to the FTC, TV, radio and Internet ads by American Tax Relief falsely claimed it could settle consumers' delinquent federal and state taxes for a fraction of the amount they actually owed. The company also lied about its ability to remove tax liens and halt wage garnishments, bank and tax levies, property seizures, and "unbearable monthly payments."
For example, the company's website (which has been taken offline) said, "The IRS is currently accepting a fraction of back taxes owed to them (sic) for those who qualify. The IRS is allowing the people with delinquent tax liabilities a ONE-TIME opportunity to settle the debt ONCE AND FOR ALL. But at the same time, the IRS does not advertise, promote or even voluntarily suggest this program."
The FTC also accuses the company of continuing its deceptive practices after federal agents raided the operation's Beverly Hills offices in April, 2010, when they seized money from bank accounts, a Ferrari from one of the company's owners, and placed liens on two residences, including a $3.4 million house. At the time, one of the company's owners was leasing six other vehicles, including a Rolls Royce, a Bentley, two Porsches, and two Mercedes-Benzes.
American Tax Relief charged up-front fees ranging from $3,200 to $25,000 for purported tax relief services. The company's ads included a toll-free number for consumers to call for a "free consultation." After speaking briefly with telemarketers who posed as "tax consultants," virtually all consumers were told they qualified, and that American Tax Relief could help them significantly reduce their tax debts, the FTC complaint alleges.
But very few of the company's customers actually qualified for IRS programs. Most who used American Tax Relief made the cut only for installment payment plans, which still require payment of the full amount owed, and which many taxpayers can easily arrange by themselves for free, the FTC said.
Many consumers were also told they qualified for an "Offer in Compromise," the only Internal Revenue Service program that allows people to avoid paying the full amount of back taxes, and available only in limited circumstances. Taxpayers are eligible for this program only after other payment options have been exhausted and a person's ability to pay has been reviewed. The IRS has been warning consumers about the pitfalls of seeking an "offer in compromise," often referred to in ads as settling with the IRS for "pennies on the dollar," since 2004.
Other consumers were told they qualified for a "penalty abatement," which the company claimed would eliminate both accumulated penalties and interest stemming from late payments. However, the IRS considers a penalty abatement only in very limited circumstances for people who have "reasonable cause" for the late payments, such as death, serious injury or natural disaster. The FTC alleges that the company did not gather sufficient information from consumers to know whether they would qualify for either an Offer in Compromise or a penalty abatement.