A federal court in Los Angeles permanently barred a Rancho Palos Verdes, Calif., married couple – Henock Teferi and Ruth Berhane – and their company, Plover Financial Services LLC, from engaging in certain abusive tax-preparation practices, the Justice Department announced today. The defendants are former owners of a Los Angeles-area Instant Tax Service franchise. Instant Tax Service is a national tax-preparation chain based in Dayton, Ohio, and claims to be the fourth-largest tax-preparation firm in the nation.
According to the government complaint in the civil case the defendants operated Instant Tax Service offices at multiple locations in the Los Angeles area until 2011. During that time, defendants’ employees allegedly engaged in a variety of misconduct, including preparing tax forms with unsubstantiated business income, falsely claiming education credits, improperly claiming false filing status, reporting false dependents, selling deceptive loan products, and preparing tax returns based on information from employee paystubs rather than employer-issued W-2 forms.
Judge Michael Fitzgerald of the U.S. District Court for the Central District of California signed the permanent injunction order, barring the defendants from violating the federal tax laws and consumer protection laws, and requiring an outside monitor to review a sample of tax returns that the defendants prepare in connection with their current tax preparation business, and report to a designated representative of the United States to ensure compliance with the injunction. The order also bars the defendants from marketing abusive loan products, including holiday or instant cash loans or advance loan products offered to customers based on information obtained from customers’ paystubs. The defendants consented to the permanent injunction without admitting the allegations against them.
The Justice Department brought five civil injunction suits against Instant Tax Service and some franchisees last year. One of those suits is pending against the nationwide franchisor of Instant Tax Service and its owner, Fesum Ogbazion, in Dayton. The court in that case has entered a preliminary injunction , and trial on the government’s request to shut down the Instant Tax Service franchisor permanently is scheduled for May 2013.
In the past ten years, the Justice Department’s Tax Division has obtained hundreds of injunctions to stop the promotion of tax-fraud schemes and the preparation of fraudulent returns. Information about these cases is available on the Justice Department’s website .