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Liberty Tax Franchisee, Employees Indicted in Maryland Tax Fraud Scheme

Maryland AG Brian Frosh shows fraudulent tax return
Maryland AG Brian Frosh points to tax return. Photo/Maryland

BALTIMORE – A grand jury last week indicted a Liberty Tax Service franchisee and eight employees in a tax fraud scheme that involved enticing homeless people and others to file false income tax returns to generate preparation fees for their company.

According to a joint investigation by Maryland Attorney General Brian Frosh and Comptroller Peter Franchot, Liberty Tax preparers operating from certain offices in Baltimore, all owned by franchisee Lateisha Vanessa Kone, aka Vanessa Dickens, were directly marketing their efforts at homeless shelters, transitional housing and drug rehabilitation centers, promising $50 for each person who showed up to have their tax return filed. The tax preparers would then create a fraudulent return that maximized the credit the filer could receive. The credit is intended to provide extra income to the working poor, incentivizing them to work without creating a tax penalty.

In every case, according to the indictments, the preparers created returns showing that the tax filers earning income as household employees in exactly the range needed to obtain the highest refund, or between $6,450 and $8,150. In each instance, preparers listed income from several sources, each under the limit that would have triggered Social Security or Medicare taxes being withheld by the employer.

Comptroller Franchot declared, "This owner and her associates targeted the most vulnerable, the homeless, disabled, drug addicts, and poor people already struggling for stability. They lured victims by paying them $50, then submitted false tax returns to make a profit without regard to the consequence to their clients."

In a typical case, the return would show that the filer was eligible for a combined $620 in federal and state credit. But most of the money, more than $400, would go to the Liberty franchise for filing fees and other charges. That system was used more than 1,100 times during the 2015 tax season across six Liberty Tax franchise locations, all owned by Lateisha Vanessa Kone. And the indictment states that the tax preparers generated fees for the franchise owner, and were eligible to receive bonuses based on the number of returns they filed, and the amount of the fees they generated.

Attorney General Frosh stated, "Tax fraud is not a victimless crime. It's a crime against all of us. These indictments show that this office will vigorously prosecute those who erode the trust we need to have in our tax system."

The indictment states that franchisee Lateisha Vanessa Kone, is charged with conspiracy to steal, as part of a scheme, over $100,000 from the State of Maryland; conspiracy to prepare false income tax returns, as well as three counts of preparing, assisting in preparing or causing to be prepared a false income tax return and claim for refund. All eight employees are named individually in the indictment with similar charges.

The tax charges carry potential penalties of up to five-years imprisonment and up to a $10,000 fine. The theft charges carry potential penalties of up to 25 years incarceration and up to a $100,000 fine, plus restitution. The Office of the Attorney General did emphasize that an indictment is not a finding of guilt. It said, "A person is innocent unless and until proven guilty."

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About Janet Sparks

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Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.

Janet can be reached at jsparks@bluemaumau.org or at 303-799-7398.