Clients of a locally-based tax preparation service thought they would get tax credit for purchases of alternative fuels, but now they claim something about the sales of methane gas from landfills just doesn't smell right.
Class action plaintiffs allege preparers from Compro Tax convinced them to buy gas to obtain tax credits through what the preparers knew was a multi-state scheme to defraud clients.
Originally filed on Jan. 5, Jimmy and Nicola Bertrand vs. Denise White et al was removed from Judge Gary Sanderson's 60th District Court to federal court in the Beaumont Division of the Eastern District of Texas on May 1.
As reported in the Southeast Texas Record, the same day another class action involving the same allegations was filed in Jefferson County, Gillespie et al vs. Compro Tax et al, (Case No. D183-934).
In April, the federal government filed its own suit against dozens of tax preparers including Compro Tax employees over allegedly fraudulent methane sales.
The Bertrand's suit alleges that preparer Denise White, National Tax Inc., Compro Tax Inc. and Compro Tax-North advised them to purchase an interest in Gas Recovery Partners 2 GP.
The purchase was in what plaintiffs claim they believed was a project to purchase methane gas from landfills, and were told by Compro Tax preparers the sales qualified under the Internal Revenue Service Code, Section 29, for credit on fuel from a non-conventional source.
But according to the Department of Justice, there were no methane sales only a scheme created by two Florida men who promoted the sham through tax preparers who acted as sub-promoters.
The plaintiffs have had their credits disallowed by the IRS, and hit with back taxes, interest and penalties.
At the time of the original complaint, the Bertrands were seeking total damages of $13,460, which included back taxes, costs of tax preparation, interest and lost time.
However, on April 7, the plaintiffs' amended complaint included more than 25 defendants and sought class certification to include "any persons who had tax returns prepared by any of the individual or Business Entity Tax Preparer Sub-Promoter defendants in the state of Texas for any of the tax years 2004, 2005, 2006 and 2007."
According to defendant Compro Tax, the plaintiffs' suit now falls under the Class Action Fairness Act, "as the amount in controversy now exceeds the sum or value of $5 million, exclusive of interest and costs," and at least one member of the class is a citizen of a state different from at least one of the defendants.
In the meantime, the federal government filed its own suit regarding the allegedly fraudulent gas sales.
The civil injunction lawsuit, filed April 2 in the Middle District of Florida in Tampa, against four CPAs, 27 tax preparers and one other individual the government seeks to bar them from promoting the sales of methane from landfills.
According to a press release from the Department of Justice, George Calvert of Hernando Beach, Fla., and Gregory Guido of Lithia, Fla., concocted a scheme that involved creating bogus business records to document sales of methane from landfills in Puerto Rico, Illinois, New York, Ohio and Connecticut.
The government complaint alleges that Calvert and Guido promoted the scheme through tax preparers, who acted as sub-promoters. The tax preparers allegedly sold interests in the sham methane production facilities to thousands of customers in at least 14 states and prepared income tax returns claiming more than $30 million in tax credits based.
According to the complaint, most of the sub-promoters were in Texas. Two of the largest sub-promoters were Louis and Elizabeth Powell, a married couple from Carthage. The suit alleges that the Powells sold the scheme to more than 1,800 customers, and then prepared tax returns for customers claiming more than $7.8 million of the improper credits.
Another large sub-promoter alleged to have promoted the scheme is Ronald Fontenot of Lake Charles, La. The complaint alleges that Fontenot is the president and CEO of Compro Tax Inc., a tax preparation service with its main office in Beaumont and more than 100 offices in the eastern and southern United States. The company was founded in 1982 by Jackie Mayfield.
According to the government complaint, Fontenot promoted the credit scheme to all Compro Tax store operators, and at least 54 of those Compro Tax store operators sold interests in the scheme to customers and then prepared federal income tax returns for the customers claiming the improper tax credits.
Other defendants include Craig Johnson and Yusef Mohammed of Beaumont, founder Jackie Mayfield of Orange and Joann Spooner of Port Arthur.
In addition, other Compro Tax agents from the Texas cities of Carthage, Dallas, Irving, Plano, Mansfield, Mesquite, Corrigan, San Antonio and Lufkin are named in the government suit.
In the Bertrand suit, the plaintiffs are represented by Beaumont attorneys Ken Lewis, Tom Peterson and Mitch Toups.
Defendants are represented by Michael Cash of Gardere Wynn Sewell LLP in Houston and John Newton III of Beaumont.
The case was assigned to U.S. District Judge Marcia Crone and referred to Magistrate Judge Earl S. Hines for pre-trial proceedings.
Bertrand vs. Denise White et al, Federal Court Case No. 1:09-cv-358-MAC-ESH