‘Hundreds of thousands of victims put their trust in him’: Man behind $70 million tax refund scheme sentenced to prison

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Talk about the tax burden.

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The founder of a nationwide tax preparation chain has been sentenced to one year and one day in prison for running a tax refund advance scheme that robbed customers of $70 million in exorbitant fees.

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Facem Ogbazian of Cincinnati, Ohio, was accused of attracting customers to the Instant Tax Service, a chain of 1,100 tax preparation offices nationwide, with advertisements offering loans before their expected tax refund.

Federal prosecutors said the Dayton-based Instant Tax Service (ITS) advertised the loans as being backed by third-party lenders, despite having no involvement with any financial institution. Prosecutors say that instead of paying upfront, the business used customers’ financial details to file tax returns from their loan applications, often without their approval or knowledge. The firm would then collect a higher fee for the work.

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Between 2005 and 2011, prosecutors say the Dayton-based firm collected $70 million in such fees from hundreds of thousands of uninsured customers.

“Many hundreds of thousands of victims put their trust in [Ogbazion]In ITS and their nationwide advertising campaign, they had every reason to expect some degree of fiduciary responsibility from ITS. Instead, the defendants abused their trust, knowingly misled their clients, and collectively defrauded them of millions of dollars,” prosecutors said in a filing asking the judge to sentence Ogbazian to 15 years in prison.

Ogbazion’s lawyer did not immediately respond to a message seeking comment, but wrote in court papers that his client had essentially cut corners during the height of the 2008 economic crisis, when he lost access to lending. And his business was struggling.

His lawyer wrote, “It was not the violent, rich-at-the-spend-for-the-poor scheme that the government makes.”

test is from 2007

The IRS and other agencies began investigating some of the Instant Tax Service franchises in early 2007. In 2013, a federal judge signed a preliminary injunction ordering ITS to stop acting as federal prosecutors prepared to bring charges against it and Ogbazian. At the time, the firm described itself as the fourth largest tax preparer in the country.

In 2015, Ogbazion and the company’s vice president, Kyle Wade, were indicted on multiple charges of wire fraud, money laundering and bank fraud. He was also accused of tax evasion for failing to pay payroll taxes for his employees for several quarters. Wade later pleaded guilty to obstructing IRS rules.

Ogbazion was found guilty by a jury in 2017 of tax evasion, willful failure to withhold and pay employment taxes, wire fraud, conspiracy to commit wire fraud, and bank fraud. After the hearing, the court dismissed five counts of wire fraud, but allowed the conviction for wire fraud and conspiracy in other cases to stand.

Once a Classic Immigrant Story

Ogbazion’s attorney wrote in court documents that his client once represented a classic immigrant success story. He said that Ogbazian was born in rural Ethiopia as the son of a shepherd and emigrated to America as a child with his family with the help of missionaries.

While he was in college, Ogbazian learned that the IRS was going to start allowing taxpayers to file returns electronically, and he put together whatever money he pulled out to start a tax preparation business. In 1999, he sold his original business, which had expanded to dozens of offices, to tax preparation company Jackson Hewitt for $3 million. According to court filings, he used the proceeds to build ITS.

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