Earlier this year, a federal grand jury handed down a 23 count indictment (downloads as a pdf) against Fesum Ogbazion and Kyle Wade for conspiracy and tax-related crimes. Fesum Ogbazion is the CEO and sole owner of Instant Tax Service (ITS) Financial, and his three companies: ITS Financial, Tax Tree, and TCA Financial. Wade was previously the vice president of financing for ITS and owned multiple ITS franchises. Today, Wade pleaded guilty to one count of obstructing and impeding the Internal Revenue Code.
Initially, Ogbazion and Wade were each charged with one count of impeding the administration of the Internal Revenue Code, one count of conspiracy to commit wire fraud, and five counts of wire fraud. Ogbazion was also charged with six counts of money laundering, one count of evasion of payment of employment taxes, eight counts of failure to collect and pay over employment taxes, and one count of bank fraud.
From about January 2004 through November 2012, Ogbazion and Wade allegedly masterminded a scheme to obstruct the Internal Revenue Service (IRS). As part of the scheme, numerous ITS franchises filed false federal income tax returns without ever having a valid form W-2 and without the permission of their taxpayer clients. Those returns included false income in order to increase the refundable Earned Income Tax Credit (EITC). The scheme also involved electronically filing large volumes of unsigned tax returns on the first day of the tax filing season while backdating taxpayer authorizations; mass filing in advance makes it more difficult for IRS to cross-check forms W-2 with refund claims. Additionally, the indictment charges that Ogbazion directed ITS employees to forge taxpayer signatures on IRS forms, and file false documents with the IRS, including bogus forms W-2.
In an effort to put a stop to the behavior, a civil injunction was issued in 2013 against Fesum Ogbazion and his three companies: ITS Financial, Tax Tree, and TCA Financial. At the time, U.S. District Judge Timothy S. Black issued a scathing order against ITS, directing the company to shut down its operations, and further barring the defendants from “operating, or being involved with in any way, any work or business relating in any way to the preparation of tax returns.” In his ruling, Judge Black found that ITS had a culture of “fraud and deception” and that shutting it down completely was “necessary to protect the public and the Treasury.”
In its heyday in 2009, ITS was ranked #1 on Entrepreneur Magazine’s Top New Franchises list; #1 lowest cost franchise in the United States; and #3 as the fastest-growing franchise. Just before the issuance of the injunction, ITS was considered the fourth-largest tax preparation business in the United States, behind H&R Block, Jackson-Hewitt, and Liberty Tax.
Ogbazion is scheduled to go to trial on his charges. After his plea, at sentencing, Wade faces a statutory maximum sentence of three years in prison and a fine of $250,000.
