CORPORATIONS THAT OWNED JACKSON HEWITT FRANCHISES IN THREE STATES AGREE TO BE BARRED FROM TAX RETURN PREPARATION

Corporation in Fourth State Will Operate Franchise Under Restrictions

WASHINGTON, D.C. - The Justice Department announced today that it has resolved lawsuits against corporations that operated Jackson Hewitt tax preparation franchises in Atlanta, Chicago, Detroit and Raleigh-Durham, N.C.

Under stipulated injunction orders that will take effect immediately if approved by federal judges in each city, corporations that owned and operated franchises in Atlanta, Chicago and Detroit will be permanently barred from preparing federal income tax returns. Those corporations are selling their Jackson Hewitt franchise rights to new owners. A corporation that owns a franchise in Raleigh-Durham will continue to operate, but will be subject to restrictions and monitoring requirements contained in a permanent injunction to be entered against it.

The government also has settled with a number of the individual defendants in the cases, including Farrukh Sohail, who owns all or part of each of the corporations holding the Jackson Hewitt franchises. Subject to court approval, Sohail will be barred by the U.S. District Court for the Northern District of Georgia from acting as an income tax preparer for five years, and will be subject to permanent restrictions thereafter. He is also selling his interest in the corporation that owns the Raleigh-Durham franchise.

Two individual defendants in the North Carolina case have agreed to the limited injunction to be entered against the franchise in that state. The government previously obtained injunctions barring two individual defendants in the Atlanta case from preparing tax returns.

Courts in the Atlanta and Chicago cases previously barred seven individual defendants formerly employed by the Jackson Hewitt franchises in those cities from preparing tax returns, finding that the seven had repeatedly engaged in misconduct. The United States is dismissing its case against some individual defendants in Chicago and Detroit. The cases against several other individual defendants in the Chicago case remains unresolved. The attached table details the settlement terms or status of all corporate and individual defendants in the four lawsuits.

The corporations to be barred operated under franchise agreements with Jackson Hewitt Tax Service Inc. of Parsippany, N.J., the second largest tax preparation firm in America. The government complaints alleged that the franchisee corporations “created and fostered a business environment in which fraudulent tax return preparation is encouraged and flourishes.” The Justice Department complaints in the cases allege that Sohail-owned franchises prepared and filed over 105,000 federal income tax returns last year, making Sohail one of the largest Jackson Hewitt franchise owners.

When the government suits were filed last April, then-IRS Commissioner Mark Everson said they were the largest civil injunction enforcement efforts the IRS and Justice Department had ever taken against tax preparation firms.

More information about the government complaints is available at http://www.usdoj.gov/tax/txdv07215.htm.

“The Justice Department is committed to taking vigorous action to ensure that tax preparers comply with the law,” said Richard T. Morrison, Acting Assistant Attorney General for the Justice Department’s Tax Division.

“The actions announced today are in the best interest of the nation’s taxpayers,” said IRS Acting Commissioner Linda Stiff. “This effort helps to ensure that taxpayers receive quality assistance when they seek the services of a tax professional.”

Since 2001, the Justice Department’s Tax Division has obtained more than 255 injunctions against tax preparers and tax-fraud promoters. More information about the Justice Department’s efforts to stop unscrupulous tax preparers and tax-scheme promoters can be found at http://www.usdoj.gov/tax/taxpress2007.htm. Information about the Justice Department’s Tax Division can be found at http://www.usdoj.gov/tax.

Listed below are the defendants named in the four lawsuits and the status of the case against each: