Liberty Tax Sues Founder Again, Hewitt Calls Allegations “Full of Lies” | Franchise overview
Two years of fighting between ousted CEO John Hewitt and founder of Liberty Tax Service appeared to end in July 2018, when Hewitt agreed to a $ 20.58 million buyback of its controlling shares. The previous two years were “Civil War. It was the worst battle ever, ”he told Franchise Times in October 2018.
The war resumes. In March, Liberty Tax sued Hewitt, its holding company Loyalty Brands and the new tax preparation franchise it acquired, ATAX, alleging a “far-reaching and continuing plan to unfairly compete with Liberty.”
Hewitt “hijacked Liberty’s confidential information in violation of the Defend Trade Secrets Act and in violation of the employment contract he entered into as CEO of Liberty, to target Liberty’s most profitable franchises” and convert them to ATAX , according to the lawsuit.
Liberty also sought injunctions to end the actions, filing a brief on April 19 that included an affidavit from Trisha Grabert, a former Liberty Tax franchisee and an ATAX employee from August 2020 to March 2021, when she been made redundant. Meanwhile, Hewitt identified Liberty franchisees who were “ripe for picking,” based on confidential information, his affidavit said.
Hewitt’s general plan was to “reconstitute the group” or “reunite the Liberty family” at ATAX. “To that end, he would invite current and former Liberty employees to his home, dinner and events, where he would sprinkle them with alcohol to get them to speak more freely,” the affidavit states.
Brent Turner, CEO of Liberty Tax since mid-2019, initially accepted an interview, but then canceled it and sent a statement that read in part: “What happened here goes way beyond the competition and instead constitute unfair trading practices. “
Hewitt and the defendants “urged the parties to break agreements with Liberty Tax in order to join with ATAX in trying to help ATAX illegally compete with Liberty Tax in the marketplace, at Liberty Tax’s expense. This calculated conduct of the defendants is not at all surprising, given that Mr. Hewitt is barred from any involvement with Liberty Tax under a DOJ order, ”Turner wrote.
“At Liberty Tax, we will take a stand against anyone, especially competitors, who uses unfair business practices to their advantage in an attempt to harm the goodwill and reputation of Liberty Tax.”
High rate loans coming soon
The charges come at a critical time for Liberty Tax, as the franchise is set to merge with a Canada-based SPAC called NextPoint Acquisition Corp. for $ 243 million. NextPoint is also looking to buy LoanMe, a California-based lender that issues consumer and business loans, at interest rates sometimes reaching triple digits. WalletHub said that LoanMe personal loans charge a 9.9% to 98% APR range. Business loans have interest rates ranging from 14.9% to 149%.
The deal is expected to close in mid-June, with Turner becoming CEO of newly appointed NextPoint Financial, Turner confirmed. Franchisees could then offer tax preparation and loan services. Turner called the loan products “very profitable” on a conference call and said they would be available at 850 Liberty Tax locations by 2023. Liberty Tax has 1.6 million customers and 2,700 locations, Liberty said. At the start of 2017, it numbered 3,668 units, its FDD said.
The seller, called Franchise Group Inc. after a name change from Liberty Tax, will use $ 182 million in cash proceeds to pay off debt. Franchise Group, backed by venture capital firm Vintage Capital Management at the time of Hewitt’s exit, began acquiring additional brands in 2019, and its holdings now include Buddy’s Home Furnishings, American Freight, The Vitamin Shoppe and Pet Supplies Plus.
Pursued ’70 or 80 times’
“Another slanderous trial. It’s a bundle full of lies and exaggeration, ”Hewitt said when asked about the allegations, noting that CEO Brent Turner signed a statement at the end attesting to the truth of the lawsuit. “Look at this. He perjured himself. We will defend him vigorously, but he has no validity. He has sworn under penalty of perjury, so we are seriously considering suing him for perjury, with all we can. “
“The more successful you are, the more you get pursued, and I learned that when I started to be successful,” with Jackson Hewitt, the previous franchise he founded after leaving industry giant H&R Block . “I’ve been sued 70 times or 80 times, by H&R Block, by franchisees, by Jackson Hewitt and now by Liberty. Ninety-nine percent of the time, the only people who win are the lawyers. “
Hewitt officially launched Loyalty Brands, its new parent company, in March 2019, when it announced the end of its non-compete agreement with Liberty Tax. Loyalty has since bought 10 brands. Its largest, with 60 units, is ATAX, acquired in July 2019 when it numbered 40. Under the aegis are also At Home Elder Care, First Choice Business Brokers and Zoomin Groomin, a mobile home grooming service. , according to Martha O’Gorman, director of marketing at Loyalty.
When asked why Liberty Tax is suing him, again, Hewitt is typically provocative. “It’s a joke. They’ve lost 500 franchisees. They’re trying to hit me to stop me, to slow me down, because they know we’re going to be the fastest growing tax company in the country.
I ask him if he is having fun in his new concert. “I am I am. You know I’m old, right? I’m 71. I’ll be 72 in two months. People say why you keep doing this? I built two public enterprises of one. half a billion dollars Why do you keep working?
“And I say, I work to help change people’s lives. It’s not the most important thing, but I have created over 800 millionaires. That means I created 5,000 half millionaires … and 10,000 quarter millionaires. I’ve changed people’s lives, and it’s rewarding, ”Hewitt said.
“When I was a kid, I thought I would retire sooner. Well I don’t know what I would do. There is nothing more fun than changing people’s lives. I think I made up this sentence: Thank God it’s Monday.
Beth Ewen is Editor-in-Chief of The Franchise Times and writes the Continental Franchise Review® column in each issue. Send interesting legal and public policy matters to [email protected]