TaxMasters and its CEO hit with a $195 million Texas jury verdict
On March 30, 2012 a Travis County, Texas jury returned a $195 million verdict against Houston "tax resolution" company TaxMasters and its founder-CEO Patrick Cox in a Deceptive Trade Practices Act case brought by the Texas Attorney General. The state had alleged the company took upfront payments and then failed to show up for customers at the IRS, and the company had filed for bankruptcy protection the day before the trial began.
- Year
- 2012
- Where
- United States
- Outcome
- Sanctioned
- Victims
- Not stated in the sources
- Schemes
- Tax debt relief scams
- Last reviewed
- 2026-09-28
The facts, as recorded
- The jury verdict, in a state civil case brought by the Texas Attorney General's office, found TaxMasters and founder-CEO Patrick Cox liable for more than 100,000 violations of the Texas Deceptive Trade Practices Act.
- Courthouse News reported the $195 million was made up of more than $113 million in customer restitution, about $81 million in civil penalties and more than $1 million in attorney's fees; ABC News reported Cox's personal liability at about $46 million.
- The state alleged TaxMasters misrepresented its contract terms, concealed a no-refunds policy, falsely told customers work would begin immediately while delaying it until full payment was received, and failed to contact the IRS or attend IRS proceedings, leaving customers exposed to garnishments, levies and liens.
- The Texas Attorney General's office reported 891 consumer complaints against TaxMasters since 2005; the company advertised extensively on late-night television, claiming to employ 'former IRS agents and tax professionals.'
- Then-Attorney General Greg Abbott said the evidence showed the firm 'didn't even bother to show up when it came time to fulfill those promises.'
- TaxMasters filed for Chapter 11 bankruptcy protection the day before the trial began, and Cox's request to delay the trial was denied; ABC News also reported an August 2011 settlement with the Minnesota Attorney General's office requiring the company to record sales calls and stop using 'flat fee' language.
Why this case matters
TaxMasters is the largest verdict on this page and the only one decided by a jury. It was also a mainstream, heavily advertised company rather than a fly-by-night operation, which is part of why it shows how the same pitch can be delivered by a business that looks legitimate to a taxpayer under pressure.
What the state alleged
The Texas Attorney General’s case turned on what TaxMasters said versus what it did: customers were told work would begin immediately, but according to the state it waited until full payment was received, and then missed IRS proceedings and deadlines. A no-refunds policy, the state alleged, was not made clear up front.
The money
The reported components, restitution of more than $113 million, civil penalties of about $81 million and more than $1 million in attorney’s fees, are the amounts the jury and court awarded, not amounts collected. The company had filed for bankruptcy protection the day before the trial began, and this page has not verified how much of the judgment was ultimately paid.
The caveat
This was a civil case, not a criminal one, and the verdict is the jury’s civil finding; no criminal charge is described in the sources read for this page. Press reports differ on the exact number of violations found (“more than 100,000” and “more than 110,000”), and on how the total was described, so this page cites the range and attributes the breakdown to Courthouse News. Nothing here should be read as a finding beyond what the court’s verdict and judgment state.
Sources
- TaxMasters, Patrick Cox Hit With Nearly $200 M Judgment. ABC News. Accessed 2026-09-28. Supports: The March 30, 2012 verdict, Cox's roughly $46 million personal liability, the advertising and sales-call allegations, the Attorney General's quotation, the bankruptcy filing and the Minnesota settlement.
- TaxMasters Whacked for $195 Million. Courthouse News Service. Accessed 2026-09-28. Supports: The Travis County court, the breakdown of the $195 million, the specific misrepresentations alleged, the 891 complaints and the bankruptcy timing.