Tulsa Man Says State Nearly Ruined His Life Over Back-Taxes He Didn't Owe
TULSA, Oklahoma - A Tulsa man says the state almost ruined his life, coming after him for more than $100,000 in taxes he didn't actually owe. It all started with a shocking letter from a law firm.
"I was sitting there just stunned," Mike Knight said. "I mean it was just total confusion. I'm saying, 'What?' I mean this was nuts. I didn't know if it was a scam. I didn't know anything."
It wasn't a scam. The Oklahoma Tax Commission wanted $111,000 in back taxes from Knight, from nine years ago, plus interest and fees. The letter came from a law firm hired by the state.
"It's the Oklahoma Tax Commission. I don't know if they can take everything I own. I don't know if they can take my house," said Knight.
He did know he had paid those taxes. But how could he prove it? Most banks, including Knight's, purge their records after seven years. According to the FDIC, that's the industry standard.
The tax commission can come after back-taxes indefinitely.
"I'm sitting here with all of the burden of proof being on me and not seeing any light of day at that point. I honestly felt lost," said Knight.
Then, in what Knight calls a miracle, his old accounting firm found the proof he needed in a storage unit. He had paid those taxes. An agent at the Oklahoma Tax Commission confirmed in a letter that Knight didn't owe the state a dime, blaming an internal computer error for generating the erroneous debt.
Not only is Knight upset with the tax commission for its potentially life-altering mistake, he's also upset they hired a particular law firm to go after him: Linebarger Goggan Blair and Sampson. For years, that firm has been tied to various scandals involving public officials.
In 2005, one of its partners went to prison for fraud and conspiring to bribe two San Antonio city councilors.
Another Linebarger attorney was indicted in 2012 in Arlington, Texas, accused of falsifying campaign contributions to win debt-collection contracts with local schools.
Plus, the firm lost contracts in three other cities in 2007 and 2008, because of perceived inappropriate expenditures on city officials.
And the IRS dropped its contract with the firm in 2007, but hasn't responded to our requests asking why.
We searched the Oklahoma Ethics Commission database and didn't find any campaign contributions by the firm or its partners in Oklahoma. In a statement, Joe Householder, a spokesman for the firm said, "…no one I've spoken to at the firm recalls any such contributions in recent years, just as I haven't turned up information of any made by individual partners or employees. That said, anyone who works for the firm is also a private citizen with the same right to be civically engaged as any other private citizen."
When we asked the Oklahoma Tax Commission how they respond to the law firm's history, officials said they were not aware of the firm's past until I told them about it. They say the firm met the state's criteria and its business references checked out during the competitive bidding process.
"We didn't get any information that the businesses that used them had any problem or we wouldn't have chosen them," said Paula Ross, of the tax commission.
The Linebarger law firm has collected more than $20 million for the tax commission since 2009. Ross said that is all money that is owed the state, no matter how long ago the debt may be from. She said the state always sends out two letters to taxpayers or businesses who owe money. Then, the debt is sent to the first of three debt collection agencies contracted with the state.
Linebarger Goggan Blair and Sampson is the third and final collection agency. It charges taxpayers an additional 27.5 percent on top of what they owe. That means the firm has made $5.5 million in fees off Oklahoma Tax commission collections alone.
The firm's spokesman defended its record saying, "With respect to the previous incidents you inquired about, in each we took immediate action against the employee involved – up to and including termination – and immediately provided full cooperation to the authorities investigating each matter."
He said the firm is proud of the work it does for the tax commission.
Tulsa tax attorney Paul Tom said the Linebarger firm is aggressive and has the power to make people pay, no matter how old the debt.
"Linebarger can, on behalf of the state of Oklahoma, file garnishments. They can garnish bank accounts. They can garnish wages and it's a big problem," Tom said.
A big problem, he said, because the Oklahoma Tax Commission, as we saw in Knight's case, makes mistakes. He said the agency has a poor track record for record keeping, yet expects the taxpayer to have the documents to prove them wrong.
"That's a big problem. It's a huge problem and I think Oklahoma and every other state needs to keep better records," said Tom.
He said taxpayers need to know their rights when contacted by a collection agency or law firm. He said they have a right to request proof the debt exists. However, for some clients, his advice is simply, "Pay or move out of the state."
Ross said the tax commission generally won't go after debts more than 10 years old. She admits the agency has had some complaints about record-keeping, but said, with so many collections, that is to be expected and she believes the state has a good track record for keeping correct records. Plus, she said a new computer system should cut down on any of those problems.
One of the main complaints, she said, arises when a business closes but the tax commission is never told. Ross said many people and businesses are contacted for back-taxes years after closing a business, because the account remains open.
All collection agencies and law firms collecting debts on behalf of the state must obey the Fair Debt Collections Act.