The board has been negotiating with Hewitt to purchase his Class B shares, which give him the ability to name a majority of the board members. However, no agreement has been reached.
Hewitt's employment agreement gave him the right to slightly less than $1.5 million if terminated with or without cause. That includes severance of $801,005 with most of the rest involving unvested stock awards.
The board worked to assure key employees stay by providing retention agreements with incentives with CFO Kathleen E. Donovan, Vanessa M. Szajnoga, VP and general counsel; and Richard G. Artese, chief information officer. It said Michael S. Piper, VP of financial products, would have been eligible for the retention agreement but gave notice of his intention to leave on September 5, before the board made its decision to fire Hewitt. He intends to stay to help in transition.
Hewitt has been a fixture in the tax store business for decade. But in the last two years, the chain went from fast-growing to troubled and it suffered a double-digit drop in tax returns prepared during this year's tax season.
Filing fraud by franchisees was a major problem. A Michigan franchisee who owned 10 stores in the Detroit, Mich., and Chicago, Ill., areas was banned from the tax preparation business in November 2015. Then, early in the 2016 tax season, the state of Maryland said it detected possible filing fraud in 23 Liberty Tax stores in that state. A federal court barred a Columbia, S.C.-based Liberty franchisee from preparing federal taxes for others in November.
Publicity from these problems stalled Liberty's ability to sell new franchises, while existing franchisees were reported not to be comfortable with opening new locations. The problems also produced a direct cost as in December, Liberty said it would purchase 100 franchised stores.
The problems also cost Hewitt personally. For the year ended April 30, 2016, he earned no compensation, except a nominal one-dollar salary. For fiscal 2017, his compensation was slightly less than $1.7 million.
In August 1982, Hewitt and other investors purchased the Mel Jackson Tax Service in Hampton Roads, Va. The company began selling franchises in 1986 and changed its name to Jackson Hewitt in 1988. Hewitt and his father, Richard, co-wrote the Hewtax interview program used by the stories. He left Jackson Hewitt in 1996. He started Liberty Tax, initially in Canada, with the purchase of a tax store there in 1997 and then moved into the United States in 2000 after his non-compete agreement with Jackson Hewitt expired.
