The task force has offered companies an "accelerated" way to prove they did qualify for the incentives they received. | Getty Whistleblower: Jackson Hewitt CEO lied to get $2.7M tax break from New Jersey

TRENTON — The CEO of the tax preparation company Jackson Hewitt lied in order to secure millions of dollars in tax incentives from New Jersey, a former executive testified under subpoena Thursday, raising new questions about the multibillion dollar subsidy programs that are set to expire in July.

The public testimony before a new task force appointed by Gov. Phil Murphy could mark a turning point in the debate about the future of the tax credit programs, fueling the Democratic governor’s arguments that the system is broken and needs to be dramatically scaled back — claims that have been met with resistance from top state lawmakers.


Appearing at the task force’s first hearing in Trenton, the former executive, Gulsen Kama, did not mention Jackson Hewitt by name. But the facts she laid out match with her tenure as the company’s vice president for financial planning and analysis — a position she held from January 2015 to April 2016, according to her LinkedIn page. The company was granted a $2.7 million tax incentive award in May 2015 after telling the state it was contemplating a move to either New York City or Sarasota, Fla.

But company executives were never considering a move, Kama testified, and, in fact, were negotiating terms of a lease agreement in Jersey City before the award was approved. That didn’t stop the then-CEO from signing a certification with the state’s Economic Development Authority confirming the company would move jobs out-of-state without the incentive. The EDA oversees the incentive programs.

“The CEO certification was false, and known by the CEO to be false,” Kama, who was under oath, told the task force at the Trenton War Memorial. “The decision to relocate to Jersey City was already a done deal.”

Kama filed a whistleblower lawsuit against the company, alleging she was terminated after raising concerns about its compliance with the award. Not only did the company lie during the application process, she said, but it did not retain the number of jobs it promised to. The company was supposed to keep 69 jobs in New Jersey, but dipped below that threshold when it moved payroll and human resource jobs to Florida.

Jackson Hewitt did not immediately respond to a request for comment.

The company already had a checkered history with New Jersey's tax incentive program, Kama said, having settled with the EDA years earlier for failing to produce the jobs it had promised under a tax credit it received from a previous program.

Kama was the first person to testify before the Murphy-appointed task force that is charged with examining the inner workings of the state’s controversial tax incentive programs. The practice of handing out tax breaks to corporations ballooned under Republican Gov. Chris Christie as a way to draw companies to the state in the aftermath of the national financial crisis of 2008. Billions of dollars worth of incentives have been approved to companies, although only hundreds of millions of dollars have been fully awarded to date.

The task force is the most aggressive step Murphy has taken to look into the programs, which earlier this year were subject to a scathing report by the state comptroller who found lax oversight and controls by the EDA.

The governor has granted the task force subpoena power, which it may use to compel companies and other witnesses to testify. The panel is being advised by the law firm Walden Macht & Haran, which includes former white collar criminal prosecutors, and is headed by Ronald Chen, the former New Jersey public advocate.

In the eight weeks it has been working, the task force has sent letters to about 100 companies that have received tax credits, telling them not to destroy any documents. Most companies have been cooperative, Chen said. One company even admitted it should not have qualified for $1.5 million in tax breaks it received and is paying back what it has paid out.

"One company went so far as to disclose to us on our very first call to them that they were not in compliance with program requirements," Chen said, without naming the company.

The task force is expected to hold more hearings and will not name any of the companies that are being examined during the process.

The task force has offered companies an "accelerated" way to prove they did qualify for the incentives they received. That includes turning over documents to backup their claims of job creation and for them to file affidavits under penalties of perjury. So far, Chen said, more than 50 have agreed to participate.

Not all companies have been as willing.

"Unfortunately, not everyone has promised cooperation," Chen said. "Rest assured, we will investigate thoroughly, and if any applied for tax incentive benefits based on false, misleading information, or if they are out of compliance, we will seek repayments."

The panel may call companies that are suspected of not having complied with the program requirements to testify. Or they may also turn over their findings to the New Jersey U.S. Attorney, or the state attorney general.

The programs are set to expire this summer, and while they are still in the early stages of the legislative process, Murphy and state lawmakers are odds over what to do.

The governor has proposed more limited programs with caps on the amounts of awards, and has already circulated proposed legislation to lawmakers. Senate President Steve Sweeney, who helped shepherd the bill that authorized the programs, seems to favor renewing them largely as they are. But, he has said the Legislature needs to get a better sense of what worked, and what didn’t.

To that end, the Legislature is holding its own hearings on the issue, and has heard from witnesses including company executives and tax policy experts. Separately, the Attorney General's Office is also reviewing the comptroller's report.

At Thursday’s hearing, Chen appeared to undermine claims by lawmakers who helped put the programs in place that the abuse was not caused by the law itself, but by lack of oversight at the EDA.

"Some serious problems have emerged that suggest the EDA might not have the right policies and procedures to serve as an effective gatekeeper," Chen said. "These problems suggest that the legislation itself does not include enough controls to ensure the EDA could monitor it effectively so companies do not take advantage of the programs to get tax breaks they don't deserve."

Among those appearing before the panel on Thursday was an expert from Pew Charitable Trusts, who was questioned on how to improve the state’s economic development policies, and state Comptroller Philip Degnan, who testified about the audit his office conducted.

Degnan testified that when his office began conducting the audit, staffers asked EDA officials whether there was any pending litigation relevant to the programs, but were never told of any. It turns out there was: In 2015, a former EDA employee filed a whistleblower lawsuit claiming he was fired for resisting demands from his bosses to falsify data to show a company’s tax credit award would create a greater “net benefit” to the state than it actually would. Although the worker lost the lawsuit in mid-2018, at the time the office asked that question, the case was ongoing.

“I would say that I would have expected that that would have been disclosed,” Degnan said.

Another whistleblower had been slated to testify Thursday, but backed out at the last minute because of concerns about how her former employer would react, said Georgia Winston, an attorney for the task force’s law firm. Winston hinted the panel may subpoena her.

“We’re also mindful of the hurtles whistleblowers feel they must overcome to tell their stories,” Winston said. “The task force may issue subpoenas to help alleviate these issue.”

Darryl Isherwood, a spokesperson for the governor, said in a statement that the comptroller’s report, news stories on the issue, and Thursday’s testimony have shown a “disturbing” lack of accountability.

“The governor appointed the task force to ensure that every dollar of taxpayer money that has been awarded by the EDA is accounted for and every promised job created or retained,” Isherwood stated. “Based on the findings so far, it seems the task force is doing that job admirably.”

Sweeney said in a statement that the hearing included assertions of misconduct that are “completely unacceptable and should not have been allowed to go undetected.”

“If any companies violated their agreements or defaulted on their promises to the EDA they should be identified,” he stated. “If anyone committed fraud, lied or cheated, they should be held accountable.”

The integrity of the programs is critical for their effectiveness, he said.

“In making any needed improvements we should be careful not to demonize all of the businesses and workers who have acted in good faith,” he said. “The great majority of them have contributed to greater economic opportunities for their home communities and the state.“

Ryan Hutchins contributed to this report.