Liberty Tax Official Accused of Usurping the Company's Board to Maintain Power

A shareholder derivative complaint was filed on behalf of Liberty Tax, Inc. (TAX) against Liberty Tax director and former Chief Executive Officer John Hewitt for breach of fiduciary duties. The complaint outlines the internal dysfunction of the company at the hands of Hewitt, who was terminated on September 5, 2017, after an independent investigation deemed allegations of sexual misconduct valid. Rather than accepting the consequences of his actions, Hewitt used his power as controlling stockholder to maintain control of the company. In light of Hewitt's actions, several board members resigned or refused to stand for reelection, and the company's Chief Financial Officer resigned on November 7, 2017. Liberty Tax's turmoil resulted in its cancelled earnings release and investor conference call scheduled for December 7, 2017. Then, on December 11, 2017, Liberty Tax reported that its independent auditor, KPMG, had resigned – making it impossible for the company to issue audited financial statements on time – because of "Hewitt's past and continued involvement in the Company's business and operations," which "has led to no longer be able to rely on management's representations." Since Hewitt's actions have come to light, Liberty Tax has faced reputational damage and loss to its stock's value.