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Estimated reading time: 2 minutes, 17 seconds

Two Liberty Board Members Resign

Steven IbbotsonThe board of directors of Liberty Tax continues to churn following the board's September 5 firing of CEO and founder John Hewitt. On December 15, Steven Ibbotson, chair of the compensation committee submitted his resignation.

Ibbotson owns DataTax Business Service, a Canadian tax preparation business which was the first outside investor when Liberty launched in Canada in the late 1990s. DataTax is also the largest owner of Liberty's publicly traded A shares.

Liberty says it does not expect the changes will impact the company's tax season

"Our approximately 2000 franchisees are hardworking small business owners. They and Liberty Tax are focused on making sure we are ready for tax season," general counsel Vanessa Szajnoga said in a prepared statement. As to issues involving Hewitt, she replied, "We cannot provide comment on employment matters."

A major issue is that Hewitt, sole holder of the company's Class B stock, has voting control of the company. Hewitt replaced board members Thomas Herskovits and Robert Howard on November 5 and George Robson, chair of the audit committee, resigned the same day. John Garel, chair of the Nominating and Corporate Governance Committee, said in Novembr he would not seek re-election but resigned this week saying Hewitt's representatives are acting together.

"The Class B Directors are acting in unison through Mr. Hewitt's Class B rights and are, in my judgment, unwilling to consider input that interferes with their objectives, with which I materially disagree," Garel wrote in a letter filed with the SEC.

Hewitt was fired after the board hired a prominent law firm to investigate complaints about his behavior. The publication the "Virginia Pilot" has reported that employees complained they could hear him having sex in his office and that he favored those with whom he was involved. In his letter saying he would not seek re-election, Garel referred to the reasons for the firing as having been reported but did not himself state them.

The termination has also taken its toll on executives.  

Michael Piper, VP of financial products resigned on September 5, even though he would have been eligible for a retention bonus. CFO Kathleen Donovan resigned on November 7 despite being given a retention bonus in September.  KPMG resigned as auditor on December 11, saying it could no longer rely on management assertions.

Ibbotson's resignation means a change of five members of a nine-member board.

In a letter filed with the SEC, Ibbotson wrote, "I made the decision to resign because I materially disagree with certain aspects of how the Company is being managed by Mr. Hewitt as a result of his rights as the sole holder of the Class B common stock and voting control at the board level."

Ibbotson was also of a member Audit Committee and the Nominating and Corporate Governance Committee.

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