Getting romantically involved with the founder was often the path to promotion or franchise deals, South Carolina-based franchise owner Anne Fuller said in court filings for a 2010 fraud lawsuit against the company. She wasn’t romantically involved with Hewitt, she said, but described herself as in the founder’s “inner circle.’’ Liberty argued to keep Fuller’s testimony out of court, but the lawsuit was settled before the judge ruled. Fuller declined last week to comment on the transcript, citing a non-disclosure agreement.

Financial Disarray

Hewitt refused to cooperate in the 2017 investigation, and the board fired him. But he continued to control the firm through his voting rights, prompting at least two senior executives and three independent board members, including Garel, to resign.

The infighting created so much turmoil that Liberty Tax missed several earnings reports and has yet to file an annual report for its most recent fiscal year. Two auditors hired by the company have resigned. The final straw appears to have been pressure from Nasdaq, which said it might not give the company more time to file its overdue disclosures and delisting was a very real possibility, according to said Alexander Paris, an analyst at Barrington Research who talked to company executives about the sequence of events.

“He was bound and determined to hang on to his company,” Paris said. He hasn’t talked to Hewitt who, he speculated, “did the best that he could, he was very persistent, and then at the very end, I think he said, ‘Hey, my net worth is on the line here.’”

Cautionary Tale

The saga at Liberty Tax is a cautionary tale for Papa John’s, which is gearing up for its own fight with Schnatter, who resigned as chairman earlier this month after reports that he used racist language during a conference call in May.

Schnatter remains the largest shareholder, controlling about 30 percent of the stock. He remains on the board. He’s since said he regretted leaving the chairmanship and, without the protection of a controlling class of shares, he plans to lobby other shareholders to avoid total banishment, according to a person familiar with the matter.

Earlier this month, the company’s board terminated its so-called founder’s agreement that designated Schnatter as the face of board and hired a law firm to oversee an investigation of its “policies and systems related to diversity and inclusion.” The company declined to comment.

As for Liberty Tax, “John Hewitt will be missed in terms of his business abilities and his knowledge of the industry,” Paris said. “But at the end of the day, this is probably what’s best for Liberty Tax, its continued survival and its shareholders.”