Calif. AG Sues 'Tax Lady' for $34M, Says Misleading Ads Promoted 'Heartless' Law Firm Scheme
A January ad from Roni Deutch’s YouTube channel.
Updated: A California attorney known as the “tax lady” whose law firm grosses some $25 million a year has been accused by the state attorney general of operating a “heartless scheme” that takes retainers from thousands of clients while doing little or nothing to help them.
In fact, instead of reducing clients’ tax liability to the Internal Revenue Service, Roni Deutch often increases it, states a press release issued by Attorney General Edmund Brown Jr. “She places clients in an endless loop of requests for duplicate documents,” it says, “that increases her fees and, due to further delays in payments to the IRS, increases clients’ IRS fines and penalties.”
Meanwhile, Brown alleges Deutch advertises a success rate grossly in excess of her actual record of cutting clients’ tax bills.
A complaint (PDF) filed yesterday in Sacramento Circuit Court by the attorney general’s office seeks an injunction prohibiting further allegedly unfair business practices—including advertising claims that Brown’s office contends are misleading—as well as $33.9 million in restitution and civil penalties, among other potential relief.
Among other claims, the suit contends that Deutch’s office has accepted and refused to refund money for legal work that was never performed.
Although the firm’s legal fees for work performed often exceed the amount of the client’s retainer, these fees are “arbitrary and false,” the suit contends, reflecting a “standardized time value” for specific tasks rather than the actual time spent to perform the work.
“Aside from telephone calls, none of defendants’ employees record the time they spend on client tasks because defendants do not require that employees do so. As a result, when the senior attorney examines a client’s file, the senior attorney can determine what tasks were completed, but has no idea how much time it took to complete any of them,” the complaint states. “Without this crucial information, the senior attorney cannot assign the actual amount of time these tasks took, and instead assigns a standardized time value for each one.”
An attorney for Deutch declined to comment, reports the San Francisco Chronicle.
On Wednesday, Deutch posted an official statement to her blog: “I believe the California Attorney General’s civil complaint against my law firm and me to simply be election-year politics,” she wrote. “And I have fully cooperated with the California Attorney General’s Office over the past few months. As a result, I am very disappointed in their decision to file a complaint, but I look forward to a full and fair airing of this matter in a court of law where my law firm and I will aggressively and vigorously defend the claims against us, and I am absolutely confident we will prevail.”
Hat tip: Tax Prof Blog.
Updated Aug. 26 to include statement from Deutsch.
