'Tax lady' Roni Deutch accused of 'heartless scheme', faces $34 million fraud lawsuit
SACRAMENTO, Calif. -- California's attorney general is suing "tax lady" Roni Deutch for $34 million, alleging that her promises to help people solve disputes with the IRS often don't pan
out and leave her clients still deeper in debt from her fees.
Attorney General Jerry Brown filed the lawsuit Monday in Sacramento County Superior Court. He alleges that Deutch overstates her TV claims of winning tax battles with the Internal Revenue Service.
Deutch, who calls herself the "tax lady," says she runs the nation's largest tax resolution law firm.
Her ads are in heavy rotation on cable television and she has offered tax advice on national networks including NBC, CNN, Fox and CNBC.
Her law firm referred calls to attorney Alexander Collins, who did not immediately return a phone message from The Associated Press on Monday.
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ATTORNEY GENERAL JERRY BROWN'S PRESS RELEASE
Brown Seeks $34 Million From TV's Tax Lady Roni Deutch For Victimizing Thousands Who Sought Her Aid in Dealing With the IRS
SACRAMENTO - Attorney General Edmund G. Brown Jr. today filed a $34 million lawsuit against television's "Tax Lady Roni Deutch" for orchestrating a "heartless scheme" that swindled thousands of people facing serious and expensive tax collection problems with the IRS.
"Tax Lady Roni Deutch is engaged in a heartless scheme that swindled people with tax problems," Brown said. "She promises to significantly reduce their IRS tax debts, but instead preys on their vulnerability, taking large up-front payments but providing little or no help in lowering their tax bills."
Deutch manufactures credibility by boasting that her tax resolution law firm, which has annual revenues of at least $25 million, is the largest of its kind in the nation. She spends $3 million a year on advertising, much of it on late-night cable TV, and frequently offers tax advice on NBC's Today Show, CNN, and CNBC.
Desperate debtors turn to Deutch based on her misleading ads that feature fictional testimonials claiming she secured large reductions in the featured clients' federal tax debts.
For example, her ad entitled "It's Your Turn" features three clients whom Deutch claims to have "saved" from having to pay thousands of dollars to the IRS. In fact, those clients still owe the IRS the full amount of their taxes, plus interest and penalties.
When potential clients call Deutch's boiler room, sales agents employ high-pressure sales tactics plus a series of misrepresentations and false promises to persuade them to retain her firm. The sales agents claim Deutch's success rate in dealing with the IRS is as high as 99 percent. But the percentage of clients whose tax bills Deutch actually reduces is a mere 10 percent.
Rather than cut clients' debts, Deutch often escalates them. She places clients in an endless loop of requests for duplicate documents that increases her fees and, due to further delays in payments to the IRS, increases clients' IRS fines and penalties.
One woman from Pico Rivera, who owed the IRS $13,000, turned to Deutch after seeing a TV ad. She paid Deutch a $1,900 retainer, but by the time the Deutch firm ended its representation, she owed the IRS hundreds of dollars more in interest and penalties, and the IRS had placed a levy against her Social Security benefits. Despite failing to take any effective action on her behalf, Deutch refused to refund the woman's retainer by falsely billing her for time the firm did not spend on her case. Deutch regularly uses false billing statements to deny her clients' refund requests.
Hundreds of clients have filed complaints with the Attorney General and other government agencies, describing Deutch's failure to reduce their IRS debts as she advertised and her refusal to refund retainers of as much as $4,700.
Brown's lawsuit says thousands of consumers in California and around the country have fallen victim to Deutch's unlawful scam, losing millions of dollars that could have been used to pay their IRS tax liabilities. The lawsuit charges that Deutch operates a deceptive tax resolution scheme that employs "a bevy of false promises and misrepresentations."
Brown's action seeks to permanently prevent Deutch from engaging in such unfair business practices and false advertising, and force her to pay victims restitution of at least $33.9 million plus civil penalties.
Brown's lawsuit follows the consumer alert he issued on March 30, 2010, warning consumers to be wary about tax debt scams. It is also one of a series of actions he has taken to protect consumers who suffered during the financial crisis and resulting economic downturn, including his 2008 lawsuit against Countrywide Home Loans that resulted in an $8.68 billion settlement, as well as recent enforcement actions against scams in the foreclosure consultant, loan modification, and property tax reassessment industries.
