California's attorney general sued "tax lady" Roni Deutch for more than $34 million on Monday, alleging that her law firm regularly violates state law by making false promises that it will help people resolve disputes with the Internal Revenue Service.
Attorney General Jerry Brown contends that Deutch overstates her TV claims of winning tax battles with the IRS. She advertises a success rate of up to 99 percent, yet successfully reduces the amount of money her clients owe in taxes in just 10 percent of cases, the lawsuit says.
"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," said Attorney General Jerry Brown, the Democratic nominee for governor in the November election.
Deutch's law firm, which has its headquarters in the Sacramento suburb of North Highlands, referred calls Monday to attorney Alexander Collins, who did not immediately return a phone message from The Associated Press.
Deutch 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.
Brown's lawsuit, filed in Sacramento County Superior Court, says Deutch's firm takes in at least $25 million annually, and spends $3 million on advertising.
The AG is seeking a preliminary injunction to block what it alleges are unfair business practices and false advertising.
The case seeks unspecified civil penalties on top of $33.9 million in restitution for the hundreds of clients Brown says filed complaints alleging they were defrauded. Her firm collects retainers of up to $4,700 and refuses to return the money when it fails to win tax settlements, the suit says.
Deutch entices clients with television ads that make false claims, the lawsuit alleges.
For instance, it says one ad portrays three clients she purportedly helped save a collective $86,000, yet all three still owe their taxes plus interest and penalties. Deutch merely won the three clients a delay from the IRS' collection efforts, according to the document.
Delays orchestrated by the firm drive up her fees while often increasing the interest and penalties her clients owe the IRS, the complaint alleges. It also accuses her of creating false billings to justify fees that are often higher than originally promised.
Deutch has faced similar allegations before.
In December 2006, she settled a lawsuit filed by New York City's Department of Consumer Affairs that alleged she misled consumers with her advertising. She agreed to pay $300,000, including $100,000 in fines and $200,000 in restitution to consumers.
The State Bar of California website shows Deutch has no public record of discipline or administrative actions.
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