Roni Lynn Deutch, known as the “Tax Lady” for her late-night commercials and television news appearances promising to reduce her clients' tax bills, has agreed to pay $2.5 million and perform 350 hours of community service to settle state charges that she defrauded customers and destroyed evidence (State v. Deutch, Cal. Super. Ct., No. 34-2010-00085933, case dismissed, 8/7/15).
Deutch and state prosecutors reached the settlement five years after then-Attorney General Jerry Brown (D) sued her and her company seeking $34 million in funds that she allegedly obtained from clients in large up-front payments for which her firm did little or nothing in return. The agreement resolves fraud and unfair business practice charges, as well as 1,609 contempt charges the AG filed against Deutch for allegedly shredding 2.7 million pages of documents in violation of a court order (78 DTR K-5, 4/22/11).
Deutch continues to deny the state's allegations, and the $2.5 million settlement is a “symbolic” amount because she has no money, Malcolm Segal, a Sacramento attorney representing Deutch, told Bloomberg BNA Aug. 10. She shut down her firm and surrendered her California state bar license shortly after the AG filed its lawsuit in 2010.
“The settlement makes it absolutely clear she denies the allegations against her,” Segal said.
If Deutch ever pays the $2.5 million, $50,000 would go toward a civil penalty and the rest would go to her former clients to reimburse them for payments they made, Segal said.
The AG's office won a $54 million default judgment against Deutch's company in March 2014, but hasn't received any payments.
Deutch and the AG's office reached the agreement through a supervised settlement conference overseen by a retired Sacramento County Superior Court judge, Segal said. No trial date had been set, and the parties were still in the early stages of discovery.
Tax Lady Again
The agreement doesn't prohibit Deutch from working as a tax adviser in the future, but bars her or her employees from making false claims that the state alleged she was making through her tax practice. To work as a tax professional again, she would need approval from the appropriate licensing bodies, such as the California state bar, Segal said.
Deutch would be barred from making false claims about the amount of money she can save clients, guaranteeing to resolve a tax liability or eliminate penalties and interest, or claiming she has a specific success rate in negotiating with the Internal Revenue Service, among other things, according to the final judgment filed with the court.
In the original complaint, California prosecutors also claimed Deutch's firm included illegal finance charges in its fee agreements, harassed clients with collections practices, falsely billed clients for time employees didn't spend on client matters, and refused to refund fees paid by clients when the firm failed to reduce their tax debts.