Jerry Brown Whomps|the ‘Tax Lady’

SACRAMENTO (CN) - "Tax-lady" Roni Deutch, an attorney whose TV commercials promised assistance with tax debts, defrauded thousands of people, Attorney General Jerry Brown says in a $34 million demand in Superior Court.

Deutch charged "thousands of dollars" in an "unlawful scam" that promised that she could get clients into IRS programs to resolve back taxes, while providing them "little or no assistance," according to the complaint.

The Deutch law firm employs about 160 people, including 45 full-time salespeople, according to the complaint. The state says Deutch's firm generates about $25 million in annual revenue and targets people "who are in financial distress and in danger of being subjected to IRS collection actions."

Deutch's legal fees range from $1,600 to $4,700, part of it up front, and the rest in monthly installments. "Defendants' advertisements contain materially false and misleading statement," the state says. "For instance, in an advertisement entitled 'It's Your Turn,' defendants claim to have 'saved' three particular clients from having to pay the IRS $12,000, $39,000, and $35,000 respectively. In fact, defendant did not save these particular clients any money, but merely placed them on currently not collectible status with the IRS, a kind of tax collection purgatory. Placing clients on currently not collectible status stops IRS collection efforts, but interest and penalties continue to accrue on the tax debt while the collection hold is in place. Moreover, the client is still liable for the entire tax debt. In fact, while the collection hold is pending, the IRS will normally also place a tax lien on the taxpayer's assets to protect the government's rights. ... Later, despite defendants' promises, these clients are subject to wage garnishment, bank levies, and/or federal tax liens."

In a statement announcing the lawsuit, Brown said that "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."

Brown claims that a Pico Rivera woman paid Deutch a $1,900 retainer for representation, and by the time Deutch finished with her case, she owed the IRS hundreds of dollars more in interest and penalties, and had a levy placed 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," Brown said.

The Deutch firm rewards its sales staff with lavish bonuses and trips to Las Vegas for soliciting new clients, but caseloads are so heavy that Deutch's attorneys "regularly carry caseloads as high as 600 to 700 clients at one time" and "during especially busy periods can service as many as 1,200 clients at one time," according to the complaint.

Among the section headers in Brown's 28-page lawsuits are: "The Sale Pitch: Defendants Lure Clients with False Promises"; "The 'Verification' Process is a Sham"; "Defendants' Fee Agreement Unlawfully Includes Finance Charges and Their Collection Practices Illegally Harass Clients"; "Defendants Falsely Bill for Time They Did not Spend on the Client's Matter"; and "Defendants Fail to Manage Client Documents and Overburden Their Clients with a Process Designed for the Clients to Fail."

Brown seeks "not less than $33,945,000" in restitution, an injunction, fines of $2,500 for each violation of the Business and Professions Code, and an extra $2,500 for each violation involving a senior citizen.

Follow @MariaDinzeo

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