Unladylike Behavior or Election Year Politics?

Earlier this week California Attorney General (and Democratic candidate for Governor) Jerry Brown filed a $34 Million lawsuit against the Roni Deutch Law Firm. Ms. Deutsch (who has a tax blog) and her law firm focus on representing taxpayers in Offers In Compromise. Her firm is one of several that have television infomercials. From the press release of the California Attorney General:

“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.

However, Ms. Deutch has a very different view of the lawsuit. Her response appeared on her tax blog today, where she stated:

I believe the California Attorney General’s civil complaint against my law firm and me to simply be election year politics. My law firm has been representing taxpayers before the IRS for almost 20 years. We have saved thousands of people tens of millions of dollars. 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.

For the record, I’ve had clients who have come from firms where they can settle for “pennies on the dollar.” Sure, some truly destitute individuals do get such offers through the IRS bureaucracy; however, most individuals do not. Many of these firms require extremely large up-front payments before they will do any work on your behalf. (I have never had a client come to me from the Deutch firm, and I have no idea if that is the case for them or not.)

Mr. Brown is locked in a very tight battle with Republican Meg Whitman to be the next governor of the Golden State. Time will tell whether this lawsuit had basis in facts or electioneering.

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