Business & Real Estate

State settles case against Sacramento’s ‘Tax Lady’

Roni Lynn Deutch addresses reporters in a defiant news conference in front of her shuttered North Highlands office in May 2011. The state attorney general had levied contempt of court charges accusing her of shredding millions of pages of documents and failing to pay clients refunds in violation of a court order. Deutch closed her law firm a month after the state obtained a court order freezing her assets.
Roni Lynn Deutch addresses reporters in a defiant news conference in front of her shuttered North Highlands office in May 2011. The state attorney general had levied contempt of court charges accusing her of shredding millions of pages of documents and failing to pay clients refunds in violation of a court order. Deutch closed her law firm a month after the state obtained a court order freezing her assets. Sacramento Bee file

She was the “Tax Lady,” a pugnacious Sacramento lawyer who made millions of dollars and built a coast-to-coast empire by vowing to beat the IRS at its own game. Then the state sued her, accused her of defrauding clients and destroying evidence, and forced her out of business.

On Friday, after a five-year legal fight, the state ended its case against former attorney Roni Lynn Deutch.

Her reputation and bank account in tatters, Deutch agreed to pay a $2.5 million fine and perform 350 hours of volunteer service. She also agreed to a permanent injunction forbidding her from ever guaranteeing she could save people money or get the Internal Revenue Service off their backs, according to papers filed in Sacramento Superior Court.

In exchange, the state dropped criminal contempt charges, filed in 2011, accusing Deutch of shredding documents and failing to pay court-ordered refunds.

The settlement contains no findings of wrongdoing.

The resolution of the case appears to do little for the thousands of customers who, according to state officials, were victimized by Deutch and her North Highlands law firm. The state previously obtained a $54 million judgment against her former law firm, but David Beltran, a spokesman for Attorney General Kamala Harris, said officials haven’t recovered any money.

One of Deutch’s lawyers, Malcolm Segal, said he believes she made some refunds “a long time ago,” but he was unable to provide details.

Her other lawyer, Ken Rosenfeld, said Deutch is broke and had to have her legal fees paid by Sacramento County. “She’s indigent,” Rosenfeld said. “Indigent people don’t have $50 million.”

Rosenfeld and Segal said it’s doubtful she’ll be able to pay the $2.5 million fine, either. “It’s more symbolic than realistic,” Rosenfeld said.

Rosenfeld said Deutch is pleased with the outcome, particularly the dropping of the criminal charges. The state had accused her of destroying as many as 2.7 million pages of evidence.

“She never committed a criminal act,” Rosenfeld said.

He added that Deutch “is very happy to be over and done with this. She’s working on starting a new chapter in her life, new business ventures.”

Deutch, who surrendered her law license in 2011, told state officials “she may seek in the future to practice law in California or some other jurisdiction,” according to court papers. She also might seek to become an enrolled agent – someone who can represent taxpayers in cases before the IRS.

Before her downfall, Deutch was something of a phenomenon in the legal world. Her relentless advertising made her a star of late-night television, and state officials said her law firm was raking in at least $25 million a year in revenue. The firm had a $3 million annual advertising budget and a 45-employee telephone sales force.

She wrote a book, “The Tax Lady’s Guide to Beating the IRS,” and dispensed tax advice via interviews on the “Today” show and CNN. She also created a franchised chain of tax-preparation centers that covered 21 states.

In their 2010 lawsuit, state officials said Deutch built her business on “a bevy of false promises.” After charging clients up to $4,700 per case, she did little or no work on their behalf, the suit said.

If anyone complained, the lawsuit said, Deutch’s staff would produce phony billing statements to “systematically cheat their clients out of refunds by exaggerating the amount of time spent on their matters.” State officials said just 10 percent of Deutch’s clients had their income-tax debts resolved successfully.

Segal said Deutch was “a victim of her own success.”

“She never, ever intended to hurt anyone,” the defense attorney said. “Her goal was to always help people resolve their differences with the IRS. As she grew bigger and bigger, she relied on the work of others and it got out of hand.”

Deutch closed her law firm in May 2011, a month after the state obtained a court order freezing her assets. In a defiant news conference in front of her shuttered North Highlands office, she denied all the allegations brought by the state.

“I am not the monster the attorney general has made me out to be,” she said that day. She added that she was “totally, completely broke.”

Dale Kasler: 916-321-1066, @dakasler

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