CALIFORNIA ATTORNEY GENERAL JERRY BROWN HAS FILED SUIT AGAINST "TAX LADY" RONI DEUTCH AND HER FIRM FOR MORE THAN $34 MILLION ON MONDAY, AUGUST 23, 2010. BROWN ALLEGES THAT RONI DEUTCH, A PROFESSIONAL TAX CORPORATION, REGULARLY VIOLATES STATE LAW BY MAKING FALSE PROMISES ABOUT THEIR ABILITY TO RESOLVE DISPUTES WITH THE INTERNAL REVENUE SERVICE.
BROWN CONTENDS THAT DEUTCH OVERSTATES HER ADVERTISED TELEVISION CLAIMS OF WINNING 99 PERCENT OF HER TAX BATTLES WITH THE IRS WHILE IN REALITY SUCCESSFULLY REDUCING THE AMOUNT OF MONEY HER CLIENTS OWE IN TAXES IN JUST 10 PERCENT OF CASES, THE LAWSUIT SAYS.
EDMUND G. BROWN JR. Attorney General of California FRANCES T. GRUNDER Senior Assistant Attorney General KATHRIN SEARS
Supervising Deputy Attorney General ALYCE C. SANDBACH (State Bar 141894) ALEXANDRA ROBERT GORDON (State Bar 207650) CONOR P. MOORE (State Bar 230079)
Deputy Attorneys General 455 Golden Gate Avenue, Suite 11000 San Francisco, CA 94102-7004 Telephone: (415) 703-5500 Fax: (415) 703-5480
Attorneys for Plaintiff THE PEOPLE OF THE STATE OF CALIFORNIA [EXEMPT FROM FILING FEES UNDER GOVT. CODE SEC. 6103]
SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SACRAMENTO
THE PEOPLE OF THE STATE OF CALIFORNIA,
Plaintiff,
v. RONI DEUTCH, A PROFESSIONAL TAX CORPORATION, a California corporation; RONI LYNN DEUTCH, an individual; and DOES 1 through 100, inclusive, Defendants.
Case No. COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF COMPLAINT, FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
Plaintiff, the People ofthe State of California, by and through Edmund G. Brown Jr., Attorney General ofthe State of California, alleges the following on information and belief:
1. This action is brought against Defendants, who regularly violate California law while preying on consumers who cannot afford to pay their tax liability and are facing collection actions by the Internal Revenue Service (IRS). In order to convince consumers to pay Defendants thousands of dollars in fees, Defendants falsely promise them that they qualify for one ofthe IRS's programs to resolve taxpayers' back tax liability. In return for these fees, however, Defendants usually provide little or no assistance to their clients.
2. Consumers from California and around the country have fallen viCtim to Defendants' unlawful scam, losing thousands ofdollars that could have been used to pay their tax liability to the IRS. In this action, Plaintiff seeks an order permanently enjoining Defendants from engaging in unfair business practices, granting restitution to victims, imposing civil penalties, and granting all other :relief available under California law.
DEFENDANTS AND VENUE
1. Defendant Roni Deutch, a Professional Tax Corporation (Deutch), is a California corporation and law firm with its principal place ofbusiness in North Highlands, California, in Sacramento County. Defendant Deutch operates a web site at www.ronideutch.com. At all relevant times, Defendant Deutch has transacted and continues to transact business throughout ,California, including Sacramento County.
2. Defendant Roni Lynn Deutch (Roni Deutch), an individual, is the founder, owner, and president ofDeutch. At all relevant times, Defendant Roni Deutch was an attorney licensed by the State Bar ofCalifornia. Defendant Roni Deutch, acting alone or in concert with, others, has formulated, directed, controlled, authorized, or participated in the acts and practices set forth in this Complaint. At all relevant times, Defendant Roni Deutch has transacted and continues to transact business throughout California, including Sacramento County.
3. The true names and capacities, whether individual, corporate, associate or otherwise, ofdefendants sued herein as Does 1 through 100, inclusive, presently are unknown to Plaintiff, who therefore sues said defendants by such fictitious names. Plaintiff will seek leave to
1 COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF 1
amend this Complaint to allege the true names of Does 1 through 100 when the same have been
ascertained. Plaintiff is informed and believes, and based thereon alleges, that each ofthe fictitiously named defendants participated in some or all ofthe acts alleged in this Complaint.
1. The defendants identified in Paragraphs 3 through 5 above are referred to collectively in this Complaint as "Defendants."
2. At all times mentioned herein, each of Defendants acted as the principal, agent, or representative of each ofthe other Defendants, and in doing the acts herein alleged, each Defendant was acting within the course and scope ofthe agency relationship with each ofthe other Defendants, and with the permission and ratification of each ofthe other Defendants.
3. At all r~levant times, Defendants have controlled, directed, formulated, known and/or approved of, and/or agreed to the various acts and practices of each ofthe Defendants.
4. Whenever reference is made in this Complaint to any act of any Defendant or Defendants, such allegation shall mean that such Defendant or Defendants did the alleged acts either personally or through the Defendants or Defendants' officers, directors, employees, agents andlor representatives acting within the actual or ostensible scope oftheir' authority.
5. At all times mentioned herein, each Defendant knew that the other Defendants were engaging in or planned to engage in the violations oflaw alleged in this Complaint. Knowing that other Defendants were engaging in such unlawful conduct, each Defendant nevertheless facilitated the commission of those unlawful acts. Each Defendant intended to and did encourage, facilitate, or assist in the commission ofthe unlawful acts alleged in this Complaint, and thereby aided and abetted the other Defendants in the unlawful conduct.
6. Defendants have engaged in a conspiracy, common enterprise, and common course of conduct, the purpose ofwhich is and was to engage in the violations of law alleged in this Complaint. The conspiracy, common enterprise, and common course of conduct continue to the present.
7. Whenever reference is made in this Complaint to any act ofDefendants, such allegation shall mean that each Defendant acted individually and jointly with the other Defendants named in that cause of action.
COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
13. Each Defendant committed the acts, caused or directed others to commit the acts, or permitted others to commit the acts alleged in this Complaint.
14. The violations of law alleged in this Complaint occurred in Sacramento County.
and elsewhere throughout California and the United States.
DEFENDANTS' REPRESENTATIONS AND BUSINESS PRACTICES
1. Defendants operate a law firm that employs approximately 16.0 people and generates approximately $25 million per year in annual revenue. Defendants utilize their sales force, which amounts to about 45 full-time employees, to advertise, market, offer for sale, and sell purported IRS tax debt resolution services. Defendants seek clients who are in financial distress and in danger ofbeing subjected to IRS collection actions.
2. Defendants' exclusive area ofpractice consists of attempting to resolve or reduce a taxpayer's liability to the IRS. Defendants do not provide advice or representation in tax planning, tax avoidance, audit representation, or tax assessment disputes. Defendants focus their practice on taxpayers who do not dispute that they owe money to the IRS, but instead argue that they CaImot afford to pay the IRS what they owe.
3. The IRS, operating under a mandate from Congress, has established several programs for taxpayers who cannot afford to pay their tax debts, which include: (1) offer in compromise; (2) installment agreement; (3) streamlined installment agreement; and (4) currently not collectible status. The offer in compromise program allows taxpayers to make the IRS an offer to settle their back tax liability for less than the total amount owed. The installment agreement program allows clients to pay their total taX liability through monthly installment payments, rather than paying the full amount all at once. The streamlined installment agreement program allows taxpayers who owe $25,0.0.0 or less to pay back their full tax liability in monthly payments over a five-year period. The currently not collectible program allows taxpayers with no significant assets and no net income to prevent the IRS from collecting on the tax debt until the taxpayers' financial situation improves.
4. Defendants use their purported legal prowess to differentiate themselves from other tax debt resolution companies.
3 COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
1. Defendants charge high fees for their purported services. Depending on which IRS program they recommend and the amount ofthe potential client's tax debt, Defendants' legal fees range from $1,600 to $4,700. Defendants require that at least a portion ofthis fee be paid up front in order to retain the law firm, and that any bahmce be paid in monthly installments.
2. Defendants use systematic bonuses at every level of the law firm to incentivize their employees to put their own interests and the interest ofDefendants ahead oftheir clients' interests. From the sales pitch to the decision about whether to refund a client's payments, and at every stage in between, Defendants use bonuses to motivate their employees to focus all oftheir energy on enhancing Defendants' profits and to ignore their clients' interest in securing tax debt relief from the IRS.
21. As more particularly alleged below, Defendants are engaged in a scheme to
? 0
swindle taxpayers, including senior citizens and disabled, who cannot afford to pay their tax debt by enticing them to engage the Defendants to negotiate a resolution oftheir taxdebt with the IRS. Defendants falsely represent both their success rate in negotiating tax debt resolution for clients and the type oftax debt resolution they can secure. Defendants promise, for example, to lower the amount the clients owe the IRS, eliminate interest and penalties accrued on the tax debt, establish a low monthly payment plan to retire the tax debt, or prevent the IRS from collecting on the tax debt. Defendants also falsely represented that they are able to immediately stop IRS collection actions,osuch as levies and wage garnishments, if clients retain Defendants.
22. After taxpayers retain Defendants based on these false promises and misrepresentations, most ofDefendants' clients are unable to get any tax debt relief from the IRS or secure a refund from Defendants.
The Sales Pitch: Defendants Lure Clients with False Promises.
23. Defendants solicit consumers for their tax debt resolution services in a number of ways, including through a pervasive television and radio advertising campaign. The television and radio advertisements air in both Spanish and English. In these advertisements, Defendants give consumers specific and non-representative examples of clients who have purportedly reduced their tax liability by as much as $150,000 by hiring Defendants. The advertisements list / 4 COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
a toll-free telephone number for consumers to call to receive a free "tax analysis." When consumers dial the telephone number listed, the "tax analysis" they receive is a sales pitch for Defendants' services from Defendants' sales agents, who are hired solely for their ability to sell Defendants' services. Defendants do not requiTe that their sales agents have any background, experience, or familiarity with federal tax law or the IRS.
1. Defendants' advertisements contain materially false and misleading statements. 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, Defendants did not save these particular clients any money, but merely placed them on currently not collectible status with the IRS, a kind oftax 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. Furthermore, if and when the client's financial situation improves, the IRS will remove the client from currently not collectible status and institute collection proceedings on the entire tax debt. In that same advertisement, Defendants claim that they saved another client from having to pay the IRS a large tax debt. Though this client did settle his tax debt with the IRS, Defendants inflated this client's savings by approximately $45,000.
2. Defendants spent a total of approximately $12 million in the last four years on their advertising efforts, including the costs to broadcast their advertisements OIi'television and radio stations around the country. These false and misleading advertisements induce consumers to retain Defendants' services in order to resolve their back tax liability.
3. Defendants' sales agents sell Defendants' services exclusively by speaking with' potential clients over the telephone. During these telephone conversations, Defendants' sales agents regularly make a series offalse and/or misleading statements to clients in order to sell Defendants' services, which include, but are not necessarily limited to, the statements listed below.
5 COlVlPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
(a) Defendants promise clients that they qualify for one ofthe IRS's tax debt
resolution programs. This is misleading because only the IRS, not Defendants, can determine if a taxpayer qualifies for one oftheir tax debt re~olutionprograms. During the prospective clients' initial phone calls with Defendants' sales agents, the consumers are asked a series of questions about their income, expenses, and assets as part of a purported "tax analysis." While it would take about 45 minutes to an hour to ask all the questions necessary to determine a prospective client's actual income, expenses, and assets, sales agents regularly finish these interviews in 20 minutes or less. Defendants do not ask all ofthe necessary questions and also accept prospective clients' off-the-cuff estimates oftheir income, expenses, and assets. At the end ofthese interviews, Defendants', sales agents tell the prospective clients that Defendants will be able to secure a tax debt resolution for them from the IRS. The sales agents also tell prospective clients that Defendants would not accept them as clients if they did not believe that their application for tax debt relief would be successful. In some cases, Defendants promise consumers that they can settletheir tax debtfor a small fraction of its value. For instance, Defendants have promised clients that they could settle a tax debt ofapproximately $33,000 for only $500. Based on Defendants'? presentation of such favorable terms, consumers are induced to sign contracts to retain Defendants fo provide ?tax debt resolution services.
(b) Defendants promise to eliminate or reduce the interest and penalties that have accrued on prospective clients' tax debt. Again, this is misleading because only the IRS, not Defendants, can determine whether it will eliminate or reduce any taxpayer's interest andlor penalties.
(c) Defendants promise prospective clients that retaining Defendants will stop or prevent IRS efforts to collect on their back tax liability, including stopping or preventing the IRS from executing wage garnishments and bank'levies. In fact, retaining Defendants does not stop or prevent IRS collection efforts. Defendants specifically mislead many clients into believing that once they give Defendants power of attorney over their tax debt, the IRS can no longer collect on their tax debts. Later, despite Defendants' promises, these clients are subject to wage garnishments, bank levies, andlor federal tax liens. Some of Defendants' legal assistants
6 NALTIES, PERMA R EQUITABLE REL COMPLAINT FOR CIVIL PE NENT INJUNCTION, AND OTHE IEF
and attorneys have complained to senior management about this promise because clients become upset when they later learn it is untrue. Defendants' management has responded to these complaints by explaining to the legal assistants and attorneys that giving clients the impression that collections ?will stop once they retain Defendants is a strong selling point, and that ifthe client intake representatives stopped giving clients this impression, it would make it'more difficult to sell the Defendants' services to potential clients and would reduce the number of sales.
(d) Defendants promise to complete the tax debt resolution process in a period as short as 6 weeks. In fact, most clients never obtain a tax debt resolution from Defendants. Of the few clients who have actually obtained a successful resolution, some waited years before their tax liability was ultimately resolved.
(e) Defendants assure clients that they will have immediate access to their attorneys during the course ofthe representation. Clients regularly ask to speak to an attorney about their cases but are instead diverted to Defendants' legal assistants who insist they are equally capable ofproviding answers. Other times, the legal assistants act as intermediaries between the attorney and the client, thus preventing the client from communicating directly with an attorney. Some clients never manage to spe8k to an attorney during the entire course ofthe representation. Others have to schedule an appointment to speak to an attorney over the phone, and these appointments are often days in the future.
(f) Defendants inform clients that they charge a "flat fee" for their legal services and that this fee will not increase during the course ofthe representation. Defendants quote the amount ofthe flat fee to consumers before they retain the law firm. Defendants neglect to tell consumers up front, however, that ifthe representation terminates before the IRS makes a decision about their application for tax debt relief, Defendants will charge $300 per hour for services rendered. Ifthis hourly rate fee results in an amount greater than the "flat fee" clients paid at the beginning ofthe representation, Defendants claim that their clients owe them the unpaid balance. Additionally, Defendants increase their legal fees by $500 or more simply because any ofthe following events occur during the representation: (1) clients change their address; (2) clients change their marital status; (3) clients become business owners or self
7 COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
employed; or (4) clients' tax liability is significantly higher than the amount originally
communicated to Defendants.
(g) Defendants tell consumers that their success rate in resolving clients' back tax liability with the IRS is as high as 99%. In fact, Defendants' success rate is dramatically lower. In a majority oftheir clients' cases, Defendants never actually submit a request for tax debt relief. Ultimately, most clients are either terminated by Defendants as clients for failure to pay legal fees on time or for failure to timely respond to onerous an~ repetitive documents requests, or themselves cancel Defendants' services because Defendants have made little to no progress on their tax matter. According to Defendants' own figures, ofthose clients who retain Defendants for the offer in compromise service, a mere 10% successfully receive an offer in compromise from the IRS; 75% terminate or are terminated as clients before Defendants ever actually submit an application to the IRS for an offer in compromise. Similarly, ofthose clients who retain Defendants for the currently not collectible service, Defendants place 25% ofthese clients on currently not collectible status; two-thirds terminate or are terminated as clients before Defendants ever actually submit an application to the IRS for currently notcollectible status. Of those clients who retain Defendants for the installment agreement service, Defendants successfully secure an installment agreement for approximately 25% ofthem; 65% terminate or are terminated as clients before Defendants ever actually submit an application to the IRS for an installment agreement.
(h) Defendants promise that they will return all oftheir clients' unearned fees in the event clients cancel Defendants' services. In fact, as described in more detail below, Defendants use false billing practices to ensure they are always able to retain their fees when they or their clients terminate representation.
27. As mentioned previously, most of Defendants' clients either cancel the law firm's services or are terminated as clients by Defendants. Ofthe clients who retained Defendants in 2006, 69% either cancelled the law firm's services or were terminated as clients by Defendants. Ofthe clients who retained Defendants in 2007 and 2008, respectively 67% and 63% cancelled or were terminated. Ofthe clients who retained Defendants in 2009, despite the fact that a 8 LTIES, PER QUITABLE COMPLAINT FOR CML PENA MANENT INJUNCTION, AND OTHER E RELIEF
significant number have only been clients for less than one year, 51 %have already cancelled the firm's services or were terminated as clients by Defendants. For most of these terminated clients, Defendants have not refunded their unearned fees.
1. Defendants inform their clients that Defendants will be acting as the clients' attorneys and negotiators with the IRS. To that end and to control what is communicated to the IRS, Defendants instruct clients not to speak to the IRS about their tax liability and to avoid responding to any communications they receive from the IRS. Defendants instruct clients to forward all communications they receive from the IRS to Defendants. In this way, Defendants' clients are shut out of negotiations with the IRS and dependent upon Defendants for information about the progress oftheir tax debt resolution. When, however, clients follow Defendants' advice and steadfastly refuse to communicate with the IRS, the IRS often initiates collection actions against them. If such clients had been in regular contact with the IRS and indicated a Willingness to resolve their tax liability, they could have delayed IRS collection action. Defendants' legal advice exposes clients to increased interest, penalties, and IRS collection actions.
2. Defendants require clients to pay Defendants an up-front fee before Defendants will render tax debt resolution services. Many ofthe distressed taxpayers Defendants solicit have already established installment agreements with the IRS, which allows them to pay monthly amounts to the IRS to settle their tax liability. These consumers do not have sufficient financial resources to continue making these installment payments and pay Defendants' up-front fee.
3. Defendants inform clients that they may suspend their installment payments to the IRS once they engage Defendants for tax debt resolution services. By doing so, clients can then apply whatever money they would have used to make installment payments to the IRS to pay Defendants' up-front fee instead. Defendants advise clients that once they retain Defendants, they are not legally obligated to continue making installment payments to the IRS. Defendants' clients, in reliance on this advice and assurance, stop making installment payments.
4. Even though Defendants regularly record other conversations between their agents and their clients, Defendants purposely avoid recording their sales pitch to prospective clients.
9 COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
The "Verification" Process Is a Sham.
32. Once the sale is complete over the telephone, Defendants transfer the client to a "legal verifier," a Deutch employee responsible for verifying certain aspects ofthe sales transaction. These legal verifiers have a script of questions that they are to ask each client, and they record their phone calls with each client. Aside from verifying the client's personal
information and the billing arrangement, the purpose ofthe verification is ostensibly to ensure that the firm did not make any promises or guarantees about the outcome ofthe client's tax matter during the sales pitch.
1. Before the verification process begins and while the client is still on hold, the sales agent tells the legal verifier about the client. In many instances, the sales agent will instruct the legal verifier not to ask the client ifthe sales agent made any promises or guarantees about the outcome ofthe client's tax matter. In those instances,the legal verifier will not ask those questions. Other times, the sales agent will tell the legal verifier to move through the script quickly, and in those instances the legal verifier will skip many ofthe questions on the script and talk as quickly as possible to finish the script. The purpose ofthese instructions by the sales agent to the legal verifier is to ensure that clients, especially skeptical or wavering ones, do not cancel Defendants' services during the verification process.
2. If the sales agent does not instruct the legal verifier to skip questions or move quickly through the script, the legal verifier will usually read all of the questions on the script. In almost all ofthese instances, however~ the client will stop the legal verifier during the portion of the script related to promises or guarantees about the outcome oftheir tax matter and tell the legal verifier that the sales agent did make those oral promises or guarantees. Defendants train the legal verifiers to then stop the recording and transfer the call back to the sales agent. The sales agent then speaks to the client and repeats many ofthe false promises that the sales agent had previously made. The sales agent assures the client that Defendants will be able to help them, and then transfers the call back to the legal verifier. The legal verifier then resumes the recording and asks if the sales agent answered all of the client's questions. Once the client responds in the
10 COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, . AND OTHER EQUITABLE RELIEF
affirmative, the legal verifier moves on to the remaining questions in the script and does not re
verify that no promises or guarantees were made.
35. In some instances, clients are "difficult" and refuse to agree that Defendants made no promises or guarantees about the outcome oftheir tax matter. In those cases, the legal verifier stops the recording and transfers the call back to the sales agent. The sales agent tells these clients that in order to retain the firm, they have to complete the verification and answer the verifier's questions affirmatively. The sales agent also promises to speak to the client once the verification is over to assure them that the firm will provide tax debt relief. The sales agent then transfers these calls back to the legal verifier, who continues asking the remaining questions from the verification script. These clients begin answering the legal verifiers' questions affirmatively, and the legal verifier and the client end the verification by saying "good bye" to each other. The legal verifier stops the recording but does not disconnect the call. Instead, the legal verifier transfers the call back to the sales agent, who often continues to make other false and misleading representations to the client. Defendants do not conduct a second verification after this closing conversation between the sales agent and the client.
Defendants Richly Reward Their Sales Employees for Meeting Sales Goals.
1. Defendants set very strict monthly goals for the sales department as a whole and for each individual sales agent. Ifthese goals are met and exceeded, Defendants richly reward the sales agents.
2. On the other hand, Defendants do not hesitate to terminate sales agents who cannot meet these month~y sales goals. Defendant Roni Deutch personally attends meetings with the sales agents in which she screams at and berates sales agents who are not perfomiing adequately.
3. Defendants provide lavish incentives for their sales agents to solicit new clients. In one month, Defendants paid its top sales agent a bonus of at least $30,000 on top ofhis base salary, commissions, and other incentives. Many of Defendants' sales agents earn over $100,000 per year and regularly receive monthly bonuses of$8,000 to $10,000.
4. Defendants also provide their sales agents with gifts for making a high number of sales in a given month, including all-expense-paid trips to Las Vegas and cash payments of
. 11 CO:MPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
$2,000 to $3,000. Prior to 2006, Defendants did not include these cash bonuses on employees' W-2 tax forms.
40. Although Defendants employ legal verifiers to purportedly audit the conversations between the sales agents and clients in an objective manner, Defendants provide bonuses for the legal verifiers based, in part, on the sales department's monthly sales goal. If the sales department reaches its monthly goal, then the legal verifiers are paid a bonus. This provides the legal verifiers a disincentive to rigorously audit the conversations between the sales agents and clients, and instead incentivizes them to do their part to ensure that as many clients retain Defendants' services as possible.
Defendants' Fee Agreement Unlawfully Includes Finance Charges and Their Collection Practices Illegally Harass Clients.
41. Once clients retain Defendants, Defendants send the clients a fee agreement.
42. Defendants' fee agreements with their clients are deficient in multiple ways, including but not necessarily limited to the following:
(a) The fee agreement states, in fine print, that ifthe client terminates Defendants or if Defendants resign from the representation, "Attorney shall bill at the rate of $300.00 per hour for services rendered." Although this appears to indicate that the client will pay $300 per hour for the time spent by Defendants' attorneys on the client's matter, in fact the term "Attorney" is previously defined in the agreement to mean all of Defendants' employees, including both attorneys and non.:attorneys. As a result, the client can end up paying $300 per hour for the time ofone ofDefendants'. low-level employees earning about $12 per hour.
(b) Many ofDefendants' clients cannot afford to pay Defendants' up-front fees in one lump sum at the beginning ofthe representation. Defendants offer these clients the opportunity to pay Defendants' total fee in monthly installments to the firm for as long as ten months. This arrangement, however, comes at a price. Clients who elect to pay over time, rather than up front, must pay more in fees, typically'in the range of$250 to $700 more than those that pay the entire fee in advance. Clients who pay using monthly installments and clients who pay the entire fee in advance receive exactly the same servic~s from Defendants. The price difference
12 COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
between the two groups ofclients reflects nothing other than the fact that the clients who use monthly installments are paying their fee over time.
(c) Defendants' fee agreements are retail installment contracts, as defined by California's Unruh Act, California Civil Code section 1801, et seq. Defendants are retail sellers of services and their clients are retail buyers because Defendants' purported tax debt resolution services are not intended for resale, but for use by their clients. The contracts are entered into and performed in California and explicitly mention that they are governed by'California law. Defendants' fee agreements regularly call for payments in more than four installments or for repayment in installments in which their same services are available at a lesser price ifthe clients agree to pay the entire fee in advance.
(d) Although Defendants' fee agreements are governed by the Unruh Act, Defendants do not abide by the statute's requirements, including but not limited to the follOWing:
(i) Defendants do not place the words "Retail Installment Contract" at the top ofthe contract, much less place those words in 12-point bold type.
(ii) Defendants' fee agreements designate Sacramento County as the only forum for resolving, settling, or litigating disputes related to the agreement.. The Unruh Act prohibits this type of forum selection clause because the only valid forum under the Unruh Act is the county in which Defendants' clients live or signed the contract. A vast maj otity of Defendants' clients do not live or did not sign their contract in Sacramento County.
(iii) Defendants' fee agreements charge their clients a fee of $25 for any dishonored checks paid to Defendants, but the Unruh Act limits these fees to $15.
(iv) . Defendants' fee agreements do not contain the disclosures required by Regulation Z as promulgated by the Board of Governors ofthe Federal Reserve System under the Federal Truth in Lending Act (15 U.S.C. ? 1601, et seq.), despite the fact that the Unruh Act requires these disclosures.
(v) Defendants' fee agreements do not contain the prepayment notice required under the Unruh ACt, California Civil Code section 1803.2, subdivision (c).
13 COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
(vi) Defendants' fee agr,eements do not contain the itemization ofthe amount financed that is required under the Unruh Act, California Civil Code section 1803.3, subdivisiori (c).
1. Defendants send monthly invoices for the amounts due to clients who establish a payment plan with Defendants. Defendants do not stop there, however, to collect the amounts their clients owe them. Defendants' collection department places a series of "reminder" telephone calls to clients in the days leading up to each monthly payment. If a client misses a payment deadline, the collection department begins a series ofthreatening phone calls to ensure that the client pays Defendants their fee. Employees in the collection department regularly threaten that ifthe client stops paying Defendants, Defendants will resign from the representation and the IRS will immediately begin collection actions against the client, such as wage garnishments and bank levies. Defendants also use aggressive, rude, and harassing language in their attempt to collect money from their clients, including screaming and cursing at clients. Employees in Defendants' collection department unlawfully discuss the clients' debts with third parties, such as their clients' family members, and faisely .imply that they are attorneys in an attempt to pressure clients to pay Defendants.
2. 'Defendants are aware of the harassing and threatening nature ofth@ calls made by the employees in the collections department because clients regularly complain about these tactics. In an effort to monitor these phone calls, Defendants require that the employees in the collections department record all oftheir telephone calls with clients. Defendants give these employees, however, the ability to turn the recording system on and off during the middle of a phone call if they do not want a portion ofthe call recorded. This allows the employees to purposely avoid recording portions ofphone calls that are harassing, threatening, aggressive, or rude. Additionally, instead of reprimanding or disciplining these employees, Defendants regularly award them the "best department" award at the firm and name the collection department's manager to the law firm's "all-star team."
45. Defendants do in fact resign from the representation when clients fail to make a
monthly payment on time. In some instances, this misse,d payment is the last payment that the 14 LT IES, COMPLAINT FOR CIVIL PENA PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
client owes the firm. Nevertheless, Defendants take the position that any missed payment is grounds for resignation. Once Defendants resign, Defendants sometimes demand that clients pay additional fees if they wish to be reinstated as a client.
Defendants Fail to Manage Client Documents and Overburden Their Clients with a Process Designed for the Clients to Fail.
46. Along with the fee agreement, Defendants send their clients a 40-page questionnaire about their income, expenses, and assets. Defendants' 40-page questionnaire is ostensibly based on IRS Form 433-A. IRS Form 433-A is only six pages in length. The last two pages of the Form are only necessary ifthe taxpayer is self-employed, as only a few of Defendants' clients are. Therefore, for most of Defendants' clients, Defendants' questionnaire is ten times longer than the IRS Form they would need to fill out ifthey sought tax debt relief without Defendants' assistance. 47. Defendants also require that their clients provide them with extensive documentation to verify their income, expenses, and assets. Clients comply with this request, and retUrn the required documents. Many clients, however, are forced to repeatedly copy and forward the same documents time and again because Defendants claim that they never received the documents. Other times, despite the clients' diligent efforts to provide documents in a timely fashion, the documents sit in Defendants' offices for months without anyone working on them, and eventually become stale. The IRS requires that supporting documents be current, so once client documents become stale, Defendants send additional requests for more recent versions of the same documents. 48. Defendants also set an internal deadline by which their clients must return these . documents to the law firm. These deadlines have nothing to do with time limits or deadlines set by the IRS. If clients fail to meet this deadline, Defendants reserve the right to terminate the representation. Defendants regularly exercise that right. In fact, in recent years, Defendants terminated the representation of approximately 25% of its clients for failing to meet these artificial and arbitrary deadlines. In some instances, Defendants mail their clients a request for documents after the document return deadline has already passed, giving them no chance to reply. 15 COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
Nevertheless, Defendants terminate these clients for failing to meet the arbitrary and post-dated
deadline that the firm has imposed.
1. Defendants pay their legal assistants bonuses based on certain performance criteria. Bonus criteria include how many letters each legal assistant sends, including document request letters, and how many tasks a legal assistant completes. Letters and tasks are tracked in CurtBooks, the firm's computer software system. When an outstanding document request deadline arrives, CurtBooks generates a note for the request indicating it requires attention. A legal assistant must then update the note, either by confirming that the client has submitted the request documents -which generates a series ofdocument-processing tasks for the legal assistant to complete ~ or by issuing a new document request letter. Often, a legal assistant will decide that it takes far less time to simply send another document request letter than it does to actually look through the firm's files and incoming mail to determine if a client complied with the firm's document request. By not marking a document packet as received, a legal assistant can also avoid generating a host of new document-processing tasks that would then need to be completed. As a result, many legal assistants simply issue multiple document request letters for a single client, regardless ofwhether the client has already submitted the requested documentation, instead of determining whether or not the client has complied with the previous requests. This strategy allows legal assistants to increase their bonuses by quickly finishing their tasks and generating large quantities ofletters. The firm's clients, however, receive superfluous document request letters for weeks or months on end, while the documents they send in lay unprocessed and become stale.
2. Defendants' legal assistants also prepare document request letters to send to clients. Although these letters are somewhat tailored to a specific client, they are based on a fill-in-theblanks template. A legal assistant simply enters the client's information into a few fields, and the computer generates the letter. Thus it takes no longer than a few minutes to draft and prepare each letter for mailing.
51. Defendants also instruct clients to send in copies of all communications they
receive from the IRS, "including collection notices. Defendants assure clients they will respond to 16 LTIES, COMPLAINT FOR CIVIL PENA PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF .
the IRS with written requests to delay collection actions, and that they will negotiate on clients'
behalf for the release of a levy or garnishment should one be imposed. Though many clients
submit IRS collection notices to Defendants promptly upon receiving them, Defendants sometimes wait weeks or months to send a written response to the IRS. Even if Defendants' written response does result in a temporary hold on collections, their unreasonable delay may by then have resulted in increased interest and penalties for the client that would otherwise not have accrued, or in missed payroll deadlines for removing a garnishment from a client's paycheck.
1. Defendants also assign too many clients to their legal assistants. As a result, enormous backlogs develop. Legal assistants each handle approximately 300 clients at one time, and do not have time to give proper attention to each client. Sometimes, Defendants can be as much as three months behind on their client workload.
2. The legal assistants are nominally supervised by Defendants' attorneys, but the attorneys are so inundated with their own work that they cannot properly supervise or meaningfully assist with the legal assistants' staggering workload. Defendants' attorneys each regularly carry caseloads as high as 600 to 700 clients at one time, but during especially busy periods can service as many as 1,200 clients at one time. The attorneys often have other responsibilities at the law firm as well, such as supervising various departments, marketing the firm's services, monitoring the sales agents, and other administrative responsibilities.
3. When Defendants' legal assistants and attorneys complain to Defendants that their caseloads are too heavy and that they cannot properly serve this high number of clients,
. .
Defendants claim the problem is not their responsibility and otherwise do little to address these complaints.
55. Eventually, if Defendants have not already resigned from the representation, Defendants use the 40-page questionnaire and the submitted documents to calculate their clients' income, expenses, and assets. These calculations rarely match the calculations Defendants performed during the sales pitch. This is significant because even small changes, such as increasing net income by $100 to $200, can mean the difference between qualifying and not qualifying for a particular IRS tax debt program. Once these differences emerge, despite 17 ALT IES, PCOMPLAINT FOR CIVIL PEN ERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
Defendants' sales agents' promises that they would successfully obtain tax debt relief from the
IRS, Defendants conclude that their clients do not qualify for the IRS program the clients retained Defendants to pursue. At this point, clients are left with few options. They can either cancel the representation and try to negotiate on their own with the IRS or elect to pursue a different IRS tax debt relief program.
1. By this point, because of Defendants' unnecessary and unreasonable delays in collecting, processing, and reviewing client documentation, most clients find that their tax debt liability has increased over the course ofthe representation. Many find themselves subject to collection actions by the IRS, in part because they heeded Defendants' advice not to make payments or communicate with the IRS.
2. When these clients try to negotiate their tax debt relief directly with the IRS, they typically discover that the only filing Defendants ever made with the IRS on their behalf was the submission ofIRS Form 2848, by which clients assign power of attorney to Defendants. Some clients are subsequently able to negotiate tax debt relief on their own by speaking to IRS representatives over the phone. Ifthey are able to resolve their debt over the phone directly with the IRS, the entire process may take these clients only a few minutes to complete.
Defendants Falsely Bill for Time They Did not Spend on the Client's Matter.
1. After clients realize that Defendants are not going to provide assistance with their tax debt resolution, they demand the promised refund oftheir unearned fees. Defendants insist, however, that all refund requests be in writing, and do not respond to clients who request a refund over the phone. Defendants regularly deny these refund requests or refund only a tiny fractjon of the clients' total payments.
2. Once Defendants do receive a client's written refund request, one of Defendants' senior attorneys responds to the request on behalf ofthe firm. The senior attorney prepares an itemization of Defendants' services, assigns a time value for each itemized task, and then assigns a monetary value to each itemized task by multiplying the time value by the firm's billing rate of $300 per hour. The senior attorney then totals these monetary values to calculate the total value of Defendants' services. If this total value is more than the amount of money that the client paid
18 COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
Defendants, Defendants deny the refund request. Using this technique, Defendants are able to avoi.d refunding most oftheir clients' payments because, in most instances, the total value ofthe firm's services on this itemization is higher than the total amount of fees that the clients paid Defendants.
1. Almost all of the time values that Defendants' senior attorneys assign to the tasks on these itemizations, however, are arbitrary and false. They do not represent the actual amount of time that Defendants spent to complete the itemized task. Aside from telephone calls, none of De~endants' employees record the time they spend on client tasks because Defendants do not require that employees do so. As a result, when the senior attorney examines a client's file, the senior attorney can determine what tasks were completed, but has no idea how much time it took to complete any of thein. Without this crucial information, the senior attorney cannot assign the actual amount oftime these tasks took, and instead assigns a standardized time value for each one.
2. Defendants assign a standardized time value for most tasks that Defendants' employees perform. For instance, Defendants bill 0.35 hours, or 21 minutes, for preparing and mailing each of Defendants' form letters (discussed further below) and document request letters. Defendants bill 0.35 hours for preparing each IRS Form 2848,0.15 hours for preparing each .IRS Form 4506, and 1.25 hours for preparing each IRS Form 433-A. Again, these time values do not represent the amount oftime that Defendants' employees actually spent completing the task. It takes only a few minutes for Defendants' employees to send a documents request letter, and even less time for form letters, which are all generated automatically by Defendants' computer system. It does not take 21 minutes to prepare and send each of these letters. In fact, Defendants previously billed 15 minutes, or 0.25 hours, for preparing and mailing each of its form letters and letters requesting documents. Defendants decided, however, that they could earn more by charging 0.35 hours, instead of 0.25 hours, and so they began to bill 0.35 hours for each of these tasks. In either case, before and after the change in amount oftime billed, the amount of time required to produce and send each of these letters remained unchanged and untethered to the time Defendants billed for each task.
19 COl\llPLAINT FOR CIVIL PENALTIES, PERMANENT INJU,NCTION, AND OTHER EQUITABLE RELIEF
1. One purpose ofthe form letters that Defendants send their clients is to provide a basis for retaining their clients' fees. These mass-produced form letters are informational in nature, and give clients only the most general information about the IRS, tax debt relief, and similar matters. The information is in no way specific to a client's particular situation. In fact, some letters have absolutely no application to some of Defendants' clients. For instance, Defendants send clients who rent information that is pertinent only to clients who are homeowners. Nonetheless, under the standardized time-value system described above, clients are billed $105 for each letter ..
2. Defendants provide employees with a chart that lists a time entry in one column and a corresponding dollar value in a second column to make it easier to calculate the fees for each task. The chart does not include all possible time increments of an hour, e.g., .05 hours, .1 hours, .15 hours, etc. Instead, it only provides dollar values for Defendants' pre-assigned standardized time entries, i.e., 0.35 hours, that Defendants commonly assign when they prepare a refund letter.
3. Defendants also assign a "budget" for refunds each month. Defendants provide monetary incentives to their employees not to exceed the monthly refund budget, which merely encourages those employees to deny or delay providing refunds to clients who legitimately deserve them. Senior attorneys assigned to respond to refund requests receive a bonus of approximately $4,000 from Defendants for each'month they stay within the refund "budget."
4. Consumers have suffered and continue to suffer substantial monetary loss as a result of Defendants' unlawful acts and practices. Defendants have been unjustly emiched as a result ofthe unlawful practices set forth in this Complaint. Absent injunctive relief from the Court, Defendants are likely to continue to injure consumers and harm the public interest.
20 COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
FIRST CAUSE OF ACTION AGAINST ALL DEFENDANTS VIOLATIONS OF BUSINESS AND PROFESSIONS CODE SECTION 17500 (UNTRUE OR MISLEADING REPRESENTATIONS)
1. Plaintiff realleges Paragraphs 1 through 65 and incorporates these Paragraphs by reference as though they were fully set forth in this cause of action.
2. From a date unknown to Plaintiff and continuing to the present, Defendants, and each ofthem, have engaged in and continue to engage in, aided and abetted and continue to aid and abet, and conspired to and continue to conspire to engage in acts or practices that constitute violations of Business and Professions Code section 17500 by making or causing to be made untrue or misleading statements with the intent to induce members ofthe public to purchase Defendants' services, as described in Paragraphs 15 through 35. Defendants' untrue or misleading representations include, but are not limited to, the following:
(a) Defendants' television advertisements contain materially false and misleading statements.
(b) Defendants promise clients that they qualify for one ofthe IRS's tax debt resolution programs. Only the IRS, and not Defendants, can determine that a taxpayer qualifies for one of its tax debt resolution programs. At the end ofDefendants' "tax analysis" interviews, Defendants' sales agents tell the clients Defendants will be able to secure a tax debt resolution from the IRS. In fact, most of Defendants' clients do not obtain a tax debt resolution.
(c) Defendants promise to eliminate or reduce interest and penalties that have accrued on the consumers' tax debt. Only the IRS, and not Defendants, can determine whether it will eliminate or reduce interest andlor penalties.
(d) Defendants promise clients that retaining Defendants will stop or prevent IRS efforts to collect on the consumers' back tax liability, including promising to stop or prevent wage garnishments and bank levies. Defendants also specifically tell many clients that once they gave Defendants power of attorney over their tax debt, the IRS can no longer collect on their tax debts. Retaining Defendants does not, in fact, stop or prevent IRS collection efforts.
21 COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
(e) Defendants promise to complete the tax debt resolution process in a period
as short as 6 weeks. In fact, most clients never obtain a tax debt r'esolution from Defendants. Of the few clients that do actually obtain a successful resolution, some can wait years before their tax liability is resolyed.
(f) Defendants assure clients that they will have immediate access to their attorneys during the course ofthe representation. Instead, when clients ask to speak to an attorney, Defendants' agents regularly thwart their requests. Some clients never once speak to an attorney during the entire course ofthe representation. Others have to schedule an appointment to speak to attorney over th~ phone, and these appointments are often days in the future.
(g) Defendants inform clients that they charge a "flat fee" for their legal services and that this fee will not increase during the course ofthe representation. In fact, ifthe representation terminates prior to resolution with the IRS, Defendants charge their clients $300 per hour for services rendered. If this hourly rate fee is higher than the "flat fee" clients paid at the beginning ofthe representation, Defendants claim that their clients owe them the unpaid balance. Additionally, Defendants increase their legal fees by $500 or more if any ofthe following events occur during the representation: (1) clients change their address; (2) clients change their marital status; (3) clients become business owners or self-employed; or (4) clients' tax liability is significantly higher than the amount that was originally communicated to Defendants.
(h) Defendants tell consumers that their success rate in resolving clients' back tax liability with the IRS is as high as 99%. In fact, Defendants' success rate is dramatically lower. In a majority oftheir clients' cases, Defendants never 'actually submit a request for tax debt relief. Ultimately, most clients are either terminated by Defendants as clients for failure to pay legal fees on time or for failure to timely respond to onerous and repetitive documents requests, or themselves cancel Defendants' services because Defendants have made little to no progress on their tax matter. According to Defendants' oWn figures, ofthose clients who retain Defendants for the offer in compromise service, a mere 10% successfully receive an offer in compromise from the IRS; 75% terminate or are terminated as clients before Defendants ever
22 AL TIES, PE EQUITABL COMPLAINT FOR CIVIL PEN RMANENT INJUNCTION, AND OTHER E RELIEF
actually submit an application to the IRS for an offer in compromise. Similarly, ofthose clients who retain Defendants for the currently not collectible service, Defendants place 25% ofthese clients on currently not collectible status; two-thirds terminate or are terminated as clients before Defendants ever actually submit an application to the IRS for currently not collectible status. Of those clients who retain Defendants for the installment agreement service, Defendants successfully secure an installment agreement for approximately 25% ofthem; 65% terminate or are terminated as clients before Defendants ever actually submit an application to the IRS for an installment agreement.
(i) Defendants advise consumers that they may suspend their installment payments to the IRS once they have engaged Defendants for tax debt resolutiOn services. By doing so, consumers can then apply whatever money they would have normally used to make installment payments towards paying Defendants' up-front fee. Defendants tell consumers that once they retain Defendants, the consumers are not legally obligated to continue making installment payments to the IRS. Defendants' clients, in reliance on this advice and assurance, stop making installment payments. In fact, heeding this advice causes the IRS to accelerate its collection efforts.
Defendants promise that they will return 'all unearned fees to their clients. In fact, Defendants use false billing practices to justify retaining their clients' unearned fees.
(k) As alleged in Paragraphs 58 to 65, Defendants falsely claim to have spent amounts oftime on clients' matters that are higher than the amounts oftime Defendants' employees actually spend. Defendants rely on these false statements to justify their retention of more fees than they 'would otherwise be entitled to keep.
68. At the time the representations set forth in Paragraph 67 were made, Defendants knew or by the exercise of reasonable care should have known that the representations were untrue or misleading. 23 COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
SECOND CAUSE OF ACTION AGAINST ALL DEFENDANTS VIOLATION OF BUSINESS AND PROFESSIONS CODE SECTION 17200 (UNFAIR COMPETITION)
1. Plaintiff realleges Paragraphs 1 through 68 and incorporates these Paragraphs by reference as though they were fully set forth in this cause of action.
2. From a date unknown to Plaintiff and continuing to the present, Defendants, and each ofthem, have engaged in and continue to engage in, aided and abetted and continue to aid and abet, and conspired to and continue to conspire to engage in acts or practices that constitute unfair competition as defined in Business and Professions Code section 17200. Such acts or practices include, but are not limited to, the following:
(a) Failing to perform on their promises, made in exchange for up-front fees from their clients, that Defendants would negotiate resolutions to their client's back tax liability. Defendants did little or nothing to help most oftheir clients resolve their back tax liability. Instead, these clients, having already paid large sums ofmoney to Defendants, faced IRS collection action or were forced to attempt to negotiate a tax debt resolution on their own, as described in Paragraphs 1 to 65.
(b) Luring clients into paying up-front fees with promises to refund any unearned fees. Instead, Defendants use false billing practices to avoid returning unearned fees to clients, as described in Paragraphs 58 to 65.
(c) Deceiving clients into believing that failing to contact the IRS would increase the odds that their tax debt resplution will be successful. Clients rely on Defendants' advice because Defendants assured them that they will remain in contact with the IRS on clients' behalf. In fact, Defendants are not in contact with the IRS, and the IRS assumes that Defendants' clients are not willing to work with !he IRS to resolve .their back tax liability. Heeding Defendants' inaccurate legal advice places clients in even greater jeopardy of IRS collection action than they were in prior to the representation and does not increase their" success rate in securing tax debt resolution.
24 COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
(d) Violating California's Unruh Act, California Civil Code section 1801, et seq., as described in Paragraphs 41 through 42 above.
(e) Violating the fiduciary duty and duties of good faith and fair dealing owed to their clients by retaining unearned fees, even after the 'client demands that all unearned fees be returned, by using false billing practices and by failing to timely review a client's file and submit the client's application to the IRS for tax debt relief, as described in Paragraphs 43 to 59 above.
(f) Violating Business and Professions, Code section 6106 by committing acts involving moral turpitude, dishonesty, and/or corruption both in the course oftheir relations as attorneys and otherwise, as described in Paragraphs 1 to 65.
(g) Violating California Rules ofProfessional Conduct, rule 3-110(A) by intentionally, recklessly, or repeatedly failing to perform legal services with competence and by failing to properly supervise employees, as described in Paragraphs 46 to 65 above.
(h) Violating California Rules ofProfessional Conduct, rule 1-400(D) by advertising for Defendants' services by'using untrue, false, deceptive, and/or misleading statements, as described in Paragraphs 15 to 35 above.
(i) Violating California Rules ofProfessional Conduct, rule 3-700(A)(2) by withdrawing from employment without taking reasonable steps to avoid reasonably foreseeable prejudice to their clients, as described in Paragraphs 46 to 57 above;
Violating California Rules ofProfessional Conduct, rule 3-700(D)(2) by failing to promptly refund any part of a fee paid in advance that was not earned, as described in Paragraphs 58 to 65 above.
(k) Violating California Rules ofProfessional Conduct, rule 4-200(A) by entering into an agreement for, charging, and/or collecting an illegal or unconscionable fee, as described in Paragraphs 58 to 65 above.
(1) Violating Business and Professions Codesection 17500, as more particularly alleged in Paragraphs 66 to 68 above.
25 COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
PRAYER FOR RELIEF
WHEREFORE, Plaintiff prays for judgment as follows:
1. That Defendants, their successors, agents, representatives, employees, assigns and all persons who act in concert with Defendants be permanently enjoined from making any untrue or misleading statements in violation of Business and Professions Code section 17500, including, but not limited to, the untrue or misleading statements alleged in this Complaint, under the authority ofBusiness and Professions Code section 17535;
2. That Defendants, their successors, agents, representatives, employees, assigns and all persons who act in concert with Defendants be permanently enjoined from engaging in unfair competition or in any practice that facilitates unfair competition as defined in Business and Professions Code section 17200, including, but not limited to, the acts and practices' alleged in this Complaint, under the authority of Business and Professions Code section 17203;
3. That the Court make such orders or judgments as may be necessary, inCluding preliminary injunctive and ancillary relief, to prevent the use or employment by any Defendant of any practice which violates Business and Professions Code section 17500, or which may be necessary to restore to any person in interest any money or property, real or personal, which may
. have been acquired by means of any such practic~, under the authority of Business and Professions Code sectionl7535;
1. That the Court make such orders or judgments as may be necessary, including preliminary injunctive and ancillary relief, to prevent the use or employment by any Defendant of any practice which constitutes unfair competition or as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition in an amount according to proof, but not less than $33,945,000, under the authority ofBusiness and Professions Code section 17203;
2. That the Court assess a civil penalty of$2,500 against each Defendant for each violation ofBusiness and Professions Code section 17200, in an amount according to proof, under the authority ofBusiness and Professions Code section 17206;
26 COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
6. That the Court assess a civil penalty of $2,500 against each Defendant for each violation of Business and Professions Code section 17500, in an amount according to proof, under the authority of Business and Professions Code section 17536;
7. That the Court assess a civil penalty of $2,500 against each Defendant for each violation of Business and Professions Code section 17200 perpetrated against a senior citizen or disabled person, in an amount according to proof, under the authority of Business and Professions Code section 17206.1;
1. That Plaintiff recovers its costs of suit, including costs of investigation; and
2. For such other and further relief that the Court deems just, proper, and equitable.
ated: August 23, 2010
Respectfully Submitted,
EDMUND G. BROWN JR. Attorney General of California FRANCEST.GRUNDER Senior Assistant Attorney General KATHRIN SEARS Supervising Deputy Attorney General
By: Deputy Attorney General Attorneys for Plaintiff
THE PEOPLE OF THE STATE OF CALIFORNIA 27 COMPLAINT FOR CIVIL PENAL TIES, PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF
