Friday, June 27, 2003 | 12:04 p.m.
A Las Vegas company that promises to solve back tax issues for "pennies on the dollar" has filed for bankruptcy, a newspaper reported today.
Ironically, the Internal Revenue Service is listed as its largest creditor.
The National Audit Defense Network -- which also is facing lawsuits from the Federal Trade Commission and the Nevada Attorney General's Office -- filed for Chapter 11 bankruptcy protection on June 11.
In Business Las Vegas, a sister newspaper to the Las Vegas Sun, reported the company listed an IRS debt of $1.3 million in its bankruptcy filing.
Weston Coolidge, president of National Audit Defense Network, responded to In Business' e-mailed questions through a public relations firm. He refused to explain the nature of the IRS's claim or provide the total amount of the company's debt.
He said the company was not going out of business, and that it filed for bankruptcy "in order to restructure our short and long-term debt."
National Audit Defense Network is described on its website as a nationwide network of of former IRS agents, auditors, CPAs and enrolled agents. The site said the company provides "guaranteed tax savings strategies designed by former IRS agents."
The company provides consulting services to clients that it claims will reduce tax bills, limit the possibility of an IRS audit and defend clients in an audit.
In 2002 both the state attorney general's Bureau of Consumer Protection and the Federal Trade Commission filed lawsuits against National Audit Defense Network. The suits, which are still pending, allege that the company failed to honor the money-back guarantee policy offered on its services.
In an FTC statement announcing the lawsuit last year, it said that the company led consumers to also believe the sale could be cancelled in within 30 days and that a refund also would available within 30 days if consumers were unhappy.
The FTC also alleged that consumers were told that they would receive a full refund if they did not achieve a $3,000 tax savings after implementing National Audit's strategies.
However, National Audit failed to disclose conditions of the refund policy, the FTC alleged, including a requirement that customers obtain a return authorization number before requesting a refund. The $3,000 tax savings guarantee also required that the customer use the strategies for a full year, and most of those strategies required the operation of a home-based business, the FTC said.
The state suit said the company placed limits on the amount of return authorization numbers it would issue and provided incentives to employees who "saved" consumers by talking them out of canceling.
Both suits said National Audit Defense Network's programs cost from $400 to $1,400.
The federal complaint said "when consumers who meet the requirements of the guarantees contact the defendants to attempt to obtain a refund, the defendants fail or refuse to make make such refunds or otherwise frustrate consumers in a variety of ways from receiving refunds in a timely manner."
Jerry Steiner, a spokesman for the Federal Trade Commission's San Francisco office, said he was aware of the bankruptcy filing.
"We are not yet certain what impact that will have on our case," he said.
A telephone hot line set up by the Nevada Attorney General's Office referring to the National Audit Defense Network case was updated on Tuesday.
The recording said: "We do not believe this will affect our ability to pursue this case we have pending against them. This may, however, impact our ability to secure restitution for consumers."
The recording also said the attorney general's office was evaluating options for consumers to file claims in the bankruptcy case.
A statement issued by the state when it filed its lawsuit against the company last year cites more than 140 consumer complaints of delayed or denied refunds. While the FTC suit makes no specific damage claim, the state suit seeks "full restitution for all injured consumers" as well as civil penalties totaling $2,500 for each violation.
A preliminary injunction issued in the FTC case barred the company from further illegal practices.
The company is still operating, Coolidge said. He said the lawsuits had no bearing on the bankruptcy filing.
No court dates have been set in the FTC case, which was filed in U.S. District Court in Las Vegas in January 2002.
The state's case against National Audit was filed in Clark County District Court in February 2002, and court records show a pretrial hearing is scheduled for Feb. 9, 2004.
National Audit Defense Network was founded by Cort Christie and Robert Bennington in 1994. In 1997, the company received national attention when it offered to represent Paula Jones in an audit case.
Jones, who filed a sexual misconduct lawsuit against former President Bill Clinton, eventually declined the offer.
archive
