GGW's Joe Francis Sues Accounting Firm
LOS ANGELES — Girls Gone Wild founder Joe Francis is embroiled in yet another legal battle. This time, he's suing accounting firm BDO Seidman claiming that it duped him into investing millions of dollars in tax shelters that cost him millions in penalties.
The suit filed in Superior Court, alleges breach of fiduciary duty, fraud, fraudulent nondisclosure, negligent misrepresentation, negligent nondisclosure, and professional negligence.
Francis was indicted in Reno, Nevada in April 2007 and charged with tax evasion having deducted more than $20 million in apparent false business expenses on his 2002 and 2003 tax returns.
The case was moved to Los Angeles, and in September 2009 Francis pleaded guilty to filing false tax returns. In November 2009, Francis was sentenced to time served and a year of probation and pay $250,000 in restitution.
In the latest action Francis claims that accounting giant BDO, the firm he used to help with his 2001 audit of Mantra Films, bilked its clients out of millions by having them invest in the firm's tax shelters.
The 36-page complaint reads, "In the late 1990s and continuing through at least 2003, BDO created investment schemes which were purportedly lawful tax deferral/avoidance products that BDO mass marketed to its clients in order to generate millions of dollars in fees.
"BDO, and others, induced plaintiff to invest millions of dollars in the investment schemes, and BDO falsely represented to plaintiff; orally and in writing, that it was 'more likely than not' that a deduction taken for losses generated by such investments would be upheld if challenged by the IRS."
Francis reportedly said he invested in the firm's tax shelters and based on its recommendations claimed "substantial" deductions on his 2001 federal and state returns. He further maintained that he didn’t know and the firm didn’t tell him that its strategies did not "comport with then existing tax law, and that the IRS would likely succeed in challenging any deductions taken for losses generated by the investments."
Once the IRS investigated Francis’ 2001 return it found he owed more than $9 million and another $3 million in penalties and interest, according to the complaint.
"As of the filing of this complaint, the exact amount of any back taxes, penalties, and interest that plaintiff may be assessed in connection with the tax shelter product is currently being litigated and has not been determined with finality," the complaint states.
The Girls Gone Wild chief maintains that if it wasn’t for BDO’s shady practices he would not have been hit with penalties nor would he have invested in the tax shelters.
Francis is seeking at least $20 million in damages.
Coincidentally, Francis last month lost a slander case to casino mogul Steve Wynn and was ordered to pay up $20 million and another $20 million in punitive damages.