A judge gave “Girls Gone Wild” creator Joe Francis a reprieve by keeping alive — at least for now — his case alleging his former accountants duped him into investing millions of dollars in tax shelters that cost him millions more in tax liabilities.
Los Angeles Superior Court Judge Elizabeth Allen White said she would not dismiss Francis’ complaint because his attorney, Carlos Colorado, reported that his client submitted his share of court-ordered arbitration fees Thursday in his lawsuit against BDO Seidman.
In January 2013, White granted a defense motion to require arbitration of the case, finding that Francis agreed when he hired BDO Seidman to resolve any disputes by that method and not through a lawsuit.
White scheduled an April 13 status conference for an update on whether a date for the start of arbitration has been set.
Defense attorney Deborah McCrimmon said she was concerned that the only reason Francis may have decided to pay the delinquent arbitration costs was to avoid having his case dismissed.
Francis, 41, sued BDO Seidman in October 2012, alleging breach of fiduciary duty, fraud, fraudulent nondisclosure, negligent misrepresentation, negligent nondisclosure and professional negligence.
Francis maintained that BDO cost its clients millions of dollars by having them invest in the firm’s tax shelters. His complaint stated that he hired BDO in 2001 when the firm offered to audit his company, Mantra Films, and do his taxes.
Based on BDO’s assurances, Francis invested in the firm’s tax shelters and claimed substantial deductions on his 2001 federal and state returns, according to his court papers.
BDO Seidman did not tell him that its strategies did not comply with then-existing tax law and that the Internal Revenue Service would likely succeed in challenging any deductions taken for losses generated by the investments, according to the suit.
After the IRS took a closer look at Francis’ 2001 tax return, it said he owed more than $9 million and another $3 million in penalties and interest, the complaint states.
In a sworn declaration shortly after filing his lawsuit, Francis stated he knew nothing about any obligation to arbitrate disputes between him and BDO.
“In any communications with BDO regarding the consulting agreement, BDO never mentioned or discussed the fact that there was an arbitration provision,” Francis stated.
Francis’ lawyers maintained the arbitration clause was unequally skewed in favor of BDO.
— City News Service