A judge Thursday dismissed “Girls Gone Wild” creator Joe Francis’ lawsuit that alleged his former accountants duped him into investing in tax shelters that cost him millions of dollars in tax liabilities.
Los Angeles Superior Court Judge Elizabeth Allen White said she took the action because Francis did not participate in court-ordered arbitration with the accountants, BDO Seidman LLP.
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. On June 8, the judge granted a motion by Francis’ counsel, Michael Avenatti and Scott Sims, to withdraw as his lawyers. They said in their court papers that Francis has not communicated with them or paid their fees.
Francis, 42, 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 stated.