Action sought against Audit Defense Network

Jace Radke

Thursday, May 6, 2004 | 10:02 a.m.

At a hearing scheduled for this morning attorneys for the Justice Department were expected to ask U.S. District Judge Lloyd George to grant a temporary restraining order against the Las Vegas-based National Audit Defense Network.

The government alleges that the network is running a tax scam and filing false federal income tax returns for customers, costing the government a total $324 million.

Earlier this week in two permanent injuctions, George ordered some of those involved with the network to stop preparing federal income tax returns and organizing or promoting some of the company's products.

The Justice Department suit asks that the company be prevented from selling what the complaint calls "sham" products while the criminal case is prosecuted.

"National Audit Defense Network runs a tax-scam boilerroom that sells three products. (1) bogus home-based businesses, (2) a phony Web site modification plan called Shopn2000 that falsely claims Americans with Disabilities Act related tax credit and (3) worthless incorporation services," the suit states.

The Shopn2000 Web site advertises personal "internet-mall" Web sites for people with disabilities. The customers then pay $10,475 to modify the Web sites to "comply" with ADA, and customers are told that by paying for this modification every year they can claim a yearly $5,000 ADA tax credit and a $5,475 business tax deduction, according to the complaint.

Other defendants named in the suit include Oryan, a California-based Web site company that supplies Web accounts to the National Audit Defense Network.

Oryan is one of the companies named in the permanent injuctions already handed down by George.

In addition to stopping Oryan, ADA Adventure Inc., Free Trade Enterprises Inc. and various employees of those companies from promoting the alleged scams, it also requires that lists of those who have had tax returns prepared by the National Audit Defense Network be turned over to the government.

Several former and current employees and managers allegedly involved with the National Audit Defense Network are also named as defendants in the complaint, including Robert Bennington, a former co-owner and co-founder of the company; Weston J. Coolidge, the company's director; and Alan L. Rodrigues, who runs the day-to-day operations of the company.

The National Audit Defense Network is described as a 470-employee telemarketing company that has about 100,000 customers, according to the suit.

The company is also facing a federal lawsuit filed in 2002 by the Federal Trade Commission, and a lawsuit filed in Clark County District Court that same year by the state. Those lawsuits claim that the company failed to honor a money-back guarantee it offered on its services.

In June 2003 the company also filed for Chapter 11 bankruptcy protection. At the time of the filing the largest creditor was the IRS with a $1.3 million claim against the company.

The bankruptcy was brought on by a $1 million Securities and Exchange Commission claim against the company, Coolidge said last year. The SEC's claim, he said, was related to an investment the company made in a failed company later determined to be a Ponzi scheme.