Help!! Someone is threatening ME!!!!

[Tania123]

What is the name of your state? Illinois

I need some advice.

I am a CPA and I have a small practice. I ran into the unfortunate event of dealing with this one client that was troublesome from the beginning, and for some ungodly known reason he wants to sue me!!!

Here is what happened. I process payroll for this client. On January 31, 2007, he told me that the W-2s were all wrong because it did not include some salaries, and how we had to redo the whole payroll system, and file amendments, a whole years worth. By the way, its his fault that the salaries were not included. He gave us the salaries and we calculated the tax based on what he provided. Also, each quarter, a quarterly tax filing is required, and he signed off on each quarter.

I told him we could do that, but how it was going to cost him extra to get that done. It was a signficant project, (and he wanted it done that day) I told him if he was interested in doing this, that he would have to fill out the paperwork for another retainer.

I thought that was very reasonable, after all we dont work for free!!!

He replies by threatening to sue me for unfair business practices, and how he is going to report me to the BBB.

I was shocked!! There is absolutely no basis. Because of how the client was acting, I went ahead and did a free internet search to see if he filed for bankruptcy or had any liens against him, and bingo, he has a history of filing for bankruptcy, I think he do so twice!!! So there is some character issues with this guy.

He then emails me, and CCs his supposed attorny how is going to file a suit against my company.

Also, this person has a history of not following directions. When we tell him to send off a form example, and sign it, he wont do it. He was a very difficult client.

Finally, we just send him a letter explaining to him that we are no longer going to be able to service the account. As a courtesy, we allowed him access to his payroll account for 60 days so he could convert it to another account.

He then emails me three months later, again, ccing his attorny, asking for the pin number of his monthly payments, (he paid monthly via credit card) and he also wanted the corporate office of my company.

Really, I dont know what he is talking about, pin number? And why he thinks there is a corporate office. I operate under a single office in a rented space. Also, if he wanted the address to sue me, why couldn't he just go to the secretary of state and get it and sue me?

My question is this. What is the due process for filing a lawsuit. Dont I have to get served a summons? He does not know what I look like, and I am rarely in the office, since I am on maternity leave. Is it true you can sued by certified mail? If that is the case, I will never pick up my certified mail.

Also, doesn't he have to have grounds? Him not liking my procedure, is that a grounds to sue?

Also, cant I turn around and sue him for MY court costs?

And, by the way, my company is not making any money. Since I am home with the baby, I only work part time, but my expenses are more than I bring in. What does suing a company that does not have any money do?

I just dont get it. After the email today, I want to say I am being harrassed. He is no longer my client, and I no longer wish to speak to him.

My question is, do you think this guy is just trying to scare me or something? I dont even know what his problem is anyway. I think he thinks I am some big CPA firm, and that he can file some bogus suit, and that he hopes that I settle and he gets money. I think he is a scumbag in that regard... But what do YOU think? What is the name of your state?What is the name of your state?What is the name of your state?What is the name of your state?What is the name of your state?What is the name of your state?

 

[Ozark_Sophist]

Pick up your certified mail. IF, in your state, it is a legitimate form of service, it doesn't matter if the recipient does not pick up the letter. Notice of certified mail and the unopened letter returned to sender may qualify as service putting you in jeopardy of a default judgment if you don't appear.

As a small buisness owner, expect to have disgruntled consumers who due to their own actions, dig themselves into a hole. You have the signed quarterly statements. As long as you can demonstrate the accuracy of your work based on the information he provided at the time, you are in the clear. Does the contract you have with him address the accuracy issue?

Anyone can sue anyone for any reason (America! What a country!), but the ability to sue does not reflect on the ability to prevail in a suit. Save correspondence you receive from him. Log his attempts to contact you and what he says. Commit as many details to paper (who said what, to whom and when--including when he first notified you of his error). That way, IF he does sue or report to BBB, you have a record.

That's my two cents (though I'm not an attorney). Good luck!

Could you clarify the time line. You found out Jan 31, 07 of his error. He had a 60 day period to convert his account--which would run through at least March. Then you wrote "He then emails me three months later," which would be April?

 

[Rexlan]

Service is perfected with the certified mail even if you don't pick it up. He can sue you for anything.

Something says there is more to this. If you are really a CPA then you have a professional license and I recall there is some insurance and bonding requirements. Your insurer or bonding company should be notified as soon as your are threatened with legal action.

However, if you are a single player shop accountant then that does not apply.

Just tell him to go away or sue you and let it rip. If what you say is accurate it will just cost you a few $$ to defend yourself and this happens everyday. That is a part of the real world of business and one which you should obviously know about. You can insure for it as well. But then, if you're not making money, why bother ... go work for someone else and let them deal with it instead.

Put a block on his email as spam and move on.

 

[tranquility]

Many of your questions can be answered from reading your engagment letter which the client signed. It is a bad idea to look at things from your point of view right now. You need to look at things from his point of view. What will *he* say you did wrong? Then, provide an answer and ask yourself if you lived up to the standards of the industry on that matter. Malpractice is expensive to defend. You should be as cooperative as possible with the former client to make sure you look like the consumate professional. I wouldn't block any communications until you send a disengagement letter to the client as lack of communications can be considered an ethical breach and cause you problems with your license.

Good luck. Screening clients and good engagement letters are two very important factors in protecting yourself. Insurance, though expensive, helps you go to sleep at night.

I'd talk to a friend who is also a CPA and ask for his honest advice. If you think there is anything you could have done, change your proceedures and talk with an attorney. A disgruntled client is problematic and can be expensive once the attorneys get involved. Is there any way you can make this guy happy?

 

[Tania123]

Thanks so much for all your responses, and yes, you answered my question. Basically, anyone, can sue for anything, and I guess this guy has nothing better to do. I have no idea what he would be suing for by the way. And you answered my question about the certified mail.

I have everything documented, and all his threats. The threats started when he did not want to pay for the additional project of re-doing his whole entire payroll for the year.

To answer the time line question, he was terminated Jan 31, and given 60 days notice, that would be March 31, and after that date!!! POOF!!! He no longer has access to his records, which was a courtesy of my firm. He was not charged the for the 60 days, that he continued to do payroll on MY system.

I think I am going to take the high road, and if it does come down to court, I am going to counter sue for harrassment. He harassed my payroll provider every single day and tried to bully them into giving him access AFTER the termination. This guy is a total YAHOO.

So, I if I have to take time away from my daughter, and other clients, to deal with this guy, then my only other recourse is to counter sue him for my time wasted on this.

My only guess is, that he THINKS I am this big corporation and that he can sue, and that I'll just settle so my insurance does not go up. But I dont have insurance.

I am a very small time CPA with 10 clients. I used to have about 200 clients, but I got rid of them when I became pregnant, and the 10 clients I have, just begged me to stay on, so I did. I make my money doing other things, like helping people getting government contracts, raising money, etc.. People are more appreciative when you help them build their businesses, rather then helping them with taxes.

The engagement letter is very general and broad, so if this is about the standards of the industry, I have a no brainer case.

In the mean time, this is my busy season, and I would rather fend this off. I have to find out if my state accepts certified mail as proper service.
Question, any ideas on how to find a kick ass civil defense attorny!??? Lets BRING IT!!!

 

[tranquility]

While you are angry, know that you may have committed an ethical breach.

To answer the time line question, he was terminated Jan 31, and given 60 days notice, that would be March 31, and after that date!!! POOF!!! He no longer has access to his records, which was a courtesy of my firm. He was not charged the for the 60 days, that he continued to do payroll on MY system.

From an article at:
http://www.cba.k-state.edu/departments/ethics/docs/Insight.htm

Raspante provides the following case studies as examples of the three most common sources of ethical complaints filed against small to medium-sized CPA firms:



Records transfer—A former tax client of yours demands you provide copies of all his records to his new accountant. The former client has yet to pay you for preparing last year’s returns. How would you respond to his request? Would it be different if the engagement had been terminated before it was completed? How would state board of accountancy rules affect your response?Raspante says the AICPA’s Code of Professional Conduct states that holding back client records after they’ve been requested is “discreditable to the profession.” In most states, he adds, holding such records in lieu of fees would be considered a violation of state board of accountancy rules. “Much of this issue’s risk exposure stems from confusion over what constitutes client records,” he explains. “If the CPA completed the engagement, he or she should be ready to provide workpapers demonstrating information not otherwise reflected in the client’s books and records.”

From the Illinois CPA society at:
http://www.icpas.org/icpas/advocacy/ethics-cases.asp

As a result of an investigation of alleged violations of the Codes of Professional Conduct of the Illinois CPA Society and the AICPA, the following ethics case has been resolved by settlement agreement under the Joint Ethics Enforcement Program:

Suspended - Thomas J. Porte of Elk Grove Village, IL, effective March 28, 2005

Information came to the attention of the Ethics Charging Authority (“ECA”) (comprised of the Professional Ethics Committee of the Illinois CPA Society (ICPAS), and the Professional Ethics Committee of the American Institute of the Certified Public Accountants (AICPA)) in which it was alleged Thomas J. Porte refused to return original client records until payment has been resolved. Mr. Porte was charged with violating Rule 501 – Acts Discreditable of the ICPAS and AICPA Codes of Professional Conduct.

I could search more, but don't know enough of the specific facts. You have risk here as to your license. No matter how outraged you are, getting pulled into a lawsuit is nasty and expensive. That you have a daughter to love and hold and squeeze does not mean much to a man who may be in serious financial problems. I don't know if he's going to sue you or report you for ethical violations. I do know that you better take this seriously. "Bring it on" is hubris which a new CPA can't afford. Malpractice attorneys don't work on contingency. I bet your retainer, which would be used up before you actually got to trial, would be around $7,500. Do you have $7,500 sitting around? And, as I said, that's just for a *retainer* *before trial*! Costs could be more if you have a real litigious person who starts throwing motions around for fun. Trial may very well be twice that. If you win.....you're just out the sleepless nights and attorney fees. (Unless you can prove the suit was meritless, which you probably will not be able to, and win a countersuit for abuse of process or malicious prosecution.) If you lose you are out all that and more.

I find your attitude disturbing. That's not to say you are wrong or that the hard line isn't the way to go, it's just that you seem very sure of a situation which is more difficult that you seem to want to admit.

 

[Tania123]

Dear Tranquility,

I think you totally misunderstood, completely.

First of all, he has all his records. In addition to having all his records, we also provide an online service as well, on top of providing the record. The client HAS everything.

What I was referring to was the payroll service. Really, its up to HIM to get another accountant so he can file his taxes. WE let him use OUR system, for FREE during that sixty day period.

No ethical breach occurred.

In this day in age, things are done online, and we are one of the few firms that do this as a courtesy to their cilents. The laws dont even address online accounting yet, so how could I have breached?

I understand that you may no know the entire situation, so I will just leave it at that.

I talked to a civil attorny, and more than likely this will be thrown out. The guy is just angry for not doing his part and now wants to sue. Let him. I am going to counter sue.

The funny thing is, is that he was the worst client that required the most hand holding, and all he did was take advantage.

Later on I found out that he lied about his old accountant passing away. Yeah, thats what he told our firm when we asked why he was changing accountants.

 

[tranquility]

Back before your time the law used to be that a person who was 55 or older could take a once in a lifetime exemption on the sale of their personal residence. (I think the amount was $125,000 and was reported on a particular form--I don't swear on it but it might have been a 2119.) We had a client use this exemption for a sale of $85,000 in the mid-to-late seventies. After a few more years they left as a client and we moved their records, including the form to storage. I believe they did their own returns for that period using ours as a template. The clients came back many years later and we continued doing their taxes for a few years. Then, 16 years after the first sale they sold their residence again and took the one time exemption again. The IRS denied the second exemption and assessed penalties and interest. We were sued both because we knew of the prior sale and because we should have advised him at that time he wasn't taking the maximum amount possible under the statute.

What result? $13,000 in cash to the client and over $3,000 to the attorney who did little more than answer the complaint and do some negotiations. Why? Because as businessmen we knew there was some risk and didn't want the huge downside including attorney fees. We were going to go to the wall too as we didn't think we did anything wrong. But, we did kinda, didn't we? Maybe a lot, maybe a little, but kinda. There isn't any kinda in your situation? Are you sure?

 

[Tania123]

No, thats not the situation at all. This situation is just pure nonsense. We are not talking about a missed deduction, or anything technical, which is what is strange.

The guy started to threaten lawsuit because what he was asking was over and beyond what his service agreement stated.

He pays $175 a month for payroll, and that includes consultation on tax related matters.

Now, fast forward to jan 31, 2007, he then decides to tell me that there were more salaries then he told me previously, and wants us to redo the whole years worth of payroll, file amended quarterly payroll taxes, and then, file amended w-2s, AND he did not want to pay for this huge project.

He did not pay, thats fine, we did not touch the payroll system. Fine.

I have no idea why he is suing, he is saying that me charging him more money is unfair business practices, and how he is going to sue me.

I have no idea. All I know is that this guy has abused me enough, lied to me, bullied me, and after a while, I just decided to drop the account. I mean, come on, I was only charging $175 per month!!

I gave him notice to find a new accountant, but in the mean time, so that he would not lapse on his payroll taxes, that we would leave the system out there for him to use while he was in conversion. I thought that was a nice send off right?

What does he do? Instead of finding a new accountant, or payroll service provider, he harrasses MY provider trying to bully them into letting him keep the account indefinitely!! I know, makes no sense.

Thats the thing, there is no technical issue here. At least a technical issue I could understand. This guy is just angry and he is a bully. He did not get his way, and now he is whining, thats all.

And someone hinted that I was a new CPA. Who said i was a new CPA? I've been doing this for 17 years now. I've heard of lawsuits, and how they effect CPAs, but in the passed, I guess I let my clients abuse me, and I always give in, even when I am right.

I decided that that type of behavior is wrong, and I should not let clients get away with abuse. I sold off the majority of my practice, and now do business consulting. Its a lot more rewarding.

By the way, in IL, as a business, you are considered served through certifiy mail if someone is at the corporate address. Since I am never there, I am on maternity leave, my attorny told that this guy is giong to have a tough time with this one.

Actually, i am relieved this happened. I retained an attorny like I should've probably 17 years ago, just for yahoos like this. I was always afraid of getting sued, but now, I am not. If this guy wants to waste both our time, on nonsense, then, hey, what can you do?

 

[Tania123]

Dear Tranquility,

Actually, reading your post made me think about this differently. You said I should think like that guy, right?

Well, probably what is in HIS head, that somehow, its my fault for not having all the salaries in the payroll system. That sounds reasonable to a person who has no clue. This is the same guy that tried to blame me for something before I was even his CPA. I remember, he wanted to blame me for something related to 2003. He did not become my client until 2006, and I had to pull his service agreement and explain this to him.

This is when I found out his old CPA was not dead, because he was forced to go back and talk to him about this matter.

So, if you follow his blaming logic, its not wonder he is offended that he would have to pay more money.

What he does not understand, is that 1) he ignored all our requests for information. We asked him for his previously filed quarterly payroll taxes, and he never gave them to us. He said his accountant was dead. 2) We then did the system with the YTD information that HE provided. Since he is clueless and does not know what he is doing, his YTD information was probably wrong. Also, he should know, that he signed off on all the quarterly payroll reports that have the salary on them from quarter to quarter. We dont get involved with the salaries, only the tax calculations. But if there was somethign wrong, then why did he sign off on the quarterly?

Thats probably how HE is thinking of it, but still I dont care. I did my part, i went over and beyond, and now he threatening to sue me.

I dont think he actually will because if is going to sue, then sue. Instead, he is just harrassing me CCing the emails to me with his attorney's name. I think that is stupid. If I were to sue someone, I would not give them a heads up and help their defense. So I think he is full of crap.

And you are right. I should watch who I retain as clients. After this guy came on board, I learned how to do background checks on people that is free info on the internet. When someone files for bankruptcy, twice, that is a serious red flag that they do not know how to conduct their affairs, and that they are probably people that blame everyone else for ALL of their problems.

Now hindsight, this guy hits all the red flags, the main one, does not do what he is told. Like we filed an annual report, and told him to sign and send payment. He ignored it, but then who did he blame when his corporation was dissolved? We went ahead and handled the reinstatement. But all the while he thought it was OUR fault!! Can you beleive this?

I have all this in writing too.

 

[tranquility]

From the facts in your posts and the anger I assumed a younger person and not one in her 40s and I think I was the one who thought you were new. Sorry to offend. I don't mean to say in any of my posts you should do work for free or give the ex-client something he doesn't deserve. It's just that after a few years under my belt there is hardly any engagement where someone can't make something out of something. For you this issue is one of many, for the client it can be the focus of his life. He will look at it from every angle and any error or potential error will be cause for his righteous indignation.

I agree you will probably not get sued as the expense of suit would probably far outweigh the damages. One does not need to be a genius to know many people threaten lawsuits when they have no real intention of suing. But, if you were worried about ditching service, I'm thinking you feel there is some realistic possibility of recieiving a complaint or summons. Once that happens, even for a meritless suit, how much is it going to cost you? Realistically, how much? I assure you I am assertive to my rights. No one who knows me think I am a pushover. However, I can go to logic mode in a snap where emotions are not a part of my decision. In my life I've learned pride, anger and clever comments which feel good at the time can come back and haunt you. Your posts are showing more anger and outrage than a person making a decision should have. I'm glad you've seen an attorney and used his dissociation from the emotions to guide your decisions. I wish you good luck, but warn to to be careful. Jerk clients can make your life hell.

 

[Tania123]

Thanks for your reply I really appreciate it. And yes, my emotions are my downfall, reall, and my anger, I guess is the result of the assault on our profression and clients taking advantage. I received the the new legislative alert on our liability and its just ridiculous!!! My anger is I guess, 17 years of bent up frustration, and now, I guess, I am letting it flow in these posts!! Unlike you, I had to learn how to stick up for myself, it was not something that happened over night.

Only because this client has a history with lawyers and litigation, that is the ONLY reason why I think he may actually follow suit with this. I know that logic does not matter.

You are right, right now, I am clueless as to what the damages would be in this case, but as you said, he will probably go back and trump something up.

Thanks for your advice.