Tax Insights

Your Guide to State, Local, Federal, Estate + International Taxation

Avoid Being Scammed like Real Housewife Heather Dubrow

On a recent episode of her podcast Heather Dubrow’s World, Heather Dubrow revealed how she and her husband, plastic surgeon Terry Dubrow, were scammed out of nearly $2 million by their accountant and another woman. After selling their O.C. home for $16.45 million, the Dubrows were encouraged by their accountant of more than twenty years, Gary Hoffman, to make a loan to Jennifer Lindsay Bell. Hoffman claimed to have known Bell for years. The plan was that Bell would rent several apartments and sublet those apartments to visitors in town for the World Cup. Bell would make a profit on the sublets and the Dubrows would receive their money back plus a decent amount of interest. To sweeten the deal, Hoffman even signed a personal guarantee on the loan, promising if the deal went sour, Hoffman would personally repay the loan to the Dubrows.

When the check for Bell’s first loan repayment bounced, the Dubrow’s turned to Hoffman, who informed them he didn’t have the money to back up the personal guarantee he’d signed. The Dubrows soon discovered that Hoffman was not a CPA, as he’d claimed, and had met Bell at a bar a week or two before presenting the “investment opportunity” to the Dubrows. They’re currently pursuing a claim through Hoffman’s professional liability insurance carrier and are offering a reward for information on Bell’s whereabouts.

So, how can you protect yourself from being scammed by an unscrupulous accountant like Gary Hoffman? First, whether or not someone is a Certified Public Accountant is readily verifiable. Because Hoffman came highly recommended by a friend of the Dubrows, they never thought to verify his credentials through the state’s Board of Accountancy. Hoffman’s accounting firm, Nardone & Hoffman, was located in New York City. Neither Gary Hoffman nor Nardone & Hoffman show up in a search on the website of the New York State Board for Public Accountancy.

It’s not mandatory for all tax preparers to be Certified Public Accountants, but all paid tax preparers are required to have a Preparer Tax Identification Number (PTIN). Anyone with a PTIN can prepare a tax return, but currently there is no education, experience or exam requirement to obtain a PTIN. The IRS maintains a directory of registered tax return preparers with additional credentials, such as attorneys, CPAs, Enrolled Agents, or preparers who have completed a voluntary Annual Filing Season Program to obtain a number of continuing education hours. Hoffman does not appear in a search of that directory, meaning he may have had a PTIN, but had no other credentials supporting his commitment to the profession.

Even if a person is a CPA, Enrolled Agent, or Attorney, that does not necessarily qualify them to give investment advice, although some CPAs and other professionals have pursued qualifications to provide financial advice. One of the main certifications for investment advisors is the Certified Financial Planner (CFP) designation. A search of the CFP directory reveals no Gary Hoffman in New York.

Anyone wishing to work as a financial advisor can take one of two approaches: be sponsored by a broker-dealer and become licensed under FINRA regulations, or register directly with the SEC as an investment advisor. Neither Gary Hoffman nor his firm Nardone & Hoffman appear in a search of brokers registered with FINRA or investment advisors registered with the SEC. There are several other credentialing programs for financial advisors. Before taking investment advice from anyone, it may be worth the time to look into what that credential means and whether the person using it has maintained it.

That’s not to say that someone with a credential, even a CPA or CFP, cannot commit fraud. Unfortunately, professionals are stripped of their licenses for just such acts all too often. But if someone has earned and maintained any of these designations, you can at least expect that they have the education and experience to have earned those designations and are held to a Code of Ethics by the governing board. Unfortunately, it seems like Gary Hoffman had none of the above.

By Janet Berry-Johnson, CPA