NY Attorney General expands H&R Block
By Ed Leefeldt
NEW YORK (Reuters) – New York Attorney General Eliot
Spitzer on Monday ratcheted up his war against the nation’s
largest tax preparer, charging that H&R Block Inc. management
had threatened to fire employees who didn’t push overpriced
individual retirement accounts.
H&R Block had no immediate response.
Spitzer filed his initial complaint on March 15 in New York
State Supreme Court in Manhattan, claiming H&R Block had
steered about 500,000 customers into IRAs with hidden fees and
low interest rates, costing them millions of dollars.
In his amended complaint on Monday, the New York attorney
general alleges that the company’s senior management
“steamrollered conscientious employees who objected to the fact
that clients were losing money” in the product.
Spitzer said he had statements from former H&R Block
employees that managers had disregarded their complaints about
misleading marketing of the IRAs and had told tax preparers to
emphasize the positive and “avoid mention of negatives.”
Managers had told tax preparers to “sell more IRAs” or
“there’s the door,” Spitzer said. Tax preparers who didn’t
comply had access to customers limited by managers.
H&R Block has refused to settle with Spitzer, claiming his
suit was “an unfair attack on a good product that plays a key
role in our mission to help lower and middle-income Americans
start saving for retirement.”
Spitzer responded by threatening the company with “vast
fines and penalties” for refusal to admit wrongdoing. He is
currently asking for $250 million in fines plus refunds.
“We’ll dig deeper into the company,” he warned in an
interview on March 17.
At issue is an IRA that H&R Block clients can start with
only $300. Spitzer says the “hidden” fees loaded onto the
account by the tax preparer — along with low interest — mean
that 85 percent of the time the clients lose money.
H&R Block responded that the IRAs provide their clients
with a tax savings. Chief Executive Mark Ernst said the company
will “vigorously defend” the product in court.
Spitzer, who is running for governor, has gotten more than
$3.3 billion from settlements in cases he has brought against
the insurance industry, investment banks and mutual funds. But
recently companies such as H&R Block have balked at settling
his cases and chosen to go to court.
On Friday Liberty Mutual Group, the sixth largest property
casualty insurer, called Spitzer’s demands to settle a
bid-rigging suit “excessive and unreasonable” and said it was
“preparing to resolve the issues in court.”