Parker Waichman LLP

N.Y. Files Fraud Suit Against H&R Block

A Money-losing Retirement Account Plan. New York state filed a $250 million fraud suit Wednesday against H&R Block Inc., charging that the nation’s largest tax preparation service steered more than 500,000 customers into a money-losing retirement account plan. H&R Block defended the plan and said it would fight to see that it remains available to […]

HSuit Against H&R

A Money-losing Retirement Account Plan. New York state filed a $250 million fraud suit Wednesday against H&R Block Inc., charging that the nation’s largest tax preparation service steered more than 500,000 customers into a money-losing retirement account plan.

H&R Block defended the plan and said it would fight to see that it remains available to its clients “who rely on it as a helpful savings option.”

But its shares sank more than 6 percent on news of the lawsuit filed by Attorney General Eliot Spitzer as the tax preparation season is in full swing.

It was the latest in a series of problems faced by the tax preparation firm based in Kansas City, Mo.

A number of states, including California, have sued H&R Block over its “refund anticipation loans,” which are high-interest, short-term loans given to taxpayers and repaid out of their tax refunds. The company recently agreed to pay $62.5 million to settle a number of class-action lawsuits over the loans; other class-action suits are pending.

In February, the company revealed that it had to restate earnings for 2005 and 2004 and the first two quarters of this year after discovering it had made a mistake in determining its own state income tax rates.

The latest lawsuit, filed in state Supreme Court in Manhattan, alleges that that Block advised clients to buy an “unsuitable, fraudulently marketed, poorly performing, fee-ridden ‘retirement vehicle’ called the Express IRA” that actually shrinks over time.

The suit said the amount of money placed in a consumer’s retirement account decreased because the only investment option was a money market account with an interest rate so low that it does not cover the fees.

Those charges included a $15 setup fee, a $15 “recontribution” fee and a $10 annual maintenance fee, Spitzer said.

Paid More in Fees Than They Got Back in Interest.

Customers “paid more in fees than they got back in interest,” said Spitzer, a Democrat leading a field of candidates for governor. “They were not told this would happen. This is a violation of state law.”

H&R Block said it will “fight vigorously to defend the Express IRA product and ensure it remains available to our many clients who rely on it as a helpful savings option.”

“Make no mistake we believe in the Express IRA product and are proud of the opportunities it presents for our clients,” said Chairman and Chief Executive Mark A. Ernst.

Spitzer said that H&R Block opened more than half a million Express IRA accounts in the last four years. He said 85 percent of customers who opened the accounts paid H&R Block more in fees than they earned in interest.

More than 150,000 customers closed their accounts, incurring additional undisclosed fees and almost $6 million in tax penalties, Spitzer said.

But Spitzer said he suspected the “real reason they set up these accounts was that once their clients had these accounts, they would continue to come back to H&R Block to have their taxes done.” He said the company considered the IRA accounts “bait.”

Sarah Ludwig, director of the Neighborhood Economic Development Advocacy Project, said at a news conference that Block’s Express IRA was part of an array of “deceptively marketed, high-cost junk products” aimed at low-income, working class families.

A recent study by her nonprofit group said that New Yorkers lost an estimated $92 million in tax refunds and earned income tax credits by taking refund anticipation loans.

The state’s lawsuit asks that the company be required to stop engaging in any fraudulent practices, be forced to disgorge profits and pay damages and restitution caused by its alleged scheme and pay civil penalties in an amount no less than $250 million.

The investigation by the attorney general’s office was launched in 2005 after it received information from an H&R Block tax preparer.

Need Legal Help Regarding Suit Against H&R?

The personal injury attorneys at Parker Waichman LLP offer free, no-obligation case evaluations. For more information, fill out our online contact form or call 1-800-YOURLAWYER (1-800-968-7529).

[sc name=”post-footers”]

What Our Clients Say About Us
We have worked with thousands of clients and we appreciate them and their positive reviews. Here are just a few recent client reviews...
5 Star Reviews 150
The Office staff at Parker Waichman has been extremely responsive to all of my questions and concerns, someone is always checking in with me to see how we are feeling, how treatments are going, it puts your mind at rest and they don't allow you to stress out about the small details because they take care of all of them. I am very grateful to have Joanne, Jillian and Cristen helping my family through this. Even the reception staff are always cheerful and pleasant, it is such a pleasure speaking with them.
Kathy Oliva
8 years ago
5 Star Reviews 150
I have been working with Tina for about a year and a half. She is a wonderful person and a true professional. I can't thank her enough.
Mike Antidormi
3 years ago
5 Star Reviews 150
Positive: Responsiveness I would like to complement my only contact person at your firm. Her name is Ashley Lopitlato her kind reassurances sustained me through times of worry and doubt she made the wait far more bearable. Thank you, Ashley
R Nagle
3 years ago

Why Choose Us to Help You?

We Take Care of Everything
Your situation is stressful enough: Let us take on the deadlines, paperwork, investigation, and litigation. We'll handle every detail so you don't have to worry.
No Recovery = No Legal Fees
We work on a contingency-fee basis, meaning that we only get paid from a portion of your settlement or jury award. If you don't get compensation, you owe us nothing.
Decades of Experience
Your situation is stressful enough: Let us take on the deadlines, paperwork, investigation, and litigation. We'll handle every detail so you don't have to worry.
Respected by Our Peers
Judges, insurance adjusters, and fellow attorneys all speak highly of our skills, and we've earned numerous accolades, including a flawless rating from AVVO.
We Have Many Locations To Serve You
We have the experience and the skilled litigators to win your case. Contact us and speak with a real attorney who can help you.
Long Island – Nassau
Parker Waichman LLP
6 Harbor Park Drive
Port Washington, NY 11050
Long Island – Suffolk
Parker Waichman LLP
201 Old Country Road – Suite 145
Melville, NY 11747
New York
Parker Waichman LLP
59 Maiden Lane, 6th Floor
New York, NY 10038
Queens
Parker Waichman LLP
118-35 Queens Boulevard, Suite 400
Forest Hills, NY 11375
Brooklyn
Parker Waichman LLP
300 Cadman Plaza West
One Pierrepont Plaza, 12th Floor
Brooklyn, NY 11201
New Jersey
Parker Waichman LLP
80 Main Street, Suite 265
West Orange, NJ 07052
Florida
Parker Waichman LLP
27299 Riverview Center Boulevard
Suite 108
Bonita Springs, FL 34134
Nationwide Service
Parker Waichman LLP
59 Maiden Lane, 6th Floor
New York, NY 10038