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H&R Block Threatened Employees, Spitzer Charges |
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May 9, 2006
Spitzer amended a lawsuit he filed against Block on March 15, citing additional evidence of fraudulent marketing of individual retirement accounts. In his original complaint, Spitzer alleged that the H&R Block Company steered hundreds of thousands of customers into IRAs that were almost guaranteed to lose money. The complaint cited e-mails in which H&R Block’s own employees characterized the company’s Express IRA as a bad investment that they could not in good conscience recommend to clients. In an amended complaint, the Attorney General cites new evidence showing that the company’s senior management did more than simply ignore the concerns of its tax preparers; management penalized H&R Block tax professionals who refused to push the product. "In addition to designing a flawed product with hidden fees and marketing it fraudulently to unsuspecting customers, senior management steam-rolled conscientious employees who objected to the fact that clients were losing money," Spitzer said. The newly-obtained evidence cited in the amended complaint includes statements by former H&R Block employees indicating that:
H&R Block introduced the Express IRA in 2002, claiming that it "paid great rates" and was "a better way to save," but the product paid less than one percent interest at times, and 85 percent of those who enrolled paid more in fees than they earned in interest. The lawsuit specifically alleges that H&R Block failed to adequately disclose its fees to customers, failed to warn them that the interest paid would not cover the fees in certain circumstances, and misleadingly described interest rates as "great" when they were actually low. This incomplete and misleading disclosure violated New York’s consumer fraud law and was a breach of the company’s fiduciary duty to its clients, Spitzer alleged. Settlement discussions earlier this year broke down when the company balked at making full refunds to customers for undisclosed fees. The company now faces statutory penalties of up to $250 million if found to have violated the law. Report Your Experience
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