H&R Block Unable to Stop Lawsuits

Despite having a slew of claims dismissed in a New York State courtroom, H&R Block now faces a series of 12 cases in a federal courtroom in Missouri regarding the sales practices of the company’s Express IRA product, according to the Kansas City Star.    Plaintiffs hold that the Kansas City-based chain tricked consumers by failing to disclose expenses, and by offering investment options it knew were inferior, claims H&R Block denies.   The fact that the judge allowed the claims says nothing about the “viability of the plaintiff’s allegations or legal theories,” the company said through a statement.   “We continue to believe that the substance and the facts of the case are on our side, and we are committed to mounting a vigorous defense of the Express IRA, which has helped hundreds of thousands of people begin saving, many for the first time,” the statement said.   H&R Block has sold more than 600,000 of these accounts, which use tax refund money to open an IRA for the consumer. The company claims those accounts represent $360 million in savings. The problem has been that the account’s only investment option is a money market fund managed by Reserve Fund of New York.   Plaintiffs argue that as early as 2002, the company knew that the fund’s returns we below market, and that the account fees ate into investor gains. New York State Judge Karla Moskowitz ruled that state law gave her no jurisdiction over the company, but did let stand two claims including fraud and deceptive practices.   But U.S. District Judge Richard E. Dorr in the Western District of Missouri ruled that the plaintiffs had met a reasonable burden of proof, and that the case will be allowed to go forward, despite H&R Block’s efforts to get it dismissed.   At the same time, H&R Block’s poor performance has lead Greenwich-based hedge fund Breeden Capital Management to attempt to takeover the company’s board. Breeden, which has forced a proxy presenting three of its own candidates for the board, claims that H&R Block’s missteps have cost shareholders $4.5 billion.   The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.