New York State Attorney General Eliot Spitzer, who this week filed a suit against H&R Block Inc. alleging deceptive marketing of a savings account product, Friday said the tax-preparation company’s public denials make a settlement less likely.
Spitzer, responding to a Wall Street Journal editorial written by H&R Block Chief Executive Mark Ernst on Friday, told Reuters that the company made “misleading, false statements repeatedly” during months of negotiations.
Spitzer also said Ernst’s actions since the suit was filed — including a press release Wednesday, the op-ed piece Friday and the disclosure of negotiations — “make it very difficult for me to imagine that we will settle.”
As a result, Spitzer said, “the ultimate cost to H&R Block shareholders is going up dramatically.”
He also warned: “H&R Block faces vast fines and penalties” as a result of its actions.
H&R Block did not immediately return a phone call seeking comment.
Spitzer, who has struck landmark settlements with insurers, brokers and mutual fund firms in recent years, in a lawsuit filed Wednesday charged that H&R Block fraudulently marketed retirement savings plans that caused hundreds of thousands of mostly low-income clients to lose money.
The suit seeks as much as $250 million in fines, plus refunds to customers, after H&R Block steered a half million tax-return clients to invest in Express Individual Retirement Accounts. The company, Spitzer said, failed to disclose the account’s high fees that outpaced interest payments.
About 87 percent of the Block IRA customers, most of whom are low- or middle-income, lost money, Spitzer said in an interview.