On March 15, 2006, Eliot Spitzer, the New York Attorney General filed a lawsuit against H & R Block, accusing the organization of fraud. He accused H&R Block of specifically selling and marketing losing IRAs to working families. This onerous practice combined deceptive selling techniques with a faulty product. 85% of these Express IRA holders have lost money. The suit, filed in New York City, alleged that H & R Block directed more than 150,000 of all of its clients and specifically almost 30,000 New Yorkers, into Express individual retirement accounts that were never going to be able to turn a profit because of incredibly low interest rates and a glut of hidden fees.
The Express IRA, like any other IRA is an investment vehicle. In this case, because of the poor return and the exorbitant and undisclosed fees associated with the accounts made a return on investment virtually impossible. The largest issue with Express IRAs is that H&R Block’s tax preparers (their main salespeople) are not licensed in securities sales which leaves only one investment vehicle open for the Express IRA, which is low interest yielding money market accounts.
The New York action seeks $250 million in fines plus refunds to H&R Block clients for the Express IRAs which have been sold to over half a million people. New York is not the only state to begin action against H&R Block – a major class action lawsuit alleging similar misconduct was filed in Kansas City, MO. H&R Block was also recently sued by the state of California because of its refund anticipation loans. California alleged that the loans were illegally marketed and sold because they were actually high-cost loans, not simply instantly available tax refunds. H&R Block agreed to pay $62.5 million to settle four class-action lawsuits related to those loans in late 2005.
The New York action, and the Kansas City class-action claim that H&R Block breached its “fiduciary duty” because it deceptive and fraudulent business practices to convince customers to buy these bad IRAs. The New York H&R Block fraud lawsuit also sought an injunction to prevent H&R Block from continuing to violate the law. This kind of fraud and the use of deceptive sales tactics may make H&R Block liable for the financial damage to its clients. The fact that H&R Block consistently targets middle and low income families for its products is also at issue because people in those financial brackets tend to have difficulty saving money, so this practice of marketing one thing but actually selling them another is truly reprehensible.
If you have bought one of these Express IRAs or been the victim of a fraudulent sale by H&R Block you may have recourse to secure compensation in return for your losses. You should contact a financial attorney or a product liability attorney to evaluate your case. When financial companies use deceptive sales tactics they are violating the law. When a company sells a knowingly defective product they are guilty of fraud and of product liability.