H&R Block in $250m fraud lawsuit

New York State Attorney Eliot Spitzer is tough on corporate fraud

New York State Attorney General Eliot Spitzer is suing US tax accountant giant H&R Block, for fraudulent marketing of retirement plans.

The attorney general claims H&R Block illegally marketed so called Express individual retirement accounts (IRAs).

Mr Spitzer, famous for tackling corporate fraud, has fined the company $250m (£143m).

In reaction, H&R Block maintains that its Express IRA product is a good way to save and will defend it in court.

Shrinking accounts

Around 50,000 customers had been encouraged to invest in accounts that fell in value over time, says Mr Spitzer.

"Instead of providing these families with accurate information that would have allowed them to make informed choices, H&R Block steered them into retirement accounts that actually shrank over time," he said in a statement.

The investigation under Mr Spitzer, who has made a name for himself in multi-million dollar settlements against investment banks and fund managers, started at the end of last year.

The Stock Exchange was prompted to investigate after an H&R Block employee provided a tip-off.

When more than 150,000 of the firm's customers closed their 'Express IRA,' they faced hitherto unknown fees, which outstripped interest rates, in addition to $6m in tax fines said the Attorney General.

The filing quotes company documents that show that senior management was aware that many customers were losing money on their retirement accounts.

'Proud'

In defence, H&R Block has said: "We believe in the Express IRA product and are proud of the opportunities it presents for our clients."

"We've helped 596,000 of our clients begin saving for their future," the firm said

As far back as 2002, a district manager complained to H&R Block's chairman and chief manager about how such accounts were affecting customers.

The civil complaint has been filed in Manhattan's state court.