Posted on: Saturday, December 13, 2003

SEC looking into H&R Block filings

Bloomberg News Service

H&R Block Inc., the largest U.S. tax preparation company, said the Securities & Exchange Commission is investigating the company's disclosure of lawsuits stemming from its tax-refund loans.

The formal SEC investigation is looking into company filings before late last year, when H&R Block reported a $41.7 million pretax charge to settle a Texas suit, spokesman Bob Schneider said.

H&R Block, based in Kansas City, Mo., hadn't disclosed the Texas case in its previous quarterly filings, and less than three weeks before the settlement said in a statement it didn't expect a material impact from any pending litigation.

"The company intends to cooperate fully with the commission's investigation," H&R Block said in a statement.

H&R Block offers loans that advance money to clients while they await a tax refund. Clients have accused H&R Block of charging interest rates of more than 100 percent and not revealing how it makes money from the loans in partnership with a bank. H&R Block has denied any wrongdoing.

Before settling the Texas case, H&R Block said it hadn't lost any of the more than 20 class-action suits filed against it by loan clients. The settlement was precipitated by a judge's letter signaling he would rule against the company. Chief Executive Officer Mark Ernst said at the time he was "shocked and outraged at this ruling."

Four lawsuits by shareholders have been filed against the company alleging that it failed to disclose litigation before the Texas settlement, according to the company's most recent quarterly filing.