New York state filed a $250 million fraud suit Wednesday against H&R Block Inc., the nation's largest tax-preparing service, charging the company fraudulently steered customers into a losing retirement account plan.
The news unnerved investors, who sent H&R Block shares down $1.30, or almost 6 percent, to $20.70 in midday trading on the New York Stock Exchange.
The lawsuit, filed in Manhattan's state Supreme Court, says Block advised clients to buy an "unsuitable, fraudulently marketed, poorly performing, fee-ridden 'retirement vehicle' called the Express IRA," an account that actually shrinks over time.
The court papers, filed by Attorney General Eliot Spitzer, say the money in the retirement account decreases because the only investment option offered is a money market account with an interest rate so low that it does not cover the fees -- "fees that H&R Block fails to adequately disclose."