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BLOCK INTERNAL EMAIL DEFENDS AGAINST CHARGES
Wed Mar 15 2006 13:34:11 ET

From: Gokey, Tim
Sent: Wednesday, March 15, 2006 11:00 AM
To: Tax Ops All Field
Cc: DL - TAX OPERATIONS COMMITTEE
Subject: Our response to the Attorney General of New York

As you may have heard, the New York Attorney General today filed a complaint against H&R Block's Express IRA product. We are dismayed that the Attorney General, who is running for Governor of New York, has chosen to attack a product which has been broadly hailed by consumer advocates as a way to help moderate income people to save.

The Attorney General alleges that Block did not adequately disclose fees to clients, falsely claimed it offered attractive interest rates, and did not adequately train its Tax Professionals. These allegations are false. Block fees have always been clearly disclosed in multiple places. Block has subsidized the rates offered to clients in Express IRA. While prevailing interest rates for most savings vehicles were not high over the past three years, Block's rates at all times over this period exceeded the benchmarks for comparable products. And Block Tax Professionals receive more training than anyone else in the industry, typically more than three times the training of competitors.

This action comes after nearly two years of discussions between the Attorney General and Block. The Attorney General's reason for attacking the Express IRA has changed multiple times over this period. The changing nature of his attack has led us to conclude he wants to go after this product for his own purposes, irrespective of the facts. Recently, he has offered to "settle" the claim for many millions of dollars. H&R Block has refused to knuckle under to his tactics and will instead contest these inaccurate allegations in court.

The key truths about Express IRA are that:

  • It is a unique product that makes saving available to a group of consumers that are unlikely to save any other way. �It is conveniently available, has a much lower minimum balance than comparable products, offers a secure return, and is FDIC insured.
  • Express IRA offers very competitive rates of interest that exceed the benchmark for comparable products, currently 3.00% vs. 1.50% for the relevant benchmark (FDIC insured money-market accounts).
  • It often opens the door to significant tax benefits. The total benefits received by H&R Block clients since the inception of this product have exceeded our fees by a ratio of more than 5:1.
  • Far from taking advantage of our clients, Block offered this product because is aligns with our Mission, despite the fact that we have lost significant money on it since its launch.
  • Express IRA has been hailed by consumer advocates and media such as Brookings Institution, The New York Times, The Economist, and the Aspen Institute.

    Thank you for your leadership in explaining the truth about Express IRA to our associates, Tax Professionals, and clients. While the Attorney General will get his press coverage, we are confident that we will prevail when the facts can be impartially presented, in Court.

    Tim

    Developing...


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