Unit of H&R Block is Accused of Fraud

Associated Press

Securities regulators have accused H&R  Block Financial Advisors of fraud in selling customers nationwide some $16 million  of Enron Corp. bonds in late 2001 and touting them as a safe investment  when the energy-trading giant had begun to collapse.

The NASD, formerly the National Assn. of  Securities Dealers, announced its complaint Monday against the investment  division of the world's largest tax preparer, H&R Block Inc.,  which denied the allegations.

"We deeply regret that our clients  experienced losses from the devaluation of Enron bonds," Nick Spaeth,  senior vice president and chief legal officer of H&R Block, said  in a statement. "However, the lost value was the result of mismanagement  and bankruptcy at Enron that later came to light."

The NASD said that in the five weeks preceding  Enron's bankruptcy filing on Dec. 2, 2001, while Enron's financial crisis  was coming to light, some 200 brokers at H&R Block recommended  and sold more than $16 million in Enron bonds  to about 800 customers in 40 states.

The brokers "made affirmative misrepresentations  to customers, touted the supposed benefits of the Enron bonds and  failed to disclose the serious and significant risks associated with  an investment in the bonds," the NASD alleged.

Most of the customers lost their investment  when the bonds' value disintegrated after the bankruptcy filing.

H&R Block had profit of about $500,000  from selling the bonds, according to the NASD, which said the company paid its  brokers higher incentive fees for selling the Enron bonds.

A spokeswoman for H&R Block denied that  higher fees were paid.

 
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