With his wanton assaults on every industry under the sun, New York Attorney General Eliot Spitzer has earned a reputation beyond the Empire State's borders.
As far as we can tell, he's never passed through our Madison County (there's one in New York, too). But if he were to visit, no doubt he'd be feted by a bevy of local admirers. Even call them imitators, like neighborhood trial lawyers Michael Flannery, Jeffrey Lowe, and Evan Buxner, who last week used a Belleville plaintiff to file a class action lawsuit against tax preparer H & R Block in federal court.
Hunting tax season publicity as part of his race for governor, Spitzer not coincidentially filed suit against the company last month, demanding $250 million in damages for allegedly fraudulent marketing of a savings account. The aforementioned Metro-East plaintiff's triumvirate made identical allegations in their lawsuit filed here, even quoting Spitzer verbatim at times in their complaint.
This practice is known as "piggybacking," or jumping on the attorney general lawsuit bandwagon to get some corporate scalp for yourself. It's a simple formula-- find an unwitting plaintiff, cut and paste the state complaint into a new Word document, add your own contact information and file away. Armed with state power and fueled by gubernatorial ambition, let Spitzer make the hard threats. You just sit and spectate-- settlement city, here you come.
Not that the speciousness of any charges could have turned Flannery, Lowe, and Buxner away from such an opportunity to cash in. But of self-aggrandizing Spitzer crusades (there are volumes), this smear against H & R Block could have major ramifications for working Americans hoping to build retirement accounts.
The savings problem, as most of us who've lived paycheck-to-paycheck know well, is getting started. We all want to stow some of our money away in practice, but reality is that every cent seems to be spoken for.
President Bush signed into law a "saver's tax credit" five years ago intended to help. If you made less than $50,000 per year and you started an Individual Retirement Account (IRA), the federal government would match what you saved by up to 50%, lowering your tax bill.
H & R Block created its "Express IRA" product as a means of letting its clients take advantage of this subsidy. Most often, the inaugural deposit was a tax refund from a saver earning $30,000 per year. If the program hasn't been a business success (the company says it has lost millions on it), it has been for hundreds of thousands of Americans using it to save more while paying less to the U.S. government.
Behind these lawsuits is the charge that Express IRA savers, whose money goes into low-risk money market accounts, haven't received high enough interest rates.
This premise-- that we somehow have a government-protected "guaranteed" return on investment-- runs antithetical to the entire concept of risk and return. It also threatens to tank the market for low-income savings options. To serve lower dollar customers, why should companies take the risk of being sued?
This class action will hurt precisely the same people it purports to protect. Judge G. Patrick Murphy shouldn't give it credence.