|Crackback Block |
Spitzer filing for a return from tax preparer
1. Block HeadsIf tax season gives you a sinking feeling, imagine what they're going through at H&R Block ( HRB).
This week New York state sued the tax preparer, accusing it of defrauding customers by
But slow is too kind a word to describe income growth in Block's Express IRA, Attorney General Eliot Spitzer says. "Customers were told that the IRA paid 'great rates' and was 'a better way to save,' but 85% of the customers who opened the accounts paid the company more in fees than they earned in interest," he said Wednesday. An Express IRA account opened with the $300 minimum can expect to earn about $3 a year in interest, Spitzer says. But then there's a $15 setup fee, a $15 re-contribution fee, a $25 account termination fee and around $20 in so-called tax complexity fees for IRA-related tax forms. One Albany resident has seen the account lose 12% of its value over four years, Spitzer says. "We have cooperated fully and provided volumes of data and detailed analyses to the Attorney General's office, but it has ignored all of the positives and has chosen to launch this attack," the Kansas City, Mo., company carps in response. "At a time when the country's personal savings rate has declined to minus 0.7%, we've helped 596,000 of our clients begin saving for their future." That's nice, though it's not quite as compelling as the defense offered up by H&R Block's Wall Street lawyer. Even if Express IRA customers got fleeced, suggests Robert Abrams of Stroock & Stroock & Lavan, they surely can't match H&R Block's own ineptitude. No, despite the ludicrous fees, "This effort has not created windfall profits for H&R Block," he says. "Indeed the company has lost money operating this program." Oh well, maybe they can write it off on their taxes. Dumb-o-Meter score: 93. Or maybe not, considering H&R Block's recent plan to restate earnings to fix a state tax error. To view Colin Barr's video take on H&R Block's entry in Five Dumbest this week,
|Misbook 'Em, Nortel |
Company accounting for the long run
2. Good RunNortel ( NT) got beaned by the bean counters again.
The Toronto-based telecom gearmaker just unveiled its
By now Nortel has admitted to misbooking almost $4 billion in revenue over half a decade. But the company insists that new management finally has a handle on those slippery books.
"Although the need to restate certain financial statements is unfortunate, it's the right thing to do," said CEO Mike Zafirovski, who took over from interim chief Bill Owens last fall. "This revenue is real -- it was recognized in the wrong periods." Small problem. Also questionable is Nortel's take on how the mistakes were made. The company admitted Monday it hadn't checked into that issue -- even though it was just two years ago that three top execs were cashiered for cause in the
3. Purple ProseKeeping the Razr's edge is making for trying times at Motorola ( MOT). The Schaumburg, Ill., wireless titan suffered a bit of a hiccup last week when it emerged that Cingular and T-Mobile had pulled the red-hot Razr phone off the shelves, citing a defect that caused dropped calls. Motorola's quick reaction should mean that first-quarter sales
|Watkins You Do? |
Why, 'whistle-blower' sold some stock herself
4. Whistling in the DarkThe Enron case hit a higher pitch this week.
The trial of former CEOs Ken Lay and Jeff Skilling moved into a seventh week. A pitched battle loomed as former exec Sherron Watkins took the stand to rehash her prediction that Enron was doomed to collapse in "a wave of accounting scandals."
Watkins testified Wednesday that she had confronted Lay with questions about some partnerships used to hide losses at Enron. The partnerships were cooked up by former finance chief Andrew Fastow, who has pleaded guilty to two felonies. Fastow is the government's key witness in the fraud-and-conspiracy trial. The defense has claimed there was no fraud at Enron, despite a wave of guilty pleas. Watkins' comments to Lay, of course, immortalized her in 2002 as one of Time's Persons of the Year. "They took huge professional and personal risks to blow the whistle on what went wrong," Time gushed of Watkins and two others in what it deemed Year of the Whistle-Blower. In so doing they helped "remind us what American courage and American values are all about." Values aside, Watkins didn't actually blow the whistle on anyone. She simply took her concerns to Lay -- a notoriously hands-off manager whose apparent response to Watkins' bracing warning was to keep pumping and dumping Enron stock. And if that reaction dismayed Watkins, she had an odd way of showing it. She went on her own stock-selling spree in the months before Enron's December 2001 collapse. Though she hardly cashed out on the mind-boggling scale of Lay or Skilling -- they both took home tens of millions of dollars in compensation from Enron -- Watkins did sell $47,000 in Enron stock at the end of August 2001 and in the first week of October, after she had told Lay (but not regulators or anyone else who might want to know) about the problems. Watkins admits the stock sales were "wrong" because she knew about Enron's travails, The Washington Post reports. "I had more information than the marketplace did," she said. Turns out everyone at Enron shared certain values. Dumb-o-Meter score: 85. In a charitable gesture totally unmotivated by his client's own sales, Lay's lawyer says Watkins' sales weren't illegal -- assuming there was no fraud.
5. Time WarpBeat the Clock apparently was quite the pastime at Bear Stearns ( BSC). The big Wall Street firm
Broker: Is there anything else you can think of that might -- that I could use -- any information that might be beneficial to me hearing now?
MFOD Head: Well, just to let you know -- just to get you aboard -- we probably do the best clearance there is on the Street on market timing, because it is infrastructurally built that we have, you know, very good experienced people here.
Broker: What's the cut-off time?
MFOD Head: ... You have plenty of time to do trades