Ex-H&R Block CEO blasts company; will leave board

Friday, July 16, 2010 | 11:48 a.m. CDT

NEW YORK — Former H&R Block Inc. CEO Thomas Bloch said Friday he is leaving the tax preparer's board of directors and sharply criticized the company's priorities, prices and its failure to keep up with do-it-yourself online tax programs.

Bloch, who was president and CEO of the Kansas City company for 15 years, said he will not stand for re-election to the board on Sept. 30. He has been on the board since January 2000.

His departure is the latest shake-up for H&R Block following a difficult 2010 tax season. Last week the company's president and CEO, Russ Smyth, abruptly resigned. Other recent departures include the company's chief financial officer and legal counsel.

Bloch, the 56-year-old son of company co-founder Henry Bloch, criticized management for focusing on short-term issues and said the company has lost a "staggering" number of customers in the last few years.

Bloch also said the company did not react strongly enough to the current economic slump.

In a public letter to the company, Bloch wrote, "No issue has raised my ire more than the pricing strategy employed in our core business," adding the company has raised prices too often and that the higher price reduces the value of its service to customers.

Bloch said the company's fiscal 2010 financial plan was too optimistic and that it lost customers in the latest tax season and didn't meet its own forecasts.

In its fiscal year ended in April, returns at offices open at least a year fell 3.9 percent and revenue fell 5.1 percent from the prior year as more customers did their taxes online.

Bloch also said Richard Breeden should not have been re-elected as chairman a year ago. Breeden became chair in November 2007 after a proxy contest, and Bloch said that while he supported Breeden at the time, he is now concerned the company is putting the interests of short-term shareholders ahead of long-term goals.

As an example, he said he opposed the $2 billion stock repurchase the company approved in 2008. Bloch said the move was poorly timed, as the company bought back stock only to watch its share price decline. In September 2008, H&R Block shares were at their highest price in three years.

Since the end of 2008, shares of H&R Block have lost more than a third of their value. The stock is down 35 percent this year, compared to a 1.7-percent decline in the S&P 500, making it one of the worst stocks in the benchmark index, Bloch noted.

In morning trading, shares of H&R Block fell 44 cents, or 3 percent, to $14.17 as the broader markets also declined.

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