HR Block 2006 Annual Report Download - page 84

ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We own our corporate headquarters, which is located in Kansas City, The executive offices of HRBFA are located in leased offices in
Missouri. We have leased additional office space for corporate, Tax Detroit, Michigan. Branch offices are operated throughout the U.S., in a
Services and Investment Services personnel, as necessary, in combination of leased and owned facilities.
Kansas City, Missouri. RSM’s executive offices are located in leased offices in Bloomington,
Most of our tax offices, except those in shared locations, are operated Minnesota. Its administrative offices are located in leased offices in
under leases throughout the U.S. Our Canadian executive offices are Davenport, Iowa. RSM also leases office space throughout the U.S.
located in a leased office in Calgary, Alberta. Our Canadian tax offices We began construction of new corporate headquarters during fiscal
are operated under leases throughout Canada. year 2005, which will allow us to consolidate the majority of our Kansas
Option One’s executive offices are located in leased offices in Irvine, City-based personnel into one facility. The new building will be located
California. Option One also leases offices for its loan origination and in downtown Kansas City, Missouri and we expect it to be completed in
servicing centers and branch office operations throughout the U.S. fiscal year 2007.
HRBMC is headquartered in leased offices in Irvine, California. HRBMC All current leased and owned facilities are in good repair and
also leases offices for its loan origination centers and branch office adequate to meet our needs.
operations throughout the U.S.
ITEM 3. LEGAL PROCEEDINGS
The information below should be read in conjunction with the of $70.2 million (the ‘‘2006 Settlements’’). The 2006 Settlements are
information included in Item 8, note 17 to our consolidated described below.
financial statements. On December 21, 2005, we entered into a settlement agreement
RAL LITIGATION –We have been named as a defendant in numerous regarding four RAL Cases entitled Deadra D. Cummins, et al.v.
lawsuits throughout the country regarding our refund anticipation loan H&R Block, Inc. et al.;Mitchell v. H&R Block, Inc. et al.;Green v.
programs (collectively, ‘‘RAL Cases’’). The RAL Cases have involved a H&R Block, Inc. et al.; and Becker v. H&R Block, Inc. (the ‘‘Cummins
variety of legal theories asserted by plaintiffs. These theories include Settlement Agreement’’). Pursuant to the Cummins Settlement
allegations that, among other things, disclosures in the RAL applications Agreement, we will contribute a total of up to $62.5 million in cash for
were inadequate, misleading and untimely; the RAL interest rates were purposes of making payments to the settlement class, paying all
usurious and unconscionable; we did not disclose that we would receive attorneys’ fees and costs to class counsel and covering service awards
part of the finance charges paid by the customer for such loans; untrue, to the representative plaintiffs. In addition, we paid costs for providing
misleading or deceptive statements in marketing RALs; breach of state notice of the settlement to settlement class members. We recorded an
laws on credit service organizations; breach of contract, unjust additional reserve of $50.7 million related to this settlement in fiscal
enrichment, unfair and deceptive acts or practices; violations of the year 2006 to fully reserve for the settlement amount.
federal Racketeer Influenced and Corrupt Organizations Act; violations On April 19, 2006, we entered into a settlement agreement, subject to
of the federal Fair Debt Collection Practices Act and unfair competition final court approval, regarding litigation entitled Lynne A. Carnegie,
with respect to debt collection activities; and that we owe, and et al. v. Household International, Inc., H&R Block, Inc., et al. (the
breached, a fiduciary duty to our customers in connection with the ‘‘Carnegie Settlement Agreement’’). Pursuant to the Carnegie Settlement
RAL program. Agreement, we will contribute a total of $19.5 million in cash for
The amounts claimed in the RAL Cases have been very substantial in purposes of making payments to the settlement class, paying all
some instances. We have successfully defended against numerous attorneys’ fees and costs to class counsel, incentive payment awards to
RAL Cases, some of which were dismissed on our motions for dismissal plaintiff and all notice and administration costs. We recorded a reserve
or summary judgment, and others were dismissed voluntarily by the of $19.5 million related to this settlement in fiscal year 2006.
plaintiffs after denial of class certification. Other cases have been We believe we have meritorious defenses to the remaining RAL Cases
settled, with one settlement resulting in a pretax expense of and we intend to defend them vigorously. There can be no assurances,
$43.5 million in fiscal year 2003 (the ‘‘Texas RAL Settlement’’) and other however, as to the outcome of the pending RAL Cases individually or in
settlements resulting in a combined pretax expense in fiscal year 2006 the aggregate. Likewise, there can be no assurances regarding the
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H&R BLOCK 2006 Form 10K