interactive.wsj.com
May 25, 2001
H&R Block Finds No Humor
In Ex-Worker's Online Advice
By AARON ELSTEIN
WSJ.COM
A former H&R Block tax preparer who posted a message on the Internet
telling the company's customers how to cheat on their income taxes is in
legal trouble -- but not with the Internal Revenue Service.
Larry Littell, of Portland, Me., has been
sued by Block over the anonymous posting,
which the company says was "intended to
cause injury" by "encouraging and aiding
customers to defraud Block." Block is seeking unspecified damages and a
court order to stop such posts.
The message, which was posted last year on a bulletin board operated by
Yahoo (www.yahoo.com), told taxpayers how to doctor information in
their employee wage and tax statements, or W-2 forms, and have Block
consultants prepare returns that would result in inflated tax refunds.
Block didn't say whether anyone followed the advice and manipulated their
income-tax information.
The Kansas City, Mo., company prepares tax returns for millions of
people each year. Block makes loans to clients based on their anticipated
refunds. It recovers its money from the refunds. Block could lose out when
the IRS rejects a fraudulent return that the company used as the basis for a
loan.
"We don't want anyone telling H&R Block customers to commit fraud or
infringing on our trademarks," says Neil Getzlow, a Block spokesman.
Mr. Littell, who left Block in July 1997 to start a tax-consulting business,
says the company is overreacting. He says the posting was a joke intended
to show how easily Block clients can commit fraud. However, in a
countersuit, he accuses the company of trying to silence criticism.
"The tone was clearly sarcastic and made in
the context of other H&R Block employees
posting similar messages on Yahoo," says
Thomas Connoly, a lawyer for Mr. Littell.
The dispute, working its way through a state
court in Missouri, is one of scores of so-called cybersmear cases that have
resulted from Internet postings a company or individual deems a personal
affront. A trial was scheduled for April 16 -- the day federal income taxes
were due for most people -- but postponed to give both sides more time
to gather evidence.
According to Block, Mr. Littell posted the message on a Yahoo message
board in March 2000 using the alias "jack_straw_67201" (a reference to a
Grateful Dead song). The company found out the identity of the poster, as
is usual in these cases, by serving a subpoena on Yahoo for information.
The message told readers: "Take your original W-2 and make a nice new
one using a laser printer. Change a number so it looks like an input error.
Say, subtract a digit from income, add one to withholding or transpose a
number. Don't be a pig about it. Just go for a few thousands dollars."
It advised people to visit a Block office during "peak" hours "so you are
sure to get a new preparer." It urged taxpayers to refuse electronic filing
because, Block alleges, that would make it harder to detect the false W-2.
"Get your coworkers, friends and family to join the fun," the message said.
In its suit, Block says any damage caused by the message would be
"impossible to quantify."
However, Mr. Littell, 43 years old, says his comments were not intended
to encourage fraud. He says he just wanted to illustrate to other Block
employees who participated on the Yahoo board how easy it would be for
their clients to manipulate the tax-filing system. "The company had no
control system and that was stupid," he says.
Among the Block employees posting messages on the Yahoo board at the
time was Chief Executive Mark Ernst, a spokesman said.
In his countersuit, Mr. Littell alleges Block sued "for the ulterior purpose to
intimidate" and prevent him from publishing any disparaging remarks about
the company. He seeks damages "sufficient to punish" Block for bringing
its action.
Although he is facing legal action from Block, it's unlikely that Mr. Littell
will hear from the IRS.
"Freedom of speech means you can say a lot of things about taxes,
including urging people not to pay taxes at all," says Cono Namorato, a
former Justice Department official in charge of tax-law enforcement and
attorney at Caplin & Drysdale, a Washington firm that specializes in tax
law.
An IRS spokeswoman says federal law forbids anyone from advising
people to file a false tax return. But she says the IRS would need evidence
that someone took Mr. Littell's advice to prosecute him. A conviction
could result in a fine of $100,000 and a prison sentence of up to three
years.
Mr. Littell says he stopped posting messages about Block after he was
served with the lawsuit in December. The lawsuit, which hasn't come to
light until now, was filed in Circuit Court of Jackson County in Kansas
City. The case started in April 2000 when the company filed a "John Doe"
lawsuit and subpoenaed Yahoo to uncover Mr. Littell's identity.
Block's case is one of more than 120 "cybersmear" suits around the
country, legal experts say. None of these cases has gone to trial, and
organizations ranging from the American Civil Liberties Union to AOL
Time Warner have weighed in against them as threats to free speech on the
Web.
Recently, several courts have ruled against companies that filed defamation
suits because of message-board postings. Last week, for example, a
federal judge in Los Angeles ordered Global Telemedia International to
pay more than $55,000 in attorney fees for the unnamed defendants it had
sued for libel. The federal judge had dismissed the company's claim.
Write to Aaron Elstein at aaron.elstein@wsj.com
KJC |
