Big Law, Big Media, Big Politics
Last year, for the first time in American history, more than half of all American families 52 percent to be precise--owned stock. For the record, 45 percent of these shareholders earn less than $50,000 a year, and more than half are senior citizens.
Given the growth of the investor class, and its impressive reach among the rank and file, one would expect the media to show this class more respect, even sympathy. But rarely do they do so, and almost never when shareholders come face to face with the media's most unlikely heroes--trial lawyers.
Indeed, so reflexive is the pro-lawyer bias that the media cannot bring themselves to dissect, even discuss, a growing legal menace that has been quietly eating away at its host economy like a tapeworm--the class action law suit.
Big Law
Some 30,000 people own stock in H&R Block. Ingram's readers know these shareholders as ordinary Americans, many of them Kansas Citians, some of them wealthy to be sure, but most of them not. Our readers also know the founding brothers of the company, Henry and Richard Bloch, as local icons--their tax filing service a model of useful, responsible enterprise; their philanthropy already legendary.
In a south Texas courtroom, however, one sees Block shareholders in a different light, namely as the perpetrators of an "unconscionable scheme" to "intentionally milk" a hapless collective of Texans out of their hard-earned money. Scarier still, the Houston attorney who made this claim is just one of many attempting to wring money out of the Block investment community through a class action law suit.
As often happens in such suits, an attorney will scour the legal landscape for some presumed offense by a deep-pocketed entity. Then he will try to find an individual who, whether he knows it or not, has suffered from the offense. From this base, the lawyer then actively solicits a cohort of similarly aggrieved individuals.
Oddly, the injured parties almost always come from plaintiff-friendly judicial districts. One presumes the honesty of the selected judges, but the potential size of a payoff--and the simplicity of pulling it off--must surely tempt human nature.
This particular Houston trial lawyer, like several of his peers, has focused on H&R Block's point of greatest vulnerability, the "Refund Anticipation Loans" (RAL). The way an RAL works is straightforward enough. Block helps a taxpayer file his or her taxes and then arranges, for a set fee, a short-term cash advance based on the anticipated return. A separate lending company provides the actual loan with Block taking a small part of the fee to cover paper work and processing.
Those taxpayers who want their refund money pronto--about four million each year--willingly pay the fee. Before Block launched this program, needy taxpayers had to barter their anticipated returns with local merchants or loan sharks. often for as much as 1/3 of the return. Block charges only about 10 percent of the street fee. According to Block's PR manager, Bob Schneider, a typical loan would run about $1700 with a fee of about $60.
Presuming that the IRS took, say, four weeks to send the refund, one could argue that the annual interest rate on this loan was something like 45 percent. Indeed, some attorneys are claiming just that, accusing H&R Block of "usury," a charge that lost its punch in the civilized world after about the 16th century.
The Texan consumers corralled by this Houston attorney took offense in ways more imaginative than mere usury. Apparently, Block failed to disclose its arrangement with the lending company when it offered the loans. And this failure, we're told, wounded our innocent Texans grievously.
Block made its relationship with the lending company apparent to all consumers after this suit was launched in 1996. But the truth is that real consumers have never noticed or cared, either before 1996 or since. This hardly matters. The Houston attorney found a judge who was as offended as he was by the arrangement, and the judge, in Schneider's words, "did something quite unusual." He issued a summary judgment against Block for $75 million without even hearing the case.
So devastating was the ruling that the New York Stock Exchange had to halt trading in Block shares until noon on the day after the judgment, November 1, 2002. By the day's end, the judge had cost Block's 30,000 share-holders, many of them elderly citizens on fixed incomes, nearly 8 percent of their shareholder value.
Big Media
Suits like the one against H&R Block remain legal only because the public remains largely ignorant of their corrosive effect on the economy. This does not happen by accident. From Sixty Minutes to Erin Brockovich, the media depict trial law as a morality play, one in which the heroic trial lawyer protects the vulnerable everyman from the dissembling agents of Big Tobacco, Big Medicine, Big Oil, Big Breast Implants, Big Macs, and now, Big Tax.
As the drama plays itself out, the attorney strips away the lies of the greedy corporate moguls until the truth surfaces and justice triumphs. Almost never examined, of course, are the motives or the machinations of the trial lawyer.
In its coverage of the Block suit, for instance, newspaper accounts routinely parrot the plaintiff's use of the loaded word "kickback" to describe the natural relationship between Block and the lending company. Indeed, not even the hometown Kansas City Star could muster a hint of irony when speaking of "the Texas con-sumers who claimed they were misled."
Big Politics
Now that the corporate shareholder is emerging as everyman, one would think that the media would start rethinking the script. No, the script will resist change for one rarely examined reason: trial lawyers and media mavens now snuggle up in the same political bed.
In the most recent election cycle, the Association of Trial Lawyers of America donated $20 million, fourth highest among all groups or corporations. Unlike big business, which tends to split its giving between parties, the trial lawyers gave 88 percent of their money to Democrats. Individual trial lawyers gave much more--three of them in excess of $250,000, all to Democrats--and some have self-financed their own campaigns. Most notable among the latter is North Carolina pretty-boy John Edwards, who invested more than $6 million of his hard-extorted money in a Senate seat and is now a seemingly credible candidate for the Democratic nomination.
As to the media, according to a now famous Roper poll, 89 percent of all Washington correspondents voted for Bill Clinton in 1992 to only 7 percent for George Bush. If less generous with their dollars than trial lawyers, they are all too generous with their ink. Or their video. Or their film. Hollywood, of course, has become a wholly owned subsidiary of the Democratic Party.
So don't expect to see anytime soon a movie in which a Houston trial lawyer pockets nearly $50 million in cash, while his "clients" settle for "coupons, software or a book of tax advice" and thousands of older shareholders lose a healthy chunk of their nest eggs over an offense so preposterously trivial it hurts to talk about it. 
Jack Cashill is Ingram's Executive Editor and has affiliated with the magazine for 25 years. He can be reached at jcashill@aol.com. The views expressed in this column are the writer's own and do not necessarily reflect those of Ingram's.