The 2023 tax season is well underway, H&R Block says, so “time is of the essence” to stop a former White Plains office manager from competing for customers.
H&R Block sued Danny W. Stanton on March 20 in U.S. District Court, White Plains, seeking an order to ban him from using its trade secrets or providing tax and bookkeeping services to its clients.
“Stanton’s scheme,” H&R Block alleges, “constituted a classic example of double-dipping.”
He allegedly received a salary and support services from the tax preparation giant while diverting clients to his own business.
Stanton was licensed as a certified public accountant in New York in 1988 and had previously run his own firm.
H&R Block was founded in 1955 and is headquartered in Kansas City, Missouri. It is worth about $5.2 billion by market capitalization, and it booked about $3.5 billion in revenue and $1.6 billion in gross profits in the past 12 months.
In 2016, according to the complaint, Stanton sold his accounting practice to Emmerman, Boyle & Associates. In 2019, EB&A sold the practice to H&R Block.
Stanton thus became an employee of H&R Block. He was given the title of senior small business partner and assigned to manage the White Plains office.
He was entrusted with confidential client information, the complaint states, and he agreed to protect the information and comply with the company’s code of ethics and conduct.
H&R Block says it formed PTF Services LLC, at Stanton’s request, to service former EB&A clients who he said preferred to do business with a boutique firm.
Stanton and other tax preparers communicated with those clients through PTF email addresses, but their salaries, office space and software were covered by H&R Block.
Unbeknownst to H&R Block, Stanton allegedly incorporated a separate company, Essential Business Advisors Inc., of Harrison. He used the acronym EBA, the complaint says, so clients would associate his new firm with the former EB&A.
“Stanton then commenced to direct certain clients to do business with Essential Business Advisors Inc.,” the complaint states, instead of with H&R Block or PTF Services.
Stanton and H&R Block employees he enlisted to work for EBA allegedly prepared tax returns on H&R Block software.
H&R Block says it discovered an Electronic Filing Identification Number associated with Stanton and EBA that was used for filing tax returns.
From 2021 to 2022, according to the complaint, the number of tax returns filed electronically by EBA increased from 646 to 1,161. During the same period, electronic filings by H&R Block’s White Plains office plunged from 530 to 287.
EBA’s clients, the complaint states, “should rightfully have been H&R Block’s clients.”
Stanton was fired on Feb. 28 after refusing to answer questions, according to the complaint. Then H&R Block discovered that he had downloaded the entire contents of his PTF Services accounts, as well as lists of H&R Block clients, including tax filing histories.
H&R Block accused Stanton of breaches of fiduciary duty and loyalty, misappropriation of trade secrets, conversion of intellectual property and unfair competition.
Efforts to find contact information for Stanton or EBA, to request a response to the allegations, failed.
It is asking the court to restrain Stanton from using its information, while it pursues an arbitration case to recover monetary damages.
