Block going back to the basics

We have a saying here in Texas: Dance with who brung ya.

H&R Block is now taking that advice to heart.

The tax-preparation giant has stumbled a bit in recent years, in part by two-stepping with some partners that weren’t very light on their feet.

The company got into the subprime mortgage lending business (and we all know how that turned out for a lot of folks), as well as detoured into banking, accounting and brokerage services.

And we can’t gloss over the refund anticipation loan issue, which produced customer lawsuits, fraud charges from the New York attorney general, special IRS attention via the Free File program, not to mention general bad PR.

Much of the Kansas City-based company’s diversification can be traced to Mark Ernst, who in January 2001 took over as the company’s chairman, president and chief executive. He resigned all of those positions last Tuesday, Nov. 20.

Ernst’s departure comes just weeks after three members of a dissident investor group, led by former Securities and Exchange Commission chairman Richard Breeden, were elected to Block’s board of directors.

Breeden, who was named to fill the company’s chairman post, reiterated Tuesday that he wants to refocus Block on its tax preparation core.

“It’s the business that made H&R Block, H&R Block,” Breeden said.

With the 2008 tax filing season just weeks away, those words were probably welcomed by the millions who head to Block offices each year for help filling out their 1040s.

And as the refocusing continues, we’ll soon find out whether that’s what Wall Street wanted to hear, too.

A drama worth watching: Even if you don’t use Block tax services (in-office or its TaxCut software) or own the company’s stock, this realignment is probably a reality show worth following.

The corporate upheaval quickly took on a soap opera air when tax service competitor John Hewitt announced he’d like the Block top job.

Hewitt, who once worked for Block, left the company in 1981 to start what have become two of H&R Block’s two largest rivals, Jackson Hewitt and Liberty Tax Service. He’s currently head of Liberty.

Here’s the official H&R Block announcement of the recent corporate changes. You also can read more about the tax company tumult in this Kansas City Star story, and more on Hewitt’s interest in this article.