H&R Block and McGladrey Settle Differences, Agree To Stay Together

H&R Block’s accounting subsidiary, RSM McGladrey, has struck an agreement in a dispute with McGladrey & Pullen LLP, an independent auditing firm.

The deal renews the firms’ existing collaboration, which was set to expire Feb. 16, extending it until 2015. Five-year renewals will be automatic after that, unless either party starts withdrawal talks, under certain circumstances, the Kansas City Business Journal reported.

Kansas City-based H&R Block said that the agreement contains “changes in both the operational and financial relationship between RSM and M&P.”

Block acquired M&P for $390 million in 1999. RSM McGladrey and M&P have operated through a service agreement ever since, with RSM providing accounting, payroll, marketing and other services to M&P for a fee. In the acquisition, M&P becoming an independent auditing firm to comply with regulatory requirements. Though they are legally independent, the two firms share office space, employees and clients, the Business Journal said.

In a suit filed in July, RSM contended that legal action against M&P was necessary, “to avoid the irreparable damage to RSM and its clients and employees that will result if the defendants’ ongoing violations of their contractual obligations are not enjoined.” The suit was filed shortly after M&P announced that it planned to terminate the administrative services agreement with Block. In September, Block moved to end the agreement. Mediation and arbitration followed.

“This agreement provides a stable foundation for future growth of RSM McGladrey,” H&R Block CEO Russ Smyth said in a release. “The discussions were ultimately healthy to review the needs of both firms and to identify how we can best manage our respective operations to improve client service, accelerate growth initiatives, improve partner wealth creation and increase shareholder returns, while preserving and protecting the independence of M&P.”