American Express to pay $138M in settlement

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American Express has agreed to pay more than $138 million in a settlement agreement with the U.S. Attorney’s Office for the Eastern District of New York. The non-prosecution agreement is in connection to what officials describe as “engaging in sales practices that provided inaccurate tax advice to customers and potential customers” of for two American Express products: Payroll Rewards and Premium Wire.

American Express has agreed to pay a $77.6 million fine and forfeit $60.7 million. The agreement requires the company to cooperate with the U.S. Attorney’s office for at least 36 months. If the company violates the terms of the agreement it could be prosecuted for any of the conduct that prompted the investigation as well as for any newly discovered criminal activity.

“Financial institutions like American Express have no business pitching inaccurate tax avoidance schemes to sell products and turn a quick profit,” acting U.S. Attorney Judy Philips said in a news release about the settlement.

“This resolution ensures that American Express will be held financially accountable for the unacceptable conduct of its sales employees in misrepresenting the tax benefits of these products,” she added.

The DOJ said in the news release that “in practice, the products were marketed as a means to generate tax savings. These products were primarily marketed to small and mid-size businesses that valued a reduced tax burden over increased profitability.”

But the company’s pitch “relied on incorrect tax advice,” which stated that the wiring fee was “deductible in its entirety as a business expense,” officials said. The company had not consulted with tax experts to very this claim, officials said.

In early 2021, as concerns grew regarding the way the products’ marketing, the company began an internal investigation, ultimately terminating about 200 employees. In the summer of 2021, the company stopped enrolling new customers in the products, officials said. By September 2021, a cap was instituted of $280,000 per wire sent. In November 2021, the products were discontinued entirely.

American Express had no previous criminal history in the past 18 years, and cooperated with officials with the investigation, according to officials.

“We cooperated extensively with these agencies and our regulators and took decisive voluntary action to address these issues, including discontinuing certain products several years ago, conducting a comprehensive internal review, taking appropriate disciplinary measures, making organizational changes, and enhancing policies, compliance, and training programs,” the company said in a statement.