
American Express Company (AMEX) has settled to pay over $138 million in response to a wire fraud investigation involving the sales and marketing of two wire products. The financial institution, under the terms of a non-prosecution agreement (NPA), will pay a criminal fine of $77,696,000 and forfeit an additional $60,700,000. The NPA holds AMEX accountable for offering incorrect tax advice to their customers and potential customers of Payroll Rewards and Premium Wire (PR/PW), which were intended to help customers reduce their tax payments, according to an announcement from the Eastern District of New York's U.S. Attorney's Office.
In parallel, AMEX and the Department of Justice's Civil Division Fraud Section have reached an agreement that requires AMEX to pay a civil penalty of $60,700,000. The NPA stipulates that the company must continue to fully cooperate with the Office for at least 36 months. In the event AMEX fails to comply, they may be subject to prosecution for their involvement in the agreement and any newly discovered criminal activity. This resolution emphasizes the importance of adhering to legal and ethical sales practices and the consequences faced when companies decide to deliberately provide false information for financial gain.
The investigation, which started due to the way PR/PW products were marketing, revealed that these were marketed unfairly as a means to profit through tax savings. AMEX's sales material and pitches made claims suggesting that the fees associated with these wire products were tax-deductible business expenses, subsequently lowering the customers' overall profit and taxable income. It was determined these claims are based on inaccurate tax advice; an offense taken seriously by financial regulators. In a statement obtained by the U.S. Attorney's Office for the Eastern District of New York, Acting Attorney for the United States Judy Philips said, "Financial institutions like American Express have no business pitching inaccurate tax avoidance schemes to sell products and turn a quick profit."
AMEX has to also adhere to measures including improving compliance and audit processes and maintaining ongoing cooperation with the investigation into their conduct, as detailed by the U.S. Attorney's Office. These advancements to the company's internal structures form part of AMEX's remedial efforts following their acknowledgment of past shortcomings in the sales and marketing of their PR/PW products. As outlined by the NPA, American Express has taken significant steps to mitigate and correct the sales and marketing practices described above, which includes terminating about 200 employees tied to the misconduct and discontinuing PR/PW entirely. "Regardless of a company's size, every business is required to comply with the laws of this nation, including all tax laws," Harry T. Chavis, Jr., Special Agent in Charge at IRS-CI New York, stated in relation to the investigation and subsequent settlements.
This sizable financial repercussion for AMEX is a clear message to the industry that unethical practices will not be tolerated. As the case was handled by the Office's Business and Securities Fraud Section in coordination with the Office's Bank Integrity Task Force, it signals ongoing vigilance against fraudulent financial activities. Assistant United States Attorneys Hiral D. Mehta, Gillian Kassner, and Tara McGrath, with assistance from Paralegal Specialist Timothy Migliaro, prosecuted the case.