American Express has agreed to settle a federal investigation into wire fraud claims linked to its sales and marketing practices for over $138 million, as announced by federal authorities on Thursday.
The New York-based financial services corporation reportedly provided misleading tax-related information to its customers and prospects, primarily regarding wire products aimed at small and medium-sized businesses, according to the Office of the U.S. Attorney for the Eastern District of New York. Customers were misinformed, for instance, that the fees incurred from these products were tax-deductible as business expenses.
Harry Chavis, a special agent in charge of the IRS office in New York, stated that the firm misrepresented the tax advantages associated with their offerings, leading to customer deception.
As a result of the internal investigation, around 200 employees were let go in 2021, and the company ceased marketing these wire products entirely later that same year.
Judy Philips, the Acting Attorney for the Eastern District of New York, stated that American Express has no right to promote inaccurate tax avoidance strategies to boost product sales. She emphasized that this settlement holds the company financially responsible for the reported misconduct by its sales teams concerning the misrepresentation of the tax benefits of their offerings.
American Express clarified that the controversial sales practices were halted in 2021 or earlier and indicated a total payment of approximately $230 million to resolve the issues at hand.
The company expressed it cooperated fully with regulatory agencies, taking significant voluntary steps to rectify the situation, which included the discontinuation of certain products, conducting an extensive internal review, implementing appropriate disciplinary actions, and enhancing training programs and compliance measures.
As part of the settlement agreement, American Express will incur a criminal fine of $77.7 million and forfeit an additional $60.7 million, which reflects the net income generated from sales of the disputed wire products, as confirmed by the U.S. Attorney’s office.
Additionally, the company has reached a separate multimillion-dollar civil settlement with the U.S. Department of Justice.
This report has been updated to clarify that Judy Philips serves as the office’s Acting Attorney rather than the Acting U.S. Attorney.
