American Express has reached a non-prosecution agreement with the U.S. Attorney’s Office for the Eastern District of New York, agreeing to pay over $138 million following an investigation into its sales practices. The company was found to have provided inaccurate tax advice to customers concerning two wire products, Payroll Rewards and Premium Wire.
As part of the agreement, American Express will pay a criminal fine of $77,696,000 and forfeit $60,700,000. This agreement requires American Express to cooperate with the U.S. Attorney’s Office for at least 36 months. Should American Express violate this agreement, it could face prosecution for any related conduct or newly discovered criminal activity.
In addition to the non-prosecution agreement, American Express has settled civil charges with the Department of Justice's Civil Division Fraud Section by paying a $60,700,000 penalty. Both the U.S. Attorney’s Office and Civil Frauds agreed to credit portions of this forfeiture amount towards their respective resolutions.
"Financial institutions like American Express have no business pitching inaccurate tax avoidance schemes to sell products and turn a quick profit," said Acting Attorney Judy Philips for the United States. "This resolution ensures that American Express will be held financially accountable."
Harry T. Chavis Jr., Special Agent in Charge at IRS-CI New York, stated: “American Express misled their customers by touting tax breaks that simply didn’t exist... Regardless of a company’s size, every business is required to comply with the laws of this nation."
The issues began in April 2018 when AMEX launched Payroll Rewards allowing business payroll payments via direct payment from an AMEX account with fees ranging from 1.77% to 3.5%. Customers earned Membership Reward points per dollar wired but were inaccurately informed about tax benefits.
Concerns over these practices led AMEX to terminate around 200 employees in early 2021 and discontinue new enrollments by summer 2021 before completely ceasing operations related to these products later that year.
The resolution acknowledges remedial actions taken by AMEX since 2021 including employee terminations and product discontinuation while improving compliance measures. This case was managed by Assistant United States Attorneys Hiral D. Mehta, Gillian Kassner and Tara McGrath along with former Assistant U.S. Attorney Brian D. Morris.
