AmEx Lured Business Customers with Fraudulent Sales Pitch

American Express’ pitch to business customers that using an AmEx card to pay employees and suppliers turned out to be built on a flawed premise that generated billions for the company but cost customers because of “a shaky interpretation of how tax law treats rewards points.” 

AmEx told customers in emails, phone calls and in-person meetings since 2018 that the rewards they earn for using their cards can then be converted into untaxed cash and deduct the transaction fees for tax purposes, according to a report in The Wall Street Journal Monday (Nov. 22). 

A whistleblower reported the problem to the Internal Revenue Service in July, telling the federal agency that AmEx convinced business owners to underreport their income and taxes. 

This is “a big company encouraging tax wrongdoing,” said Gregory Lynam, co-founder of Lynam Knott, the law firm that filed the report on the whistleblower’s behalf, in the WSJ report. It “promotes a tax shelter that doesn’t work,” he said. 

An AmEx spokesman told WSJ that some members of its U.S. sales organization “failed to uphold our values and had positioned certain products inappropriately, specifically with respect to tax benefits.” The company hired its own law firm to investigate the situation. 

“This misconduct should not have happened,” he said, noting the company has fired, disciplined or retrained some employees and their compensation plans have been adjusted, and that Amex “will take further action if appropriate.”