In late May last year, some 250 salespeople at American Express learned they weren’t going to get paid.
Amex had abruptly changed their compensation plan, and any commissions they had earned would not be honored.
The company assigned roughly 100 of them to new roles, including one that didn’t pay commissions. Another 150 or so of their colleagues were fired with little to no explanation, according to some of the 13 former employees and attorneys who spoke to Insider for this story, all of whom asked to speak on the condition of anonymity because employee exit packages barred them from disclosing company information.
By last July, several people Insider spoke to estimated that the team had been cut from more than 300 two years earlier to something closer to 100. It would shrink further still.
For top performers, the sudden change meant losing hundreds of thousands of dollars they had already earned by encouraging clients to use their American Express corporate credit cards. Even moderately successful salespeople lost tens of thousands of dollars.
From home offices across the country, the sales team works with companies with between $10 million and $300 million in revenue. And commissions often make up the bulk of the salespeople’s pay — a modest base salary was supplemented by a slice of any new card spending and was paid out over 13 to 18 months.
The pay restructuring, in addition to the prior layoffs, created a culture of fear and confusion among salespeople, who felt left out of the decision-making process and cast as scapegoats for a series of investigations dogging the company, they told Insider. Salespeople remained bitter for months after the cuts, as the company and salespeople sparred over the underlying purpose of the restructuring, some of them said.
“There was no way anyone could determine why they picked the people they picked,” said one person who received their notice last May and spent weeks trying to come up with the reason. The sales team was a significant presence in a division that in 2021 brought in more than $12 billion in revenue, or roughly 30% of the company’s total revenue, the person said.
Adam Isserlis, an Amex spokesman, said the May 2022 overhaul was simply the result of a regular review of how it serves clients.
“Over a year ago, we made changes within a small sales and account management team that supports US small and mid-sized business payments, one of the many segments within American Express’ Global Commercial Services business unit,” Isserlis said in an email. “These changes were designed to serve our customers more effectively, and better leverage American Express’ digital marketing capabilities to position the business for growth.”
Amex has disclosed in a Securities and Exchange Commission filing that the Office of the Comptroller of the Currency, the civil division of the Justice Department, and federal prosecutors in Brooklyn are investigating its small-business sales practices. The company says it is cooperating with all of the inquiries.
In 2021, a whistleblower lodged a complaint with the Internal Revenue Service over a product based on a dubious interpretation of tax laws, The Wall Street Journal reported in November 2021. It is not clear if the IRS has decided to investigate. And in California, a former employee has claimed in a legal filing that salespeople were pressured to sell the product “marketed as tax write-off vehicles.”
Amex has sought to portray the effort to sell the tax product — which allowed small-business owners to use business income to pay employee expenses in return for personal credit-card rewards points — as the work of rogue salespeople acting out of line.
Most of the leaders of Amex’s sales team have either been fired or otherwise left the company, but Amex has not placed any blame on more senior executives.
Internal sales material seen by Insider, interviews with former salespeople, and the legal claims raise questions about whether senior managers knew the product was being pitched to help avoid taxes and how high up the corporate ladder the awareness went.
The division-wide sales push included regional and national training, sample email templates, and scripts with suggested questions and conversation starters. The effort gained steam when a top sales manager sent a June 2019 email dialing up commissions for selling the product. Salespeople who didn’t sell it, according to one person, were placed on a “bad list.”
“I can’t imagine that Amex would allow people to go and create a product and go out and sell it if it hadn’t been blessed by senior managers,” said an attorney representing an Amex employee who asked for anonymity to protect their client.
Since Stephen Squeri became CEO of the credit-card giant in 2018, he has sought to tamp down some of the more freewheeling corners of the company’s culture, joining with competitors across the industry to exert more control over employees working on commission.
But lawyers and others who spoke to Insider said that few financial-service companies have been as harsh as Amex in wiping out already-earned commissions or making other payouts, such as severance or transition bonuses, contingent on signing new agreements with gag clauses.
Former Amex employees trace the company’s May 2022 restructuring to a multiyear effort to encourage customers to charge more volume to their corporate accounts.
For many years, a holy grail for Amex salespeople was to get business customers to charge employee payroll, which is often a company’s largest expense, to their credit cards. It promised billions of dollars in additional volume that could be routed through the company’s payments infrastructure — giving Amex a cut of every dollar.
Business owners charging payroll to their credit-card provider was more or less unheard of, but Amex figured out a workaround.
One initiative began when Amex started working with a third party, a Canadian company called Payroll by Credit Card. Amex used the company’s technology to route salary payments through its system. Customers paid a fee, which Amex shared with its partner, and received Amex rewards points they could use on travel or other benefits, one person familiar with the program said.
Sometime around 2018, Amex executives found a way to cut out the middleman. Employees in the global commercial-services division, where the May 2022 cuts took place, collaborated with the team in charge of handling foreign-currency payments, known as FXIP, to design a product to do much the same thing.
They launched a pilot, signed up senior sales leaders to promote it internally, and then rolled it out with extensive training to a sales organization that at the time numbered more than 300 people. Teams in charge of product, compliance, and legal signed off on the material, several people who spoke to Insider said.
Isserlis declined to comment on whether those teams had signed off on the product.
Called Premium Wire, it allowed customers to use their Amex account to fund payroll. Amex would send a wire on a client’s behalf to its payroll company, which would then pay employees. Business owners repaid Amex, plus a fee, which some salespeople told the owners they could write off as a business expense. According to a rate sheet viewed by Insider, the fee ranged from 1.77% to 3.49%, depending on the size of the wire. For every dollar sent by wire, customers received one reward point.
The product, according to people familiar with it and a lawyer who asked to remain anonymous, took advantage of IRS guidance from 2002 that said the government wouldn’t object to the personal use of frequent-flier miles earned on business expenses.
The product took some time to gain traction. Though Amex salespeople played up the fact that the fee could be deducted as a business expense while the rewards could be enjoyed tax-free, the cost was still higher than the value of the points. That made it attractive to only a small segment of Amex’s customers who were considered, in the words of one former salesperson, “points junkies.”
Salespeople weren’t making it a priority. Some who spoke to Insider after the fact said they worried about its legality. Others just wanted to focus on volumes that would mean the most in commissions — in the early days, Amex awarded fewer commission credits for a dollar sent via wire than it did for card volumes, according to one of the people Insider spoke to.
That all changed with a June 3, 2019 email identified as coming from the office of Pablo Ribas. The senior vice president of SME field sales, Ribas was two rungs in management down from Anna Marrs, the leader of Global Commercial Services, the division that sold Premium Wire and other products for small- and medium-sized businesses, and a member of Amex’s executive committee.
Insider could not determine how many employees Marrs oversaw at the time, but after a promotion, she now oversees more than 6,500 across several business segments.
The subject line of the email, which was viewed by Insider, read, “FXIP Premium Wire Update,” and the first heading promoted an “Exciting Update.” The email explained that the company was now changing the compensation structure so that Premium Wire would be compensated at the same level as card volume.
Salespeople suddenly showed interest, two of them told Insider. In addition to earning commissions, the Premium Wire volumes helped them reach higher compensation tiers, known as kickers. They acted as a strong incentive for salespeople to beat their quotas and for managers to encourage it.
Ribas declined to comment, and Amex declined to make Marrs available for an interview.
In August 2019, one of the regional sales teams came together for their annual midyear offsite, this time held at a Marriott in Orange County, California. Over three days, salespeople and their managers met for team-building activities, awards presentations, and product talks, according to a person who was there.
With about 50 people in attendance, salespeople were shown a PowerPoint presentation on best practices for selling it, the person said. Audience members learned that they could walk clients through the tax implications and allow them to take screenshots of any calculations, but shouldn’t share anything directly, the person said.
Salespeople were also told to politely remind clients that they weren’t accountants, the person said. Some of the hushed conversations in the hallways suggested that the product operated in a regulatory gray area, the person said.
While regional in-person training played a part in the salespeople’s education, regional and national sales calls did as well.
During one call in summer 2019, slides featuring official Amex branding and disclaimers viewed by Insider promoted Premium Wire.
And it promoted a deal Amex had with Charles Schwab that allowed customers to transfer Amex rewards points for cash that would go into their Schwab account at a rate of 1.25%. For every 1,000 points transferred, in other words, clients would get $12.50 in their Schwab account.
One slide was titled “Charles Schwab Strategy Allows You to Turn Membership Rewards Points Into Cash,” while another offered best practices for speaking to clients about how they could think of the program as a way to use a tax loophole to enrich themselves.
A sample of those questions: “Are you more interested in driving profitability to your business’ bottom line or increasing your own personal net worth?”
A calculation on another slide seen by Insider shows how a business expense could be transferred into a “Personal Tax Free benefit.” Wiring $1 million would incur a 1.77% fee, or $17,700 — but if expenses were deducted by a business with a 35% tax rate, that fee would drop to $11,505. Those 1 million membership rewards points could then be converted into $12,500 at Schwab.
Mike Peterson, a Schwab spokesman, said in an email that “Schwab does not condone this kind of sales pitch and we appreciate that American Express addressed it,” adding that “our co-branded American Express card offerings remain in place, as do all related benefits of the cards for our clients.”
For the first time, the Premium Wire product made economic sense.
It also may have run afoul of IRS guidelines. In the 2002 guidance, the IRS said the relief it was granting on frequent-flier rewards “does not apply to travel or other promotional benefits that are converted to cash.”
Charlene Luke, a professor at the University of Florida’s Levin College of Law and the school’s former associate dean for tax programs, said tax experts understood the IRS’s guidance from the beginning.
“A tax professional looking at this would say something is off,” she said.
If salespeople had similar concerns, they looked to Amex’s senior leadership and assumed that they’d gotten approval from the very top of the hierarchy, some of the people who spoke to Insider said.
Marrs, who joined Amex in September 2018, was known as a hands-on executive who had a strong command of the numbers. A spreadsheet that tracked the volumes of every product salespeople sold, including spending on various cards, working capital solutions and other loans, and Premium Wire, was known colloquially as the “Marrs Report.”
You were on a bad list if you didn’t sell it.
With the Schwab deal, salespeople were encouraged to sell more of Premium Wire. Many shared email templates, call tracks, and other tips with one another, assuming that anything shared by managers had been vetted by the national division. Many of the materials viewed by Insider made note of the Premium Wire’s tax arbitrage.
“You were on a bad list if you didn’t sell it,” said one person. “They were pushing it as an agenda.”
During a fourth-quarter town hall for the national field sales team, executives highlighted big wins for 2019, including one sales duo who persuaded a client to move $9.1 million in volume through Premium Wire. According to bullet points laid out on a slide seen by Insider, the salespeople won by showing that the rewards points earned would be enough for the client to pay for his company’s annual travel spending, and “the additional points earned could also be viewed as a non-taxable form of income to increase his own personal wealth.”
By the end of 2019, Amex booked at least $1.2 billion in Premium Wire volume, according to an internal presentation viewed by Insider.
When the pandemic ground travel and entertainment spending to a halt — typically a source of heavy card volume — Premium Wire offered some relief for Amex executives, said some of the people who spoke to Insider.
In the summer of 2020, a senior manager held a sales call in which he outlined an update to his 2020 Key Strategic Priorities, according to a person familiar with the call and a presentation, which was viewed by Insider. The presentation discussed shifting the sales focus toward Premium Wire and another product to “accelerate revenue growth and meet client’s needs.”
Sales managers dialed up the pressure even more at the end of that year, encouraging salespeople to sell as much Premium Wire as they could through December 31, according to some of the people who spoke to Insider.
Some people encouraged clients to sign up by telling them that if they didn’t sign up for the product before the end of the year, it might not be available next year.
“They told the team six weeks before the end of the year, so guess what everyone started doing?” said one person. “It was a mad scramble.”
That scramble reversed course early in 2021, when employees were summoned to surprise meetings attended by Amex’s compliance officers, who told them to keep the meetings secret, former employees said.
Amex had been searching emails for specific words or sentences, said people who attended the meetings. In some cases, Amex even reached out to clients to check if scheduled meetings actually took place, according to one person.
The lawyers would come and ask, “Do you recall this email you sent on December 15?” said a former employee. “It was unclear where they were going.”
Initially, Amex was focused on the pressure tactics the company said salespeople used to meet year-end 2020 goals. After the company found emails or recorded phone calls showing evidence of that, they fired an initial round of salespeople, the former employees said.
Nick Williams, a salesperson who said in an interview that he was a top performer who often traveled to New York to meet with Amex executives, was fired around that time. Williams described the process in vivid detail on a website:
“After a 73-day interrogation process, without ever explaining the charges against Nick or why they were justified, Amex fired him,” the website reads. “Williams pushed back while he was being terminated via Webex by a senior leader and friend who had been reading from a script Amex legal counsel prepared. In response, the leader continued reading from a script and offered Williams $100,000 to sign a Release of Claims and move on.”
Williams has waged a legal campaign to get his case heard, arguing that the decision to fire him was intended to boost Amex’s diversity numbers. In an interview, Williams, who is white, said Amex offered him as much as $196,000 to drop his fight, but he refused. He suggested that it didn’t make sense that Amex would be willing to offer him money to drop his claims if it had fired him for misconduct.
“American Express, at the time I was terminated, was under scrutiny by three federal regulators,” he said. “They scapegoated me, which is what they do.”
Williams says he has now run out of money and been forced to drop his legal case.
Isserlis said Williams was fired because of misconduct unrelated to Premium Wire. “Mr. Williams is spinning a false narrative of possible reasons — other than his own misconduct — for his involuntary termination from American Express,” Isserlis said. He declined to comment on the 73-day process Williams describes on his website or the culture it created.
Thomas Zoerner was another salesperson caught in that early wave of layoffs. A salesperson in global commercial payments, Zoerner filed a wage claim with the California Labor Commissioner. Amex petitioned in California Superior Court to move Zoerner’s case to arbitration and extinguish that claim.
Zoerner, in the declaration for that case, says he was wrongfully terminated for whistleblowing, and an email exhibit to the declaration shows that he allegedly was owed the $42,326 in commissions that Amex withheld from him. Zoerner cited more than 30 people he knew of who had worked on Premium Wire or another product and either been fired or pushed out.
“Amex’s senior executives were responsible for the development and implementation of the specific features of the Payroll Rewards and the Premium Wire Services Programs, which were marketed as tax write-off vehicles,” Zoerner wrote in the declaration. “Salespersons, such as I, were trained by management on how to sell the product and were pressured to encourage clients to wire funds, earn membership rewards points, and then convert the points to cash via a Charles Schwab account.”
In March 2022, two months after bringing legal action to compel Zoerner to arbitration, Amex asked to dismiss the case. Zoerner’s case has been disposed, according to the court’s clerk. Isserlis declined to comment on the case, and Zoerner’s attorney declined multiple requests for comment.
Despite these claims, Isserlis said the sales effort was the work of a rogue band of employees acting outside the bounds of company policies.
“As we stated in 2021, we discovered through internal channels that some members of a group within our SME sales organization failed to uphold our values and had positioned certain products inappropriately, specifically with respect to tax benefits,” Isserlis said, repeating a statement the company issued in November of that year.
“The product has since been discontinued,” he said. “After conducting an internal investigation, we terminated employees that engaged in misconduct and enhanced our policies and controls to prevent the issue from recurring.”
Isserlis said the company isn’t aware of any IRS investigation into the whistleblower’s claims, and it’s unclear if the agency has or will start an investigation. “We have disclosed all governmental investigations involving our GCS sales practices,” he said.
In April 2021, Marrs received a promotion to group president, adding oversight of credit and fraud risk to her duties. The promotion statement lauded her record for expanding her division’s client offerings beyond the core card product.
Isserlis said Marrs is a highly respected leader who has gotten more responsibility because of her strengths and the results she’s been able to achieve. “In the process of digitally transforming aspects of the GCS business, she restructured a group within one of her teams to sharpen that group’s focus,” he said.
The company has also played down the importance of Premium Wire. From 2018 through September 2021, Premium Wire and another product accounted for “approximately one half of one percent of American Express’ total network volumes,” according to the company’s November 2021 statement.
Amex books more than $1 trillion a year in network volume.
In the wake of the May restructuring, Amex required the salespeople it was firing to give up all claims against the company in exchange for severance.
For those who weren’t fired, Amex proposed moving them into new roles, such as an account-development position focusing on servicing existing clients rather than bringing in new accounts; the role does not include commissions.
Others were moved to the new sales incentive plan and asked to give up their earned commissions in exchange for receiving a “bridge payout.” In return, they were asked to sign a document similar to the severance plan.
The new comp plan raised the base compensation but reduced the amount of money salespeople could make on commission, according to two people who spoke to Insider.
“You might be able to make $200,000 a year, but the days of making $1 million are gone,” said one person.
Some resigned. When they gave their two weeks’ notice, they were told to leave that day.
Carter Johnson contributed reporting to this article.
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