Financial services company American Express (AXP) has agreed to pay over $138 million to settle a federal investigation into alleged wire fraud tied to its sales and marketing practices. Federal authorities stated that the company provided misleading tax advice to small and mid-sized businesses by claiming that fees for certain wire products were tax-deductible business expenses. The U.S. Attorney for the Eastern District of New York emphasized that these claims misled customers.
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In response to an internal investigation, American Express terminated around 200 employees in 2021 and discontinued the questionable products. Acting U.S. Attorney Judy Philips criticized the company’s actions by saying that financial institutions should not promote inaccurate tax schemes for profit. American Express stated it had cooperated fully, taken disciplinary measures, and strengthened its compliance and training programs to prevent similar issues.
As part of the resolution, American Express will pay a $77.7 million criminal fine and forfeit $60.7 million in revenue linked to the products. The company also agreed to a separate civil settlement with the Department of Justice, which includes an additional $60.7 million civil penalty. The firm also noted that these practices ended in 2021 or earlier and talked up the proactive steps it took to address the issue. Nevertheless, shares were slightly lower in today’s trading.
Is AXP Overvalued?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on AXP stock based on six Buys, 11 Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 74% rally in its share price over the past year, the average AXP price target of $317.53 per share implies 2.1% upside potential.
