The Amex Sales Scandal

Published: Wed, 07/19/23

July 19, 2023

TOGETHER WITH

We hope this email finds you… somewhere air conditioned. Jeez, it’s hot out there. Thankfully, you can probably get through this newsletter before that annoying lower back sweat starts to soak through your shirt. In this week’s issue, we’ll cover the Amex sales scandal, share a Sales Fail about building trust, and give some advice to a rep deciding between two jobs. Let’s go.

NUMBER OF THE WEEK

171

Top performers speak at an average of about 171 words per minute, while the rest of the team speaks at around 182 words per minute.

Source: Sales Insights Lab

SALES ROUNDUP

Here’s what’s happening in the sales world this week:

Microsoft is slimming down its salesforce again, as it laid off another round of salespeople and customer success reps, who posted messages on social media announcing that they'd lost their jobs. The cuts come on top of the 10,000 lay-offs the company announced in January. A Microsoft spokesperson declined to specify the number of cuts in the latest round. You can read the full report here.
In a cautionary tale about the dangers of gambling, Ireland Live recently ran a profile of a frozen food salesman who lost everything and then some gambling on sports. The salesman, Matthew Allsopp, says he spent his life convincing family and friends to keep lending him large sums of money so that he could punt, sometimes on “ridiculous sports,” which he knew “nothing about.” He is now in recovery. You can read the profile here.

FEATURE

RYO Alexandre/shutterstock.com

American Express is under investigation. Its salespeople say they’re being made to take the fall.

In May of last year, American Express changed their compensation plan, causing hundreds of reps to lose hundreds of thousands of dollars in commissions. On top of that, 150 of those employees were fired with very little or no explanation.

Adam Isserlis, an Amex spokesman, told Business Insider that “These changes were designed to serve our customers more effectively, and better leverage American Express' digital marketing capabilities to position the business for growth."

This, on top of previous layoffs at the company, made salespeople feel like they were the scapegoats for recent investigations into Amex’s small business practices, conducted by the Office of the Comptroller of the Currency, the civil division of the Justice Department, and federal prosecutors in Brooklyn.

Given that as recently as 2021 the sales team brought in roughly 30% of the company's total revenue, perhaps these feelings are justified. That same year, a former Amex employee claimed in a legal filing that salespeople were pressured to sell a product that occupied a legal gray area. This product gave small-business owners personal credit card rewards points in exchange for paying employee expenses with business income. Amex portrayed the salespeople who pushed the product as rogue actors.

Now that most of the sales team leaders have been fired or left Amex, the question is: how high up the corporate ladder did knowledge about the dubious legality of this product go?

To answer that, we have to go back to 2018, when Amex launched a product called Premium Wire. This product was intended to incentivize business owners to charge their payroll – usually their biggest expense – to their credit cards, giving Amex a cut of every dollar that routed through its systems. This would conceivably result in billions of additional dollars in revenue for Amex.

Business owners, meanwhile, were told that the fees they paid Amex for this service could be turned into reward points – one point per dollar wired. But the points earned on these transactions still didn’t outweigh the costs of the wires, so only “points junkies” were interested in the product, one former salesperson told Business Insider. Additionally, some salespeople questioned the legality of the product in the first place, so they weren’t making selling it a priority. Others were focused on card volume because it earned them more commission credits than dollars wired.

Then, in 2019, Amex announced that Premium Wire would be compensated at the same level as card volume, and the sales teams’ attitude changed. Trainings all over the country — both at the regional and national level — gave salespeople advice for selling the product. One such training presentation viewed by Insider told team members to pitch the program as a way customers could use a tax loophole to enrich themselves. Business owners would pay fees on large transactions, but they could deduct a percentage of that fee as a business expense, then turn every single point into cash.

Now salespeople had a reason to sell, and business owners had a reason to buy. "You were on a bad list if you didn't sell it," one person told Insider. "They were pushing it as an agenda."

When it came to the legality of the product, most salespeople at Amex trusted that their bosses were doing everything by the book. But in 2002 guidance, the IRS specifically said that while frequent-flier rewards earned on business could be used personally, that rule "does not apply to travel or other promotional benefits that are converted to cash."

According to an internal presentation, Amex booked at least $1.2 billion in Premium Wire volume by the end of 2019. And when the pandemic hit and credit card spending decreased significantly, senior leadership agreed to shift their focus towards Premium Wire. Salespeople were encouraged to sell as much of the product as they could before December 31, 2020. But in early 2021, Amex’s compliance officers started holding secret meetings in which they questioned employees about emails they had been sending to customers about Premium Wire.

They then started firing salespeople, citing the inappropriate tactics they had used to sell Premium Wire to customers.

Thomas Zoerner was one such person fired in that first wave. He filed a wage claim with the California Labor Commissioner, a claim that Amex attempted to extinguish by petitioning the California Supreme Court. At the time he was fired, Zoerner was allegedly owed $42,326 in commissions by Amex.

"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’s claim stated. "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.” Zoerner's case has since been closed, according to the court's clerk.

Amex maintains that it’s the salespeople themselves, not the leadership, who are at fault.

"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," Adam Isserlis said in a statement. "The product has since been discontinued. After conducting an internal investigation, we terminated employees that engaged in misconduct and enhanced our policies and controls to prevent the issue from recurring."

Amex required the salespeople it was firing to give up all claims against the company in exchange for severance. And those who offered their resignation were told to leave that same day.

AI-POWERED SELLING: THE GUIDE FOR SALES LEADERS

Sales leaders, there’s never been a better time to embrace AI.

Only 57% of salespeople make their annual quotas, according to a CSO Insights survey. That’s in part due to new realities in a turbulent economy — including difficulty sourcing pipeline, slower deal velocity, and lower conversion rates.

Read this ebook to hear from 5 Outreach leaders who will show you how AI helps you create and close more deals.

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MEME OF THE WEEK

Source: Instagram -- Sales Humor

QUIZ

Where was the sales and marketing tech company HubSpot founded?

A. Seattle, WA
B. Santa Clara, CA
C. San Francisco, CA
D. Cambridge, MA

SALES FAILS

Each week, we bring you the most cringe-worthy sales moments from across the web. To submit your sales fail story for consideration, click here. (Don't worry, you'll remain completely anonymous).

I sell insurance and have been in the business for close to a decade. A few years ago, I was assigned an inbound lead for a guy who wanted to change out his policies on his home and his vehicles. He worked as a technician or something like that. I can’t remember exactly what he did, but it was something technical.

On my first call with the guy, he was extremely skeptical. He kept asking questions like “What’s the catch?” and “There’s nothing hidden in this paperwork, is there?” These aren’t unusual things for people to ask, but he was taking it over the top, borderline accusing me and the company of being scammers, even though he was the one who reached out to us.

Eventually, we were getting ready to put together all the paperwork for him to sign, and he gave me a hard time basically all the way through, sending emails that basically made it clear how he didn’t trust insurance companies or salespeople. Finally, I got so frustrated that I went to my boss and asked what to do. My boss looked at me and said to tell this guy that if he doesn’t trust us, he’s welcome to take his business somewhere else.

So that’s what I did. I emailed him a long message that I spent quite a bit of time on telling him that I (and the company) always conduct ourselves with the highest integrity and that if he doesn’t feel comfortable with us, then it’s totally understandable, and that he should work with somebody he feels comfortable with.

A few hours after I sent the email, he responded thanking me and almost (not quite) apologizing for how he had been acting, and saying that he’s just trying to cross his t’s and dot his i’s. He said to send the paperwork and that he would sign it. So we sent the paperwork, and the guy completely ghosted me and never picked up my calls or responded to my emails again. Most obnoxious deal I’ve ever worked on.

Anonymous Location Withheld

GRAPH OF THE WEEK

Source: LinkedIn Poll -- July 2023

WORTH A PEEK

Building rapport — two words that strike fear in the heart of every introverted sales rep in the world. There’s a lot that can go wrong. A LOT. Okay, maybe not that much, but HubSpot has a decent article on 7 key rapport-building mistakes that trip salespeople up. It’s full of helpful reminders. Check it out here.

ASK THE QUOTA

Want to submit a question and be featured in our advice column? Click here. (Don't worry, you'll remain completely anonymous).

Dear Quota Team,

I’m in my third year of sales and am trying to decide between two different roles. Currently, I’m an inside sales rep for a company that’s kind of a hybrid between a tech company and an agency. One of the roles is an internal role at my company, moving up to team leader (this is just under a sales manager at my organization), and the other is an Account Executive role at a well-funded tech company that’s not a competitor to the company I work for now.

The team lead role comes with a very small base pay bump, and an even smaller bonus based on team performance. I would still be an independent contributor, but would also be involved in helping other reps manage their deals and more involved in training new reps. Based on my calculations, I would probably make between 10k and 15k more per year than I am making now if I took the team lead role.

The AE role would be more of a lateral move. My current company has a decent product and customer base, but it has a ceiling and I don’t think there will ever be an IPO or anything like that. This new company is likely to IPO eventually, though I’m not necessarily counting on that. The base for the AE role would be almost $40k higher than my current base, and total on-target-earnings (including the base) would be almost $100k higher than what I’m making now.

Basically, if I take the team lead role, I’ll be making just a bit more money, but I’ll be on track for a sales manager position, whether it’s here or somewhere else. If I go the AE route, I could make a lot more money and break into a more “traditional” tech sales role compared to where I am now. I think I can be successful in either case, but I'm having a hard time making a decision. Generally speaking, I am in sales for the earning potential. But the idea of getting into management is very appealing to me too. Do you have any advice?

Deciding in the Northeast

Dear Deciding,

We think the answer comes down to how much you like your current employer. You didn’t say whether you’re happy where you are. If so, then the devil you know might be better than the devil you don’t. As some of our other advice columns have shown, the grass isn’t always greener.

That being said, if you’re motivated mostly by money, then the AE position sounds like a smart move. Assuming reps there are hitting their targets, a $100k pay raise is pretty solid. And when it comes to moving up into a management position, you can do that anywhere if you proactively put yourself on that track.

So, if you love your current company, then consider taking the team lead role. If it’s not what you expected, you can always make the switch a year from now. However, if money is what’s driving you to work hard everyday, then the AE role is unlikely to disappoint. Just do your research and make sure you’re going into it with your eyes wide open. Good luck!

Quiz Answer: D – HubSpot was founded in Cambridge, MA in 2006

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Today's email was written by Ken Kupchik, Erica Furgiuele, Steve Rado, and Emily Hill.

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