American Express probes $24 million discrepancy

October 05, 1991|By Los Angeles Times

NEW YORK -- American Express Co., reeling from disclosures of huge third-quarter losses on its Optima credit card operation, is looking into whether middle-level executives may have deliberately falsified records to downplay an alarming rise in non-payment of credit card bills.

Company President Harvey Golub said American Express has retained an outside law firm to conduct an internal investigation into why $24 million of Optima Card losses were not recognized in earlier quarters.

Disclosure of the big losses has caused American Express' stock to plummet and prompted unusually harsh criticism of the company from some securities analysts yesterday. The analysts noted that the surprise disclosure was only the latest in a series of embarrassments for the diversified financial services giant. In addition, the company confirmed yesterday that it expected to have to set aside a large amount for Optima losses again in its fourth quarter.

American Express' stock fell $1.25, to $21.75, yesterday before trading on the New York Stock Exchange was halted for the day in advance of a company statement about how the losses would be accounted for in the fourth quarter. The stock price has fallen by 14 percent over the last two days.

The company earlier this week said that it was taking a $265 million charge against earnings for the third quarter, which ended Sept. 30, mainly due to problems with Optima.

The company has said that it marketed Optima too aggressively to consumers who turned out to be poor credit risks. It said that Optima was hurt by the economic downturn and a rise in personal bankruptcies.

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