HOUSE OF CARDS

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American Express is considered one of the most successful financial institutions on Wall Street. A billion dollar, cream-of-the-crop bank, American Express has fine-tuned its expertise over a period of 150 years. Credit standards are second to none. To be approved by American Express is an honor and symbolic of financial achievement.

In early 2002, my client, VMCI, submitted financial statements to American Express seeking to open a credit card account. At the time, VMCI averaged about $500,000 gross revenues per month and needed increased lines of credit to stay in business. American Express approved VMCI, issuing a Corporate Credit Card limited to $35,000 along with several other cards for selected employees to use.

REUTERS, October 5, 2009, wrote: "American Express was the fastest growing credit card company between 2003 and 2007 as it relaxed lending standards. But it paid a heavy price when the bubble burst and bad loans rose to record highs."

Thursday, June 27, 2002, American Express wrote: "Consolidated, VMCI will have a minimum $1,350,000 spending capacity for every 45 day period ..." January 23, 2003, American Express wrote: "The available revolving credit available to VMCI, during a regular 30 day billing cycle is $2,000,000 ..." American Express promoted credit lines created to fail, yet make the bank lots of money.

American Express terms require that commercial credit card balances be paid in full within 30 days after a previous month's charge activities end. There is no debt carry forward. Good business practices dictate that the maximum allotted debt accumulation in any one month not exceed a pre-determined percentage of gross monthly revenues; thought to be 25% or less. In the case of VMCI, the maximum allotted charge activity in any one month should have been about $125,000.

During the next 18 months, or so, credit card specialists, located inside American Express, monitored and approved all transactions originated by VMCI. Sales personnel from the same offices and in the field regularly encouraged increased use of VMCI's cards. Communications from American Express strongly suggested that the 150 year old financial Goliath kept close watch on VMCI.

When American Express investigated VMCI in late 2003, early 2004, VMCI's monthly debt had increased from $35,000 to over $2,000,000; not $125,000 as projected. American Express had charged monthly fees of 2.95% on this amount; over $60,000 each month. Accordingly, VMCI had to pay off over $2 Million each month plus operating overhead, all with average monthly gross revenues of $500,000. VMCI needed money desperately and never questioned the increasing credit line from American Express. American Express willingly threw money at VMCI because fees were immense. The former I understood; the latter may be fraudulent entrapment; for lack of a better phrase.

A February 2004 email shows that their Senior Credit Manager re-approved VMCI for a $450,000 (down from over $2 Million) credit line after weeks of investigations. VMCI's financials and tax filings clearly revealed that its monthly revenue stream average had fallen to less than $400,000.

American Express had thus decided that VMCI was now able to pay all overhead, payrolls, payroll taxes, materials and supplies, insurances, payables and proposed debt service of $450,000, all with less than $400,000 monthly gross revenues. Proof that American Express approved, encouraged and permitted the way VMCI conducted its credit card business.

By this action, American Express waived all contractual limitations of its merchant and card accounts. American Express, solely for purposes to increase profits and commissions, intentionally, illogically and fraudulently increased spending limits on card accounts associated with VMCI. Further, American Express deliberately prepared and invoiced VMCI for millions of dollars that represented debt by VMCI, when in fact; the debt had been deceitfully created by American Express. Once enticed and trapped in this double dealing scheme by American Express, VMCI had no choice but to cooperate.

Common sense says that VMCI was not unique and the only company in the world to receive monthly credit lines greater than monthly gross revenues. As growing debt defaults were announced in the Press, it became obvious to me that many other customers had been entrapped by American Express, just like VMCI. American Express promoted credit lines created to fail, yet make the bank lots of money.

A massive amount of cash float was supposedly generated and thus begs questions. How much problematic cash float currently exists and how much has reached the hands of potential terrorists or just plain criminals? How much cash float will be generated in the future; how shaky will it be; and, where will it go?

NOTE: Prefaced entirely on VMCI's cash float fallout, if we presume that a mere 15 other cities throughout the world contain a small group like ours - rank amateurs - in one year, the cash float created thereby exceeds $1,000,000,000 - that's a billion dollars. Multiply the number of similar card holder groups by a more logical 1,000, even 100,000, and the numbers are too large to grasp.

I allege that American Express is indeed a "House of Cards" and perhaps the largest cash float (factoring) company in the world. Worse, profit motives may have put blinders over the eyes of those who should care.

Regardless that VMCI needed credit, by intentionally and straightforwardly approving VMCI for a credit line six times monthly revenues, requiring VMCI to pay the credit line in full each month, and continuing the scheme for over 18 months, American Express - a 150 year old financial specialist - promoted and prolonged a transparent scheme to defraud VMCI and Richard Shumaker for the sole purpose of fees and profits. By using the mail and telephone to perpetuate this scheme, American Express may be guilty of mail and wire fraud. My INDICTMENT of American Express HERE!

NOTE: By October 2003, American Express collected a conservative $600,000 plus in monthly fees. Expending only $600,000, at its current average monthly fee of $2.95%, American Express created for its own use a compounded total by March 2010 - excluding tax implications - of over $4 Million.

... Richard Shumaker

Copyright 2010 Richard Shumaker. All Rights Reserved.