According to a press release dated February 20, 2009, the Complaint charges American Express and certain of the Company's executive officers with violations of federal securities laws. American Express is currently the world's largest issuer of charge cards and credit cards as measured by purchase volume. engages in the communications business in North America and Europe. The Complaint alleges that throughout the Class Period defendants knew or recklessly disregarded that their public statements concerning the Company's business, operations, and prospects were materially false and misleading. Specifically, the Complaint alleges that defendants' public statements, among other things, misled investors by falsely representing American Express's exposure to the riskiest credit card holders and failed to disclose the Company's increasing reliance on riskier credit card programs.
On November 10, 2008, the Company won Federal Reserve System approval to convert to a bank holding company, making it eligible for government help under the Troubled Assets Relief Program ("TARP"). The new American Express bank could qualify for up to $3.5 billion of the Treasury Department's money-a capital infusion required to save the Company from its riskier endeavors. As a result of the Company's shift to risky card issuances, American Express stock has plunged approximately 65% since March 2007.
On April 22, 2009, the first filed complaint was voluntarily dismissed by the plaintiffs against the defendants without prejudice. The case is continuing in Local No. 30 International Brotherhood of Electrical Workers Pension Fund, et al. v. American Express Company, et al., case number 09-CV-03016.
On August 14, 2009, Judge William H. Pauley, III, granted the motion to appoint Local No. 38 International Brotherhood of Electrical Workers Pension Fund as lead plaintiff, and approved Scott + Scott LLP as lead counsel. On October 13, 2009, the plaintiffs filed a Consolidated Class Action Complaint. The defendants responded by filing a motion to dismiss the Consolidated Class Action Complaint on November 20, 2009.
According to an article dated July 20, 2010, U.S. District Judge William Pauley in New York yesterday granted American Express’s request to throw out the 2009 suit. The investors failed to establish that defendants including Chief Executive Officer Kenneth I. Chenault and Chief Financial Officer Daniel T. Henry knew of any fraud or acted with reckless disregard, Pauley wrote. “The complaint’s allegations, taken collectively, reveal a company attempting to increase its share of the credit card market during significant financial turmoil,” the judge said, calling the case “a classic example of fraud by hindsight.”
On August 17, 2010, the plaintiff filed a Notice of Appeal from the Judgment and Memorandum and Order dismissing the case. On September 27, 2011, the Court entered the Mandate from the Second Circuit Court of Appeals affirming the judgment of the District Court.