Katie Genter writes about the case where the Department of Justice has gone after a woman for redeeming Membership Rewards points belonging to her husband’s business despite an order freezing assets.
- Kevin Merrill was arrested on charges related to running a ponzi scheme.
- His assets were frozen and an order was issued against hiding or moving assets
- His wife, Amanda Merrill redeemed points from his American Express Membership Rewards account for “127 gift cards worth $26,075 for retail businesses such as Target, Home Depot, Nordstrom, Sephora, and Starbucks” (she was not an authorized user on the account).
The FBI claimed this violated the order not to hide or dispose of assets. But are points a cardmember’s assets? The Membership Rewards terms and conditions is very clear that they are not.
- “Points are not your property” and a proof point is that “[y]ou can’t transfer points to any other person or program account.”
- Moreover American Express says that “points can’t be transferred by operation of law,” despite claims by the FBI that the order was meant to secure assets to recover damages for victims, American Express says not so fast. The terms are explicit that points cannot be ordered transferred by the government in bankruptcy or by court order in a divorce or through an estate.
American Express says they can “cancel the program at any time” (upon 3 months’ notice) and that even during this time they “may change or cancel some or all of the rewards” that are part of the program.
If you declare bankruptcy – just the sort of thing that someone caught running a Ponzi scheme might find themselves doing – then “you’ll forfeit all points in your program account.”
According to American Express points are not your asset and points cannot be transferred by the government. Moreover in bankruptcy all points are going to go away. In all likelihood prosecutors aren’t even aware of these provisions. So why is Amanda Merrill pleading guilty to absconding to Membership Rewards points in violation of a court order?
It turns out that she also was caught taking a trip to the couple’s home in Naples Florida and cleaning out cash and assets from there.
- The FBI had a taped recording of her discussing a plan to do so (hint: conversations with an inmate in prison are taped)
- There was video of her bringing back suitcases from a trip to Florida
- Plus American Express statements showing ticket purchases and overweight bag fees
That was enough to get a search warrant for the Maryland home in which the items and cash were found. Since they had her dead to rights on cash and items from the Florida house, the Membership Rewards points were more or less thrown in with the rest of the charges and likely never challenged. She could have argued those points weren’t hers really, but converting them to gift cards which were hers would have hurt her case. And she’d have been left with the rest of the assets having been moved and hidden.
As a result the Department of Justice’s position that Membership Rewards points are property of the accountholder, contra the terms of American Express, was never actually litigated.