Ex-Discover Exec Sues to Recoup Pay Ahead of Capital One Merger
A lawsuit by a former Discover executive claims the company wrongfully revoked millions in compensation.
The lawsuit, filed Wednesday (Sept. 4) in federal court in Chicago by former Discover chief information officer Diane Offereins, also claims the payments giant used her as a “scapegoat” for the company’s misclassification of credit cards as regulators examine Discover’s planned $35 billion merger with Capital One.
PYMNTS has contacted Discover for comment but has not yet gotten a reply.
Offereins retired from Discover last year. According to the age and gender discrimination lawsuit, the company “arbitrarily and without any clearly articulated basis” canceled her unvested awards in Discover stock — worth around $8 million — telling her she was partly to blame for the misclassification issue.
The suit notes that Offereins was the only woman retired member of the company’s executive committee to lose equity over the investigation.
“Other executives who were not retired received a reduced cash bonus or were offered handsome severance packages, with the latter resulting in no loss to equity awards and an additional two years of pay,” the suit says.
Discover revealed on an earnings call last year that it had been overcharging merchants for more than a decade.
“Beginning around mid-2007, we incorrectly classified certain card accounts into our highest merchant and merchant-acquiring pricing tier,” then-CEO Roger Hochschild said then, weeks before stepping down.
The company said in July of this year it was offering $1.2 billion to settle class-action litigation brought by overcharged merchants.
Offereins’ suit says she was not responsible for the classification of cards and “had repeatedly raised concerns about the classification issues” and “advocated for ways to change it.”
A report on the lawsuit by Bloomberg News points out that it’s not clear how much the misclassification issue will affect regulators’ review of the Discover/Capital One merger, which would create the largest U.S. card network in terms of volume.
In July, Rep. Maxine Waters, the top Democrat on the House Financial Services Committee, called on regulators to block the deal. She said it fails the three tests regulators need to consider for mergers: the impact on competition, financial stability and the convenience and needs of communities.
“Post-merger, consumers may have to pay more for Capital One’s credit cards,” Waters said, pointing to the Consumer Financial Protection Bureau’s (CFPB) findings that the largest card companies charge consumers steeper interest rates and annual fees than smaller issuers.
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