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data breach; consumers are suffering from breach fatigue; Vice President and Chief Operating Officer, Robert Torino,
they're tired of getting new cards and becoming impatient were reportedly reimbursed on personal credit cards for
with checkout procedures." expenses never paid to third-party vendors. The SEC
accused both men of conspiring with vendors to inflate
Consumers also want to buy things quickly and walk invoices and receive kickbacks from the overpayments,
out, he noted. They may enter a Wal-Mart and see 50 cash and improperly claiming commissions and bonuses that
registers, but only four lanes are open. They would rather were diverted in various ways.
visit a Sam's Club where they can scan items with their
smartphones and present their virtual receipts as they exit Shakouri and Torino apparently did not act alone. Three
the store, he added. other iPayment executives – Bronson Quon, John Hon and
Jonathan Skarie – were also charged in the SEC complaint
"Partnerships like Mastercard and Oracle or Visa and for their alleged participation in falsifying books and
IBM Watson reflect a fundamental shift in the payments records to hide the thefts of corporate funds, and being
industry," Wethington said. "These international, rewarded by using misappropriated funds. The SEC is
enterprise-scale partnerships reflect a bigger trend of seeking disgorgement of the ill-gotten gains, interest and
payments consolidation that has been developing over penalties, and bars from holding corporate officer roles.
time. I expect to see a similar deep link between American
Express and a POS provider. iPayment issued the following statement, "As publicly
reported by the Company [iPayment] in 2012, the Company
Wethington expects retailers that use Oracle POS was the sole victim of the embezzlement schemes, and
systems to have confidence in Mastercard's secure no merchants, agents or other business partners of the
payment schemes and encourage their customers to use Company were affected." It also noted that "the Company
digital payment technologies. If Mastercard can compel has implemented controls to address and prevent these
20 percent of Oracle users to leverage and promote its occurrences in the future" and that the ruling "brings to a
payment schemes, the card brand can create a wave on the close a regrettable period."
consumer side, he added.
Revitalization underway
Oracle is trying to innovate, Wethington noted. The On Feb 22, 2017, iPayment filed a separate complaint
company spent $5 billion to acquire Micros POS in 2014. If with the Supreme Court of the State of New York against
Oracle can solidify a secure platform with Mastercard and former iPayment Chief Executive Officer Carl Grimstad
provide a value proposition to retailers, it will get a return and his spouse, Jessica Grimstad, seeking over $445,000
on investment. If Micros gets cracked again, it will be a in compensation "as the result of the pattern of abuse he
completely different discussion, he said . and his wife engaged in at the expense of the Company's
shareholders and other constituents." Grimstad served as
SEC charges former CEO from 2011 to Nov. 24, 2016, when he was officially
terminated.
iPayment execs, ex-CEO Among the allegations cited, the lawsuit outlines the
embezzlement charges brought against former employees,
under fire Grimstad's permanent ban from the Electronic Transactions
Association after publicly assaulting an attendee at an
ETA event, and a laundry list of personal expenses that
included escort services, a $288,000 hotel stay while the
n March 10, 2017, the U.S. Department of Justice couple relocated from Nashville to New York, $70,000 for
and the Securities and Exchange Commission clothing, and more.
charged two former iPayment Inc. executives
O with masterminding an accounting scheme to In addition to being forced to restructure itself in 2014,
embezzle millions of dollars from the firm. In a parallel iPayment has since taken action to change course for the
action, the U.S. Attorney's Office for the Central District 150,000 small and midsize businesses it serves.
of California filed criminal charges against the two men
involved. On Nov. 25, 2016, iPayment appointed O.B. Rawls IV as
President, CEO and board member, through a unanimous
"As alleged in our complaint, these executives manipulated decision by its board. Rawls most recently served as Senior
iPayment's internal accounting systems, lied to the external Vice President and General Manager, Partner Solutions at
auditor and caused approximately $11.6 million in losses First Data Corp. Shortly thereafter, Philip Ragona rejoined
to the company," said Sanjay Wadhwa, Senior Associate the company as Executive Vice President and General
Director of the SEC's New York Regional Office. Counsel. Rounding out the executive team, payments
industry veteran Greg Cohen joined iPayment as Chief
From 2008 to 2012, iPayment's then-Senior Vice President of Operating Officer in 2014.
Sales and Marketing, Nasir Shakouri, and then-Executive

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