Former Discover executive accuses age and gender discrimination in court complaint
In a significant turn of events, Diane Offereins, a former executive at Discover Financial Services, has filed a lawsuit against the company, alleging gender and age discrimination and a breach of contract. The lawsuit, filed in the U.S. District Court for the Northern District of Illinois, comes amidst a series of compliance issues and investigations at Discover.
Offereins, who spent nearly 25 years at Discover, served as global chief information officer for about 11 years and president of payment services for close to 14 years, according to her LinkedIn profile. She retired in June 2023. The card misclassification issue at Discover, a problem where certain credit cards or accounts were incorrectly categorized or handled by the company, forms part of the broader context in which Offereins alleges that Discover discriminated against her and failed to honor contractual agreements.
The internal review into the card misclassification issue, named "Project Simple," began in the first quarter of 2023. Offereins cooperated with the internal investigation and was interviewed in July by outside counsel days after her retirement began. However, the complaint alleges that Discover provided no evidence or explanation to back up the claim of Offereins engaging in "willful or reckless violation of the Company's risk policies." Furthermore, no one at the company had suggested to Offereins that she was suspected of misconduct in connection with the review.
Capital One has stated it's preparing for a significant undertaking in resolving Discover's compliance issues, as the proposed merger between Discover and Capital One awaits regulatory approvals. The potential for increased regulatory scrutiny and compliance issues due to the merger adds a new risk to the already complex situation.
In a twist, Offereins' attorney, Sean Hecker, asserts that Discover's decision to cancel Offereins' equity was a desperate attempt to make her a convenient scapegoat amid the merger deal. Offereins lost more equity as a percentage of her total received equity than any other executive, including former CEO Roger Hochschild and current president of consumer banking Dan Capozzi. Discover canceled Offereins' unvested stock awards in January, citing "misconduct."
The Securities and Exchange Commission is investigating the card misclassification issue, as Discover disclosed last October. The internal investigation into the card misclassification issue, led by outside counsel, was "long-running," delving into potential misclassification of some non-commercial credit cards into a commercial tier which charged merchants higher interchange fees on transactions.
Discover announced in July that it would settle class-action lawsuits related to the card misclassification issue for $1.2 billion. The complaint mentions the potential need for purchasing licensing rights, but no specific details are provided. Senior managers in Discover's risk, legal, and finance departments were aware of the card misclassification issue for years, and proposals to fix the card misclassification issue were routinely presented to the most senior leaders of the Company over the course of the 2010s, according to the complaint.
In a statement, former Discover CEO Roger Hochschild stated that the card misclassification issue "underscored deficiencies" in Discover's corporate governance and risk management. The card misclassification issue became relevant in the context of internal company disputes and legal actions, serving as a backdrop or contributing factor in the lawsuit, linking operational challenges at Discover to alleged unfair treatment of an executive involved in managing or addressing those challenges.
Following Offereins' retirement, Discover publicly disclosed a card pricing error in the month after her retirement, which affected merchants and merchant acquirers. The error occurred due to the company mistakenly putting certain credit card accounts into its highest merchant and merchant acquirer price tier, resulting in overcharges.
The proposed merger between Discover and Capital One, valued at $35.3 billion, remains under scrutiny as regulatory bodies assess the potential implications of the deal. The card misclassification issue at Discover, alongside other compliance issues, adds a layer of complexity to the merger negotiations.
- Given the ongoing card misclassification issue at Discover, which has resulted in compliance investigations and a recently disclosed pricing error following Offereins' retirement, the business and finance departments may need to collaborate more closely to address these operational challenges.
- As the proposed merger between Discover and Capital One approaches regulatory approvals, the alleged gender and age discrimination, breach of contract, and misconduct allegations involving a former executive like Diane Offereins could potentially impact the business side of the combined entity.
