MoneyGram International Inc. settled a probe into fraudulent use of its money-transfer services and agreed to spend $1.1 million to inform U.S. consumers about the risks, New Jersey Attorney General Anne Milgram said Wednesday.
MoneyGram fell 14 cents, or 12.5 percent, to 98 cents Wednesday. If the St. Louis Park-based company's share price remains below a dollar for 30 days, MoneyGram will face delisting under New York Stock Exchange regulations.
In settling the investigation, MoneyGram agreed to measures including sending anti-fraud messages to its agents, suspending or firing agents involved in fraud, and blocking wire transfers when it believes fraud will occur, Milgram said. A five-year plan includes more prominent fraud warnings for money-transfer customers and better training for agents, the company said.
MoneyGram reached the agreement with 44 states and the District of Columbia, according to Milgram. The company's shares have slumped 94 percent this year amid losses tied to mortgage holdings. Chief Executive Officer Philip Milne resigned June 29.
MoneyGram will contribute $1.1 million to the AARP's Foundation for Consumer Education to fund an education program for the elderly, who are often fraud victims, according to a company statement. The firm also will pay $150,000 to reimburse an attorneys general executive committee that negotiated the agreement.
"We are committed to helping to stop fraud and protect consumers," MoneyGram Chief Operating Officer Tony Ryan said in the statement.
Some telemarketers, often based abroad, tell consumers that they have won a large sum on money in a lottery, and that they must pay taxes or other charges to collect their winnings, according to Milgram. Victims are often told to send tax money by wire transfer, Milgram said.
The U.S. Securities and Exchange Commission told the company in February that it was conducting an inquiry into financial statements related to MoneyGram's investment portfolio, according to a regulatory filing in April. The company has said it's cooperating with the SEC.
