First Data Reviews Request from Feds On Offshore Merchants

First Data Corp. is reviewing documents filed in federal court earlier this week by the U.S. Department of Justice seeking information on First Data merchants that sell or provide offshore services, including financial processing, a spokesperson said in a statement Thursday. The Justice Department on Wednesday asked the U.S. District Court in Denver to order Greenwood Village, Colo.-based First Data to turn over account information on those merchants as part of an ongoing investigation of offshore tax evasion, according to The New York Times and Associated Press. If the judge approves the request, First Data will have to identify clients who, through credit cards, debit cards, or other financial processing arrangements may have diverted unreported income offshore, received unreported income from undisclosed offshore sources, taken improper deductions or credits, or failed to withhold tax on payments going back to 2002. In court papers, the Internal Revenue Service said First Data actively marketed and sold offshore services to U.S. merchants, typically investment and Internet-commerce advisory shops, which in turn used the service to help clients hide taxable income, according to The New York Times. The First Data spokesperson said that the processor “has an excellent track record of cooperating with all government agencies and will continue our practice of complying with all lawful requests for information with due regard for the confidentiality of our customers' data.” The statement noted that the Justice Department in the past has served similar summons on the major payments companies as well as more than 100 merchants, including MasterCard Inc., Visa Inc., eBay Inc.'s PayPal payment service, and others. “It is our understanding that the Internal Revenue Service is seeking information from First Data only in its capacity as a holder of third parties' records. First Data does not approve or support any practice whose purpose is unlawful tax avoidance,” the spokesperson said. The focus of the IRS request is the First Data subsidiary formerly known as Cardservice International, now called First Data Independent Sales, according to the Times. In 2002, Cardservice began marketing offshore processing services with First Atlantic Commerce, a Bermuda-based e-commerce company, court documents said.