[PART TWO OF DAN PRICE ARTICLE HERE]

[5-PART VIDEO SERIES: "GRAVITY CHECK" HERE]


part one: gravity check


Photo_staffers.jpg

Dan Price is CEO of Gravity Payments, a credit card processing company that claims to be "trusted most by community businesses."  Price promotes his unparalleled commitment to transparency, honesty and integrity like a badge of honor.  On April 13, 2015, he doubled down on that commitment by ratcheting up the minimum wage for his entire workforce to $70k.  News of the magnanimous gesture spread from Seattle to Sydney at the speed of sound. 

Within days, Price became the one and only celebrity payment processor on the planet and a Millennial folk hero who fueled a new debate on fair pay.  With the spotlight firmly fixed upon him, Price is now hell-bent on injecting "love" into the business lexicon in order to steer a generation of greed toward a new horizon of beneficence.

Yet, beyond the heroics and the heartthrob references, beyond the altruism and the global acclaim, there exists another Dan Price; one whose past and present are riddled with lawsuits, lies, abuse and a massive financial swindle with ties to thousands of unsuspecting small businesses, Wall Street titans and his very own staff.


Every page of the Gravity Payments website is wallpapered with declarations such as “Devoted to complete transparency… "Transparent pricing"… "Building A Business With Values & Integrity"… "Leveling the playing field for small businesses.”  Dan Price has leveraged countless handsomely paid speeches and network TV appearances to deliver parables that promote people over profiteering.  He often recounts a childhood rife with Christian values that drove him to serve his community from a very early age.   He also implores audiences around the world to follow suit and replace self-indulgence with public service.



Price's story became one of the most followed throughout all of 2015 largely due to a media machine in a frenzied search for the latest-greatest and a digital universe that changes the trajectory of one's existence faster than a mouse click.  Though the dust has yet to settle, Dan Price has made it clear: he loves the world stage, and the world stage clearly loves him.

But how exactly did a credit card processor from the cornfields of Idaho gain access to such a stage, to the world's most iconic media brands, to the world's most notable celebrities, to the world's titans of business, and even to standing Presidents and current candidates?  The answer is complicated.  But the result is undeniable.  A deeper look under the hood of his earliest assertions reveals an engine of plastic pistons and Kool-Aid in the tank.

Unlocking the contraption of truth can be an exhausting if not tormenting exercise, especially in an era of perpetual "breaking news"  from which false information consistently fuels false idols.  Dan Price is and has largely been a take-no-prisoners peddler of Dan Price, and only a handful have cared to police him on this latest ride of his life.  Whether it's his relentless posting of his latest headshots and publicity grabs, or his canned speech detailing Price's private and public conquests, this is a pitchman, pure and simple.  Plenty of tin gods have come before him, and plenty will follow.  But this does not excuse institutions or individuals who appoint such folks ambassadors of goodwill or good business without a requisite level of due diligence straight out of the gate.


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Gravity Payments is a Seattle-based credit card processing company that Price launched with his brother Lucas in 2004.  150 Gravity employees, largely 20-somethings hired without prior industry experience, serve nationwide merchant clients through sales, service, marketing, tech and analytical roles.  According to a Nilson Report, Gravity ranks 35th out of all U.S. payment processors and serves approximately 19,000 active accounts.  The Strawhecker Group’s Directory of U.S. Merchant Acquirers lists approximately 200 businesses offering similar services.

During that fateful morning of April 13, 2015, Price told a room teeming with thunderstruck staffers, “Effective immediately we’re going to put a scaled policy into place, and we’re going to have a minimum seventy thousand dollar pay rate... Is anyone else freaking out right now?”  Within hours, talking heads near and far labeled Price everything from "a modern Robin Hood" in the case of Paul Keegan at Inc. Magazine, to "a case study in MBA programs on how socialism does not work," care of Rush Limbaugh.  Price appeared on The Daily Show during which host Trevor Noah not-so-gingerly made sport of how Price's appearance and message were eerily similar to another famous figure who had once purportedly risen from the dead and walked on water.

Every media outlet focused on Price's $70k minimum, but such a goal would not be attained until December 2017, two years and eight months after Price made his über-public pledge.  He merely sold the goal better than the reality.  According to current and former employee sources, the reality at Gravity Payments included significant turnover and morale issues for years, especially due to poor pay, long hours, excessive demands and a belligerent boss in Price.

Little has also been made of the employees that Price handpicked to be in the room with him during his announcement.  Most if not all of those who already made over $50k were apparently not in attendance, but if they had been, chances are they would not have roared such affirmation since their wages held relatively steady while those of their coworkers received a shot of overdue adrenaline.  Hundred Eighty Degrees asked veteran Gravity Payments sales reps, Art Tay and Ayman Lukata how Price’s new pay policy affected them, and both said it did not.  In fact, they were less than enthused by the development.  Tay said:

“I already make more money than that, so if anything, it’s a distraction.  I spend more time than I want discussing all the media coverage with customers.” 

Though Price maintains that all Gravity reps are on salary in order to somehow reduce costs for clients, Tay said he was a commissioned rep.

A never-ending cycle of challenging economic, political and social concerns certainly has the public hankering for any news that smacks of feel-good.  Considering Main Street’s ever-growing revulsion over Wall Street's role in economic disparity, Price’s act wasn’t just feel-good, it was feel-great.  For over 40 years, pay has not been properly indexed to productivity.  In fact, while productivity has continued to increase, wages have been static at best.  As the Economic Policy Institute cites:

"The rising gap between productivity and pay for the vast majority likely has nothing to do with any stagnation in the typical worker’s individual productivity." 

Translation: people work harder, produce more and get paid less.

This is what drew the world to Price's story - a story of social justice, of a neck-on-the-line deed, and especially of a young man who could energize a generation of Millennials to potentially redraft the future.  Wage fairness is a touchstone almost without rival.  Health, education, environment, employment - every ounce of it tracks back to proper pay.


Photo courtesy of Michael Nigro © nigrotime

Photo courtesy of Michael Nigro © nigrotime


Days after Gravity's wage announcement, acclaimed digital news platform, Truthdig.com, with a mission to "challenge conventional wisdom," named Price “Truthdigger of the Week.”  Such an accolade is described as, “Every week the editorial staff selects a group or person worthy of recognition for speaking truth to power...”  Assistant Editor, Alex Kelly, said of Price’s wage hike:

“The history of American capitalism offers precedents of executives who successfully and without pressure from markets applied the values Price has made a bid to embody – and more recently than Henry Ford, who in the early 1900s famously said that workers in his factories should make enough money to buy the cars they produce.  We hope that Price sticks to his plan and that his example is picked up as ammunition for the view that much of the suffering borne by workers in the United States and around the world is unnecessary.”

Parallels drawn to Henry Ford, values held aloft like a beacon for a new generation of business leaders, protector of the world’s working class – this clarion call from Truthdig was just one in a number of such proclamations from print, broadcast and digital media.  Patricia Cohen is a celebrated New York Times journalist who penned:

“When Dan Price announced last week that he would cut his own pay and profits to make it possible to raise the minimum wage at Gravity Payments, his credit card processing company in Seattle, to a hefty $70,000 a year, he had little idea of the whirlwind it would stir.”

In fact, Price had every idea of the whirlwind it would stir.  And as it turns out, Cohen actually had a front row seat to the spectacle.

Weeks before his announcement, Price recruited two of the planet’s biggest media brands to be in the room with him and his team.  One of them was NBC, the other was The New York Times.  Cohen is credited with breaking the story.

Price eagerly quarterbacked the invitations, the press releases, the numerous follow-ups, the theatrics of the day and the incessant monitoring of its effects.  Cohen told Hundred Eighty Degrees that Price even carefully crafted sound bytes aggressively promoted to media far and wide, including her own New York Times.

"Price had not only struck a nerve; he had also turbocharged a debate now raging across the American landscape, from presidential forums to barrooms to fast-food restaurants."  Chicago Tribune
"The dramatic move has gotten widespread media attention, in part because it comes at a time when CEO pay has skyrocketed nationally and fast-food employees around the country have been protesting for a $15 minimum wage." 
The Los Angeles Times
"This guy has to be up for boss of the year."  ABC News
"Mr. Price says the questions focused on capitalism and whether his plan to increase pay will be seen as a smart business decision. But if the early days are any indication, some of those fears may be short-lived. Fact is, new clients are lining up to do business with the firm."  Wall Street Journal
"Almost overnight, he represented a swashbuckling blow against income inequality."  The New York Times
"Price's theory is that by investing in his employees, the company will grow faster. And that's already in evidence, given a boost in new business since Price announced the plan to his workers this month."  CBS News
"At a time of massive wealth and income inequality in our country, Mr. Price sets an example that other companies should learn from."  Democratic Presidential Candidate, Bernie Sanders
"In a world of rapacious CEOs and gross income inequality, Price’s move turned him into a poster boy for the low paid."  The Guardian
"But the goodwill he just engendered is likely to pay itself back not only through hard work, greater loyalty and better talent, but through the greater returns that usually follow in such a culture."  The Washington Post
"The announcement caught everyone off-guard. Could it be true? $70,000 is the new minimum wage in this office?"  USA Today

None of the early (or ongoing) reporting verified - via research data, interviews, etc. - that new clients were, in fact, "lining up to do business with the firm" or how "the goodwill he just engendered is likely to pay itself back."  Therefore, in an effort to further explore such declarations, Hundred Eighty Degrees contacted Gravity Payments a few weeks after Price's announcement and offered to produce a documentary, in real time, about the effects of his new pay model amid the context of a greater wage equality debate.  Gravity point person, Ryan Pirkle, confirmed:

"I fully recommend we move forward."

In preparation for the project, Hundred Eighty Degrees poured over copious print, tape and ancillary documentation on Price.  The results were abundantly clear: his anecdotes and claims were far more Hollywood than credible.  Worse still, Price had exploited an industry rife with flaws, aggressively capitalized on economic unrest and had a pattern of being on the wrong side of lawsuits.  During late fall of 2015, Hundred Eighty Degrees called Pirkle and advised him that it was no longer interested in the project.  Hundred Eighty Degrees also mentioned that it was drafting a story about Price and posed a series of questions for Pirkle, to which he replied:

“There’s a lot of inexperience here when it comes to this kind of stuff.   But we want our story told.  That’s what we want.  We want it done with integrity and truth, with the good and the bad.  I'll try my best to get answers to you [Hundred Eighty Degrees], and to do so quickly.  Thanks again for the good conversation.”

Pirkle certainly had enough "experience" to hoist Dan Price into the media stratosphere and get his "story told" over the preceding months.  Nevertheless, that was the last Hundred Eighty Degrees heard from Pirkle and a clear indicator that not only were “trust” and “transparency” off the table, but a story “with integrity and truth, with the good and bad” was of no interest to Price.

Within the week, Bloomberg Businessweek published an article titled, "The CEO Paying Everyone $70,000 Salaries Has Something to Hide," in which it claimed that Price initiated the wage hike as retribution for his brother/business partner's lawsuit and that Price also repeatedly beat his ex-wife who, during a TEDx Talk a month earlier, recounted specific incidents of such violence, without naming names.  For the moment, these public revelations stemmed a favorable media tide that Price had surfed without challenge.  Businessweek Editor, Ellen Pollock, entertained an interview with Politco during which she stated:

"The trick to that story is that we reported it to death. I spent 18 years at the Wall Street Journal before joining BusinessWeek and then Bloomberg Businessweek, and I feel really comfortable running those kinds of stories — stories that go behind the stories in the news, or stories that raise questions about the topics people think they already understand. I've never called it wrong on one of these. I think the trick is having a good gut, and realizing a good gut is not enough. It's just reporting, reporting, reporting. That's an advantage we have here at Bloomberg Businessweek and Bloomberg News — we have the resources and the chops to report."

Bloomberg is a widely read weekly business magazine created "to provide information and interpretation about what was happening in the business world."  In this case, its reporting on Price primarily addressed personal matters -- motivation for the wage hike, media attention, alleged domestic violence.  Beyond such assertions, however, Bloomberg was wholly unaware of a yet untold, business-centric story with far greater implications.

Capitol One's slogan "What's in Your Wallet?" could hardly be more apropos these days, as plastic has clearly become the new sheriff in town.  This seismic shift has led to a credit card industry that has (d)evolved into nothing short of a labyrinth within a labyrinth.  230 million Americans each possess, on average, 3.7 credit cards processed by millions of retail chains, independent businesses and big finance brands, most of which remain squarely in the crosshairs of controversy since the economy fell off a cliff not so long ago.  Despite this recent history, industry regulators have all but gone fishing.  Visa and MasterCard are internal regulating and rule-setting bodies that pretend to reign with an iron fist when the reality on the ground is that payment processors can bend or even obliterate rules with barely a slap on the knuckles.

Gravity Payments is a case in point.  And a significant one at that.

An exhaustive Hundred Eighty Degrees investigation estimates that Price has bilked over $100 million dollars and continues to leverage a fraud scheme via upwards of 10,000+ small business clients.  His wormhole connects to Wall Street mega-brands including Visa, MasterCard, Wells Fargo, First Data, Bank of America, Chase, CitiGroup, Capitol One and other finance giants.  By simply changing a “2” to a “3,” Price established a high-profile money machine that tramples the playing field and does so in direct violation of what are supposed to be explicit and severe regulations.

His punishment?  Overnight fame, a talent deal with William Morris Endeavor, for which he is billed out at $25-40k per speaking gig, a speech at the United Nations, an endorsement from Bernie Sanders, a $500k book deal from Penguin Random House, appearances on every major broadcast and cable network, and countless radio and digital platforms, repeated coverage in iconic newspapers and magazines, glowing reviews from and face-time with business leaders, celebrities, pro athletes and rock stars worldwide, 1,500+ new clients, 50 new employees, and significantly increased profit, which means more money in his personal coffers.  And continued radio silence from regulators.


Price's WME client page

Price's WME client page


Price takes every opportunity he can to convince as many audiences as he can of his selfless efforts to buoy dreamers and entrepreneurs.  Ironically, his speeches are devoured by a highly calculated me, myself and I folktale of how he rose from the ashes of a rural no-man’s-land in order to save the day.  The fact is, Price lived but one mile from downtown Nampa, Idaho, the state's second most populous city behind its capital of Boise, also only a short drive from his doorstep.  Price often cites financial struggles endured by his family for as long as he can remember.  Somehow, those struggles did not prevent the family from living in a 4,200 square foot, 6 bedroom 4 bathroom new construction home with a lake view.  His self-described “blue collar upbringing" was peculiarly bereft of any callouses.  His father, Ron, was a well-known business executive and consultant, and his siblings, all college grads, had successful careers in their own right, and not careers that involved assembly lines or farm fields.  And where it concerns the business that Price claims to have fashioned from a tiny dorm room in order to thwart "an industry that takes advantage of the little gal or guy," Gravity Payments is arguably just as dubious as the targets of Price's ire.

Regardless, it is inarguable that Price has made a near household name for himself as a self-described, incomparable steward of integrity, a soldier determined to right the wrongs of big finance and a humble servant of the small business space.

In 2006, Dan Price told with The Green Sheet, “We have high standards for merchants.  We are as merchant-centric as you can imagine." He continued, “We are very honest with merchants… There's not a whole lot that is secret here."
In 2008, The Seattle Post-Intelligencer posted a headline, “Credit him with Business Savvy,” and penned, “The brothers co-founded Gravity Payments with the aim of rectifying what they felt were problems in the payment processing industry… he [Price] said, there was general dissatisfaction among business owners with a lack of transparency in the business practices of processing companies.”  Price stipulated, "I saw a lot of things that were missing in our industry."
In 2009, Entrepreneur Magazine instructed, “Dan says he wanted to bring something new to the payment processing space.  The brothers' strategy for earning credibility for their Seattle company was making payment processing more transparent for merchants so clients knew exactly what they were paying for.”  Price himself declared, "We disclose our costs and how much is going to us to do the actual processing."
In 2010, Price told The Puget Sound Business Journal, “I think the No. 1 way to sustain growth is to keep doing what got you there.”  He continued, “For some, it could be easy to turn your back on that and think that making money is the most important thing in business. We completely reject that model.”
In 2011, Seattle’s Queen Anne News asked Price about how he was able to compete and grow to which he replied, “We did a billing model that would let customers see how much gross profit Gravity was making – right on the statement.  It built a lot of trust."
In 2012, Price gave a speech at The University of Washington’s Foster School of Business in which he shared his top ten sales and networking tips.  Number one, “Be transparent.”
In 2013, Price launched into his acceptance speech for Geekwire Entrepreneur of the Year Award with, “We founded Gravity on one simple principle.   Treat small businesses, that were really subject to predatory practices, the way you would want to be treated.  Treat them ethically.”
In 2014, Price told the Young Presidents Organization, “If you want people to trust you, the way to earn their trust is to be 100 percent honest and transparent.”
In 2015, Price authored a piece for The Huffington Post in which he proclaimed, “I made honesty and transparency the foundation of my company.  Eventually, that drew clients to us.  This focus on honesty and transparency continues to pay off.”
In May of 2016, Price was a guest on the PBS series Point Taken during which he kicked off the episode by stating, "The only way to get workers back engaged is to re-earn their trust... if you want people to trust you, be transparent with them, tell them the truth." 

Price has also assembled a swath of tireless disciples who evangelize his teachings at every turn.  In addition to Ryan Pirkle and the ever-growing Gravity Payments marketing and PR squad, other internal gatekeepers are always at the ready to spread the good word. 

Tanya Williamson is an Account Consultant at Gravity who, when asked about her primary business challenge, replied:
“I see unethical payment processors exploit merchants all of the time.   Most payment processors… they’ll say whatever they need to say to the merchant to get them to switch, even if it’s a flat out lie.  The hard part is trying to explain to merchants that we’re different and that we genuinely care about what’s best for them.”
Or former Gravity rep for the Portland market, Janae Allen who explained to Hundred Eighty Degrees:
The way Dan [Price] works is that, after training, he expects you to be your own boss, although I could call his cell and discuss deals whenever I needed to.  Though my merchant portfolio was pretty balanced, the majority of my accounts were restaurants and bars.  I would tell clients how this was a predatory industry and educate them on how Gravity would give them the transparency, simplicity and fairness they deserved.”

Price largely hires 20-somethings with little if any sales or industry experience.  They are indoctrinated with a big picture view of how he will, as he says, "destroy the industry," but they have historically not been compensated well for carrying out such a coup.  Janae Allen’s starting salary was a mere $30k with limited ancillary earning opportunities.  After three years of signing “a lot of new business” for Price without an ounce of residual income to show for it, she left because she needed “a better financial opportunity.”  Most payment processing sales reps continue to earn residuals from the merchant portfolios that they build, even if they exit the company for which they built them.  This ability to accrue virtually endless residual income is what makes selling in the industry such an appealing prospect; hard work can indeed have a sizable and sustainable payoff.  

But not for reps at Gravity, with the exception of veterans like Art Tay and Ayman Lukata.

Though Allen asked Price about arranging a similar residual model for her, Price did not bite.  After all, by maintaining his status quo, he gets to keep the entire cake and eat it too.  Price streams a substantial amount of additional income directly into his own coffers instead of those who build the business for him.  Price says that Gravity reps are salaried in order to save clients money.  Such an explanation is opaque and disingenuous, at best.

Revelations from other employees explicate a very different reality from the “transparent” edition that Price and his marketing team spin on a regular basis.  Two current Gravity employees, who chose to remain anonymous on Glassdoor, revealed:

“Dan Price.  He knows what management is doing because he trains them to do it.  I've seen it.  He also runs some less than savory financials.  And anyone who looks past the facade and has worked with him can attest to this.  Sales reps are mostly the industry standard.  They will lie and cheat."
“Gravity Payments emphasizes their values at every turn.  Creative leadership, passion for progress, and responsibility.  Working for this company for any amount of time you will quickly learn that these are little more than selling points.  For a long time there was a big push on transparency.  From what I can tell there is no transparency at any point along the way.  Sales Reps are not transparent with their customers/potential customers, managers are not transparent with their employees, and senior management are certainly not transparent with their reports.”

Maisey Stein McMaster is, perhaps, the most significant public example of employee dissent.  She worked for Price for over five years, which is, by all accounts, an unusually long tenure at Gravity.  As Finance and Risk Manager, McMaster was instructed by Price to reconfigure financials in order to accommodate the yet unannounced wage hike.  She worked nights and weekends to execute his wishes.  When she presented Price with her proposal, she also shared concerns and made recommendations.  Price gave her such a swift and unkind rebuke that she virtually resigned on the spot.  Though McMaster shared her disgust in an article by the New York Times, Price was not phased and even told CNN that she remained a trusted confidante, though no such relationship exists.  Price also immediately took the opportunity to move his 23-year-old brother, Alex, a wholly inexperienced, recent college grad, into McMaster's seat where he became guardian-gatekeeper of his big brother's growing empire.

Price publicly responds to internal complaints either without addressing issues head-on or, more frequently, by tearing into external parties who are entirely unrelated to such matters.  Perhaps more alarming are his constant references to violence or extremism when making such arguments.

With regard to the Glassdoor compaints, he countered, “Our competitors hate us because we are very disruptive with our business model.  We charge so much less and provide much more, they are spending a lot of money trying to kill us…”
In February of 2014, Price was awarded Seattle Magazine’s “Executive Excellence Award.”  During his acceptance speech, Price (in)famously said, “We have a very simple concept of how to run a business – we really never want to make screw-you money like the rest of the financial services industry.  Our competitors look at them (small business clients] as easy prey – if we make this stuff confusing enough, we can charge them anything we want and we can treat them however we want.  We say we’ll stick up for these guys until you kill us or we kill you.”
During speaking engagements at the Aspen Ideas festival, the Weiden+Kennedy Love Summit and even in his own LinkedIn blog, Price speaks of Che Guevara as, "one of the most brutal killers in history and when they asked him, what do you look for in a guerilla fighter, you would probably be surprised to find that his answer was 'love.'  And that is where I think leaders can follow suit - love." 
In an interview with Entrepreneur Magazine, Price clarified, “I was really upset at this industry for the way they were treating my clients, and I just wanted to blow the thing up."
During a lecture at Brown University, Price unabashedly admitted, "I can be kind of a violent person at times, and so destroying this industry that seems so predatory seems like a fun thing." 
It was only two weeks earlier that Price's ex-wife shared horrific accounts of abuse she suffered at the hands of her former husband.

The greatest harm might arguably be the racket that Price has effectuated for over a decade.  Not only does he leverage small businesses, specifically restaurants, to generate the very same “screw you money” he so vehemently rebukes, but he also clobbers competition under false, if not illegal, pretenses.  For Price, it's a win-win-win-win... more company revenue, more personal income, less competition, sustained fame.

It is easy to get lost in the weeds when explaining how Price does what he does.  But the essence of it is fairly straight-forward.  In performing initial due diligence on Price during its preparation for the documentary, Hundred Eighty Degrees identified significant inconsistencies in Price's explanations about how Gravity Payments was able to charge clients far less than other processors.  Price often talks about the unscrupulous behavior of others and their "opaque fees" that he is on a mission to extinguish.  Numerous industry sources - competitors, former Gravity employees, industry trade groups - were subsequently contacted in an effort to determine how Gravity was able to charge a fraction of what other processors charged.



Most sources that agreed to comment requested that they do so off the record, an immediate red flag signaling that something damning was at play.  Nonetheless, Hundred Eighty Degrees aggregated internal and external source testimonials, verified documentation and market studies that irrefutably prove Price is committing fraud at an alarming rate with equally alarming success.

Price has always focused on acquiring and maintaining restaurant clients.  Two former employees with intimate knowledge of the operation advised Hundred Eighty Degrees that approximately 85 percent of the company's instate (Washington) clients are restaurants, and approximately 65-85 percent of the company's out-of-state clients are restaurants.  Bars represent a significant share of his remaining roster.

Before Price can officially bring a new merchant-client into the fold, his underwriting team evaluates the business model to determine the merchant category that best applies, i.e. Healthcare Provider, Financial Services, Lodging & Hotels, Restaurants, etc.  Once the category is determined, the underwriter assigns a Merchant Category Code (MCC) to the contract.  MCC's are four-digit codes used by the credit card brands (Visa, MasterCard, etc.) to identify the fee that particular merchants pay to accept cards.  For instance, when a Rewards Card is swiped at a restaurant, the fee that the merchant pays to the Card Issuing Bank (Bank of America, Citi, Capital One, etc.) is more than if that same card were being swiped at a bar.  An average restaurant ticket is more than that of a bar, which means more risk for the Card Issuing Bank, hence why the fee is more.  These fees, known as "interchange fees," ultimately depend upon the merchant category and type of credit card.  Every payment processor, including Gravity Payments, pays the same interchange rates which are agreed upon between the Card Brands and the Card Issuing Banks.  

The MCC for a restaurant is 5812.  The MCC for a bar is 5813.  Price and company knowingly apply the bar MCC to all of his restaurant clients.  This seemingly innocuous change from a "2" to a "3" enables Price to game the system without drawing unwanted attention.  Though this fraud enables restaurant clients to pay lower fees per transaction, which clearly benefits them, Price is not exacting this scam for that reason.  He does so because, not only does he build in a higher margin for himself, but he also woos business away from his competitors by significantly undercutting their pricing - an antitrust breach if there ever was one.

Price has been able to execute this swindle without recourse, because he structures clients with "flat-rate" pricing.  A flat rate combines all credit card processing fees into one monthly rate, thereby obfuscating how such fees are allocated.  In other words, unlike 99 percent of his payment processor competitors, Price's monthly client statements do not reveal how fees are applied to each one of their transactions within a given month.  Price claims to offer such a unique structure to simplify matters for his clients when, in fact, he does so to bury any traces of how he commits fraud.

Here is a competitor's statement clearly showing total fees charged per day

Here is a Gravity Payments statement - top page - which only shows a fee total

Here is the competitor's individual transaction fee per credit card type - clearly transparent

Here is the Gravity Payments daily breakdown without any fee explanation - not transparent

The fact that most restaurants include bars does not work in Price's favor.  According to Visa's manifesto of rules and regulations, the distinctions are clear.  If you earn more in food than booze, you are a restaurant, and vice versa.  And if you have two distinct operations at the same location - a restaurant on the first floor named ABC and a night club on the second floor named XYZ - you must assign two different MCCs. 

The party that is responsible for assigning the proper MCC is the Acquirer, which in this case is Price, not his merchants.  Price's Sponsor Banks, Wells Fargo and BMO Harris, should call into question any irregularities during periodic audits.  They clearly have not done so, either because they do not pay attention, or because they choose not to.  It is that simple.  Perhaps even more important is the fact that, if Visa and other card brands are notified of any payment processor who is purposefully assigning incorrect MCCs, and the proof of such activity is absolute, at the very least, the cards brands must enforce their regulations, audit offenders and notify industry regulators that such violations might be chronic enough for investigation or prosecution by state or federal authorities.


Here are excerpts from Visa's rules and regulations:


Here is an example of what a transaction might look like:

  • A customer uses a Visa Rewards Card at a restaurant.
  • The Interchange Fee assessed to the merchant is 1.95% + 10¢.
  • Since Price applies the wrong code for a bar instead of a restaurant, the Interchange Fee is 1.65% + 10¢.
  • Credit card processors impose their own fees for their services above and beyond interchange fees in exchange for providing account management, security, support, etc.

While the difference in interchange fees per transaction may seem inconsequential, the annual difference for restaurants with consistent volume certainly adds up.  Restaurants that are high-volume, high-ticket or both, process thousands of transactions per month.  Such a restaurant can easily short the system $5,000+ per year for Visa transactions alone.

According to the National Restaurant Association, restaurant sales were roughly $750 billion in 2015.  One million restaurant locations employ a total of 14 million people here in the U.S.  By contrast, sales for drinking establishments (discotheques, nightclubs, cocktail lounges) approximated $20.5 billion (less than 3 percent of restaurant sales).  Roughly 65,000 such establishments employ 365,000 employees (also less than 3 percent of restaurant employees).

This data falls in line with the data that Price's former employees supplied to Hundred Eighty Degrees regarding the fact that Gravity Payments hospitality merchants largely consist of restaurants, not fast food restaurants, but fine dining or table service operations.  For the sake of argument, Hundred Eighty Degrees will use conservative numbers to illustrate the magnitude of Price's fraud:

  1. 15,000 total Gravity Payments merchants (not 19,000 as cited) x 65 percent of which are restaurant clients (not 85 percent which is probable) = 9,750.
  2. Based on data aggregated from markets where Price primarily operates, average restaurant revenue per year transacted via credit cards is, at least, $1 million dollars.  Again, this is conservative.
  3. Visa, MasterCard and Discover transactions comprise approximately 70 percent of restaurant card transactions.
  4. $1 million dollars x 70 percent = $700k.
  5. The average difference in interchange fees between applying the proper MCC for restaurants or the incorrect MCC for bars is .0025 “basis points” per transaction (also conservative).
  6. $700k x .0025 = $1,750 (what Price scams per year per restaurant, though it is likely far more).
  7. If Price fraudulently codes only half of his restaurants... 4,875 restaurants x $1,750 = $8,531,250 (what Price scams per year).
  8. Hundred Eighty Degrees has determined that Price has executed this scam for a decade.  Therefore, the estimated total of Price's scam over such a period totals between $85-$150 million dollars.

Hundred Eighty Degrees also used Visa's Supplier Locator and MasterCard's Merchant Locator to identify 1,022 restaurants purposefully coded as bars before ending its discovery of what is estimated to be a fraction of the fraudulent sum.  Over 600 incorrectly classified merchants were identified in Washington state alone - Price's primary sales territory.  Hawaii and Portland are other top markets.


Download List Here


Because Price operates a private company, it is impossible to know the extent of his market reach, however, primary markets include:

  • Washington State
  • Hawaii (all islands)
  • Portland
  • Idaho
  • San Diego, CA
  • San Francisco, CA
  • St. Louis, MO
  • Oklahoma City, OK
  • Omaha, NE
  • Phoenix, AZ


Price has the ability to go into his back end account management “boarding system” at any time in order to reset MCC codes.  This change can take effect overnight and make it can appear as if any allegations are attempts to defame him.  However, Visa and MasterCard have the ability to audit Price or any processor, and if they see inordinate scrambling all at once, the damage will still be done. 

Incidentally, come tax time, Gravity Payments restaurant merchants receive a document called a 1099-K.  The form is actually sent by First Data Corporation, a global payment technology solutions provider responsible for 6 million merchant accounts and nearly half of the nation's credit and debit transactions.  The 1099-K is an IRS information return used to report certain payment transactions to improve voluntary tax compliance.  First Data sends the 1099K on behalf of Gravity Payments and then Gravity's merchants verify and account for their credit card income to ensure that the proper tax is paid. 

They key here is that front and center on the form are two boxes that show, 1.) the Merchant Category code, and 2.) who the payment processor is.  Therefore, every Gravity Payments restaurant merchant can see if it is fraudulently coded.  Here is such an example:

According to Bobby Schleizer, Director of Underwriting for a national payment processing company:

“It is a violation of Card Brand rules to miscode merchants.  The Card Brands and issuing banks will fine the appropriate party $1,000-$10,000 monthly on each occurrence.” 

Were the Card Brands and Issuing Banks to retroactively pursue Price and his merchants, penalties would pile to the clouds and violators would find it nearly impossible to keep their lights on.  Here are Visa's very own violation clauses:

Hundred Eighty Degrees has repeatedly attempted to contact Visa, MasterCard, Wells Fargo, BMO Harris, Bank of America, Citigroup, JPMorgan Chase, Capital One, First Data (for whom Price acts as a sales agent) and other financial institutions.  Most will neither confirm nor deny that their own investigations are underway.  Hundred Eighty Degrees has also contacted industry trade groups who prefer to remain silent on the matter.

Wells Fargo Communications Executive, Jim Seitz, was asked the following questions:

  • Is an processor like Gravity subject to periodic audits by Wells similar to how other sponsor banks audit processors?

  • When was the last time you audited Price?  Or have you ever?

  • Are you currently conducting an investigation on Mr. Price and Gravity?

  • Are you aware that Price is miscoding his restaurant merchant contracts and thereby leveraging his/your merchant accounts in order to process fraudulent transactions?  This has been proved.

  • Since Price is proved to be miscoding contracts in order to gain an unfair competitive advantage, and gain more merchant accounts, and short Issuing Banks their proper interchange, what kind of penalties or processes would/will Wells subject him to?

His reply to Hundred Eighty Degrees:

"Wells Fargo sponsors a number of Independent Sales Organizations (ISOs), such as Gravity Payments. Organizations that are registered ISOs of Wells Fargo are able to access the Visa and MasterCard payment networks and offer payment processing to their customers through our sponsorship. The sponsorship of ISOs is a standard practice within the payments processing industry. Well Fargo informs and requires its ISOs to abide by payment network rules.We have extensive procedures in place to ensure third-party processors and independent sales organizations (ISOs) comply with our policies and payment network rules, yet we do not discuss our practices and procedures in detail. Due to customer confidentiality, we cannot provide further comment."

Hundred Eighty Degrees spoke with First Data Corporation Communications representative, Hally Sheldon, who said she would share my requests with her team and issue a response.  No reply to date.

Hundred Eighty Degrees exchanged with Jason Oxman, CEO of the Electronic Transactions Association (ETA) "the international trade association serving the needs of organizations offering payment technology products/services."  In short, the ETA is the industry's leading policy and advocacy body.  Here were our questions:

  • As the self-described "principal representative of the industry" please advise how processors who do effect fraud should be handled by Issuers, Card Associations, federal authorities and/or the ETA, especially since you "advance the technology, safety and security of payments every day."

  • ETA's "Voice of Payments" platform is the self-described "leading source of credible industry information for government officials making legislative and regulatory decisions impacting our industry."  Since this is the case, what responsibility do you and the ETA have to inform and convince such stakeholders that a processor like Gravity Payments is an anomaly and that the industry is well-policed from the inside and the outside?

  • The ETA published a white paper titled "A Practical Approach to Acquiring Risk Management."  It's downloadable from your site.  An entry on page six reads, "External Fraud Risk: The risk that an unauthorized entity/individual(s) commits fraud against the company or uses the company system to commit fraud. This includes compromised merchant or reseller accounts, theft of card account numbers, bank account numbers, or other sensitive information; extortion, theft of intellectual capital, etc."  How does a merchant protect itself from the external risk of a payment processor who leverages said merchant to exact fraud?

 Though Mr. Oxman is able to answer such questions beyond the context of Gravity Payments, he responded accordingly:

"You originally asked me to comment on your investigation of Gravity based on your assumption that Gravity was an ETA member and therefore we would have familiarity with the company.  I responded that Gravity is in fact not an ETA member and that we have no comment.
You are now asking me additional questions, and having had the benefit of reading your article, I know that all of your questions are still asked in the context of Gravity.  Thus we still have no comment.
I understand you are pressed for time as you are publishing today, and I appreciate your reaching out to us."
JDO

The Strawhecker Group is the leading management consulting company for the payments Industry.   TSG clients include merchant acquirers (like Gravity Payments), issuers (like Bank of America, Capitol One, Citigroup, etc.), the card brands, technology and mobile companies, processors, major merchants, bank specialty lenders and private equity firms, as well as banks and financial institutions.  Founder and principal, Jamie Savant, was interviewed for the initial investigation about Price and about industry standards and practices.  This was Mr. Savant's response to our request for follow-up comments regarding the now released investigation.

Hi Doug,
 
I am on back to back calls today , sorry
 
Jamie

Hundred Eighty Degrees spoke with a former Gravity sales rep, Sean Ring, who sold in the San Diego market from August 2012 to December 2013.  Gravity was a place where Ring could cut his teeth in outside sales.  He worked in hospitality for some years before joining Price’s team, and this is likely why Price hired him to woo high-ticket restaurants.  The cold-calling and utter isolation got the best of him in the end.  Ring said that Price was constantly, if not even harshly, on his reps to emphasize how transparent Gravity Payments was with its small business merchants.  Regardless, Ring said of Price and Gravity that some things never quite added up:

“Somehow we were able to set up restaurants at below cost.  I couldn't understand it, how we could get accounts set up that way.  There was a focus on restaurants with higher average tickets and it had something to do with the bars, I couldn’t figure it out.  I would get these contracts back from underwriting with an incredibly low flat rate and it was never explained.  I thought Dan had some inside track to something.  There was always something with Dan I could not put my finger on.  I had to walk around with articles with Dan’s face on them and staple my business card to them, like he was some kind of celebrity.  I texted him after the wage hike [two years after he left the company] to congratulate him, and he texted me back to see if I now wanted the job back due to all the publicity.  I called a friend I had made at Gravity who still worked there and when I mentioned the media attention Price was getting she said all of it made her want to vomit in her mouth.”

Hundred Eighty Degrees also spoke with Brian Bell, a 22-year veteran sales rep for payment processor, PayPros.  He knew Ring and had nice things to say about him, despite the fact that Ring and Gravity swiped key restaurant accounts away from him; accounts that Bell had for years.  In fact, Bell also spent 16 years in the hospitality industry prior to PayPros, and he clearly knows his way around a restaurant operation.  After losing the business to Price and company, Bell decided to determine how it was possible:

“Gravity beat me on pricing by a bunch, and that was just my basic pass-through cost, not cost-plus.  So, I did a full year of interchange research on Bertrand at Mr. A’s, one of the restaurants I lost to them.  I determined the only way they could do what they were doing was by miscoding a 5812 to 5813. The difference on interchange was $5,000 from only one restaurant in one year.”

Bob Carr grew Heartland Payment Systems from two-dozen employees in 1997 to 4,500 today.  Carr just sold Heartland to Global Payments for a whopping $4.3 billion dollars.  Until Price grabbed the spotlight, Carr was the most high-profile figure in the credit card processing arena with friends in very high places.  In fact, he was recently appointed by President Obama to a special infrastructure committee. 

In 2008, Heartland suffered what is widely considered as the largest data breach in U.S. history, compromising data of up to 100 million credit and debit cards issued by more than 650 financial services companies.  Heartland rebounded and used the debacle to pioneer new encryption and security measures, though they were breached yet again in 2015.  Regardless, Carr is known as an ethics champion who was accused of summoning government over-regulation in 2013 after he penned an open letter that strafed the very industry that made him extremely wealthy.  In this letter, Carr “called out criminal and misleading practices” including “deliberately misrepresenting MCC codes" and "some of those benefiting from bad behaviors look the other way and attack the messenger in the ultimate act of intellectual dishonesty.”  Carr told Hundred Eighty Degrees:

“Deceptive trade practices have no place in this industry, period, and we must be committed to doing everything and anything we can to end junk fees and intimidation of merchants.  It is really impossible to know if an investigation [of Price] is ongoing or not.  Our industry is dominated by financial engineers with few, if any, concerns for normal people.”

Kacie Long has worked as a sales rep for Heartland for eight years.  She operates out of Boise, Idaho, not far from where Price grew up.  Though Long is familiar with Price, she would not comment on the record about his exploits.  She did volunteer:

“The underwriting and contract process is black and white.  It is absolutely clear how all of us must classify a business such as a restaurant.  Card brands can audit at any time.  I would never put my customers, who place a lot of trust in me, or my company in that position.”

Price often discusses how his contracts and statements are the most “transparent” you’ll likely find, with no hidden fees and the simplicity that small businesses deserve.  As noted above, Gravity Payments does not disclose interchange fees and fee breakdowns in any documentation.  Price claims that rates aren’t disclosed because each merchant is unique.  There is no explanation of cost, just a flat rate that merchants like, especially because Price persuaded them that simple is good, anything else is bad.  In fact, the opposite is true.  Proper industry practices widely lambaste flat rate pricing in favor of "cost-plus."  Proper statements disclose interchange fees across all transactions so that customers can see precisely how their revenue is disbursed and if it lines up with the terms of the contract they signed.

The Strawhecker Group is a management consulting firm focused squarely on the global electronic payments space and arguably its top advisor.  Partner Jamie Savant told Hundred Eighty Degrees:

“It’s important for a processor to be up front with what the costs are.  Nowadays there are a lot more moving parts.  You have to disclose to the merchant all the fees that the merchant is paying.  Disclosure is critical.  And if a bank sees that an ISO is mistreating merchants or the process, it will most definitely do something about it.  Visa and MasterCard will do anything to protect their brands."

Tim Murry is a partner at SMARTMerchantsClub, a Seattle-based processor.  He shared this with Hundred Eighty Degrees:

"When an agent in our industry sees a statement that is blank except for a flat rate, the first thing we think is what are they hiding?  A flat rate means there is no way to see what the processor is hiding because the Visa and MasterCard interchange is missing, no way to see if their processor is correctly paying their Visa and MasterCard fees.  It’s so hard to explain that what they think is a simple flat rate is most likely a tactic using their trust as a tool to defraud Visa and MasterCard.  And worse yet, the poor merchant doesn’t even know and could be liable for the fines from the card brands and perhaps make them pay back the interchange, although more likely the processor who is responsible for insuring the accuracy of a MCC code is more apt to receive the penalties, which would be substantial.  We could lose our right to operate in the industry if we purposely miscoded merchants.  Your [Hundred Eighty Degrees] discovering the MCC codes online was quite resourceful, and had other processors known this was there, they would likely turn in competitors reporting wrong codes.  Any merchant on a flat rate should demand to see a copy of their monthly interchange breakdown from the card brands going back several months, if not longer.   We care about our merchants too much to put them in this risky situation of miscoding them for our profit or to unfairly compete."

Matt Janke is such a merchant.  He used to be a dishwasher.  Today, he and his business partner, Jill Buchanan, own of one of Seattle’s highest rated eateries, the sustainable-focused Lecōsho.  Janke was earnest about fiscal challenges that he faces in an industry severely impacted by Washington’s $15 mandatory minimum.  Like many merchants, he has a less than favorable history with credit card processors but has considered Gravity Payments, his current processor, to be a cut above. 

“His [Price] wage hike is an interesting move, but it doesn't affect us one way or another.  He must be an honest man.  He fought tooth and nail for my business, gives me a flat rate and keeps things simple while other credit card processors are spawned straight out of hell.”

FredHutch.org

FredHutch.org


If restaurateurs who use Gravity Payments know about Price's swindle and choose to stay aboard with Price, according to Visa's own rules and regulations, they could and perhaps should be held liable for any fraudulently processed transactions, past and present.  Again, such fines range from $1,000-$10,000+ per month for every instance, year over year.  At a restaurant of Janke’s size, this means game over.  Hardworking folks like Janke don’t have time to always read the fine print, although in Price’s case, there is little to read in the first place.  Price's trust and transparency pitch is what hooks them, and apparently, that seems good enough to consistently close deals.


TheSeattleSchool.org

TheSeattleSchool.org


It was certainly good enough for Brian Canlis who co-owns and operates Canlis, a 60-year-old, James Beard nominated, high-ticket eatery in Seattle.  Canlis signed on with Price over a decade ago.  When Patricia Cohen interviewed Canlis last July, she said Canlis “was more discomfited by his [Price’s] actions” and that he though the pay raise at Gravity “makes it harder for the rest of us.”  Canlis told Hundred Eighty Degrees this was misleading and out of context:

“We feel the same today as we did when Dan first made his announcement – completely supportive.  We were never worried about increased fees - Gravity assured us there was nothing to worry about.  We've been a client of theirs for over a decade… We frequently field phone calls from credit card processors trying to get our business.  None of them have been able to match Gravity's rates.”

Hundred Eighty Degrees shared its findings with Canlis which led to a swift severance of the long-term relationship.  Ethan Stowell Restaurants is a nationally recognized group of 12 esteemed operations that had also been one of Price's early adopters.  Stowell too has abandoned Gravity for the same reasons.  Reports from industry sources reveal that other restaurant operators will follow suit.

Even if restaurant merchants are unaware of Price’s dodge, they can still be financially or logistically inconvenienced in any number of ways.  Card brands and banks can audit them.  Liquor control boards can investigate whether business licenses do not match the business model classification and levy fines or other punishment.  And even Price himself can push the blame upon them.  In fact, he has already proved willing to do such a thing.  Price learned about Hundred Eighty Degrees' findings on January 31, 2016.  On February 1, he released a Facebook post that did not mention Hundred Eighty Degrees by name but indirectly addressed the allegations.  He stated that restaurant merchants are responsible for classifying their own businesses, which is a direct violation of Visa's rules.  This was clearly a tactic to shift accountability should he be investigated.



Price (noted below as "Third Party Agent") and his Sponsor Banks Wells Fargo and BMO Harris ( noted below as "Members"), are irrefutably responsible for determining the proper MCC and assuming any violations thereof.  Here are the regulations:

Throughout this investigation, many sources with knowledge of Price’s offenses refuse to speak on the record about those offenses – from CEOs of sizable outfits to current or former employees, reps at other processors, plaintiffs, personal acquaintances or those closest to Price.  Those who take issue with Price always invoke parallel reasons for such silence, such as, “I know him, and he and his lawyers will come after me or my company with everything they have” or “We know what he’s doing, so many reps do, but it’s hard to put your job or company on the line to go after him – that costs money.”  One CEO source simply said, “The guy’s a sociopath” while another claimed, “He’s absolutely dangerous.”

Hundred Eighty Degrees has attempted to contact Dan Price by phone, in person, email and text on numerous occasions.  Gravity gatekeepers have since blocked incoming email by Hundred Eighty Degrees to any employee other than Price or Pirkle.  This certainly stands in stark contrast to the transparent processor that Price claims to be.

Hundred Eighty Degrees has also learned that, since notifying Penguin Random House of Price's fraud and other misdealings, Price's $500k book deal has been pulled.  Rick Kot, the Executive Editor who obtained the rights to Price's story, has not yet responded to Hundred Eighty Degrees' requests for comment.  Price is selling the book on his own website.

The bench trial that pit Lucas Price against Dan has now concluded.   Judge Theresa B. Doyle has issued the brothers into a last-ditch mediation period before issuing her decision.  Such a move is rather rare, especially in light of the fact that a lengthy pretrial preparation period ran legal bills likely into the hundreds of thousands, multiple mediation attempts have already failed, and proceedings have run their course. 

Lucas accuses Dan of excessive compensation, manipulation of company valuations, running up hundreds of thousands of dollars in personal expenses charged to the company, and suppressing Lucas' income and input.  In 2012 alone, Price paid himself nearly $3 million dollars between salary and bonuses.  He initially demanded that Lucas agree to compensating him $5 million dollars.  $3 million dollars is 10 times the average income of a CEO at a firm his size in the same industry.  In fact, according to public records and numerous CEO sources who spoke with Hundred Eighty Degrees, Price's base salary was more than any processor -- CEO, public or private.  Price's 2012 compensation was so inordinately high that he tipped the company into the red, because pretax net income was only $1.4 million dollars.

As of this writing, Hundred Eighty Degrees has confirmed that its findings have stoked an investigation by the Washington State Department of Financial Institutions.  Under a new policy, the agency may require Price to obtain an operating license.  If he is found to be in violation of business codes pertaining to the acquisition or transfer of monies, such a license would become unobtainable, and he would be ordered to cease and desist doing business in the state.  While the agency initially mentioned that the state's Attorney General's office was also investigating Price, the accuracy of such a statement is still under review.

PART TWO of this investigation uncovers a history of reckless business and personal exploits that define the Dan Price who is not portrayed on television sets or event stages.


[PART TWO OF DAN PRICE ARTICLE HERE]

[5-PART VIDEO SERIES: "GRAVITY CHECK" HERE]


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