PayPal Ordered To Hand Over Customer Records

Online payment service PayPal has reportedly been ordered to hand over customer records in a federal investigation of tax cheats.

April 12, 2006

2 Min Read
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Online payment service PayPal on Wednesday confirmed it had received a federal court order to hand over customer records in a federal investigation of tax cheats that try to hide money overseas.

The so-called "John Doe" summons approved in February by U.S. District Judge James Ware in San Jose, Calif., orders PayPal to provide information on subscribers who sent money to a bank or credit-card account in any of 30 countries from 1999 to the present, the San Francisco Chronicle reported Wednesday. PayPal's nearly 100 million customers conducted almost $27.5 billion in transactions last year.

Amanda Pires, a spokeswoman for PayPal, a subsidiary of online marketplace EBay Inc., said the order was received about two weeks ago. No decision had been made on how the company would respond.

"We're still evaluating our options," Pires said. "A key part of our evaluation will be the privacy of our customers. We take their privacy very seriously."

The order stemmed from a request by the Internal Revenue Service, which is engaged in a crackdown on people trying to hide money in foreign nations believed to be used as tax havens. Court documents showed that PayPal was ordered to give up customer records showing account activity and balances. The federal officials also wanted information on any EBay accounts the customers have, the newspaper said.Pires said it would be very difficult for a U.S. resident or someone with a U.S. PayPal account to funnel money to a foreign bank, since all transactions have to be conducted through a U.S. bank or credit card company. In addition, PayPal, which caps payments at $10,000, is unavailable in many of the countries targeted by federal authorities.

"We actually have a very strong compliance system," Pires said.

The governments' interest in PayPal was revealed Tuesday in public comments by Eileen O'Connor, assistant attorney general for the Tax Division of the Justice Department, the newspaper said.

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