Kenneth I. Chenault, president and chief operating officer of American Express Co., took the stand Thursday in the Justice Department's case against Visa and MasterCard, offering a picture of Amex as both superior competitor and victim of the bank card associations' practices.

Mr. Chenault, who is to succeed Harvey Golub in early 2001 as Amex's chief executive officer and chairman, described in confessional-style testimony his company's mistakes, including decisions to turn down opportunities to offer cobranded cards with AT&T and American Airlines. He acknowledged that the company had been arrogant. Then Mr. Chenault portrayed Amex as a humbled company that has come to realize it needs banks' help to increase its card business in the United States and abroad.

Mr. Chenault, who recently broke both his knees while playing basketball with his children, seemed to offer a physical metaphor for his company's disadvantages. Because he needed to prop up his legs, Mr. Chenault sat in a special chair in the jury box instead of the witness seat next to the judge's podium. His physical therapist came to the courtroom, and there was a break in the proceedings to let Mr. Chenault get some exercise.

In the morning, while he sat in obvious physical discomfort and waited to be questioned, Judge Barbara S. Jones met privately in chambers with lawyers for both sides and dealt a setback to Amex: She ruled that nine documents detailing conversations Amex executives have had with the Department of Justice could be used as evidence. Amex had wanted to keep them out of the trial.

Mr. Chenault said it had been a "big, big mistake" to pass up the chance to market a card with American Airlines, which eventually found a partner in Citibank. "It showed a lack of understanding," he said. "These were our core customers, frequent business travelers."

He described other missteps - such as a failed gold card that American Express had offered with some 2,200 banks in the 1970s and 1980s - and offered an analysis of why Amex reached a low point in the early 1990s. The testimony seemed designed to counter the image Visa and MasterCard have crafted of Amex during the course of the trial, as a devious and malevolent competitor.

Mr. Chenault sought to distance himself and American Express from a report that outside consultants prepared for Amex in 1996, entitled "Trench Warfare: A Battle Plan vs. Citibank, First USA, and Visa." The consulting firm Bain & Co. - where Mr. Chenault worked before joining Amex in 1981 - advised Amex to drive a wedge between Visa and MasterCard, and to try to convince banks that "Citibank is the enemy," Mr. Chenault said.

Mr. Chenault called this advice "ludicrous" and "naive," because he "wanted to work with banks."

Visa and MasterCard have made much of this 18-page document, fighting for the right to make it public, then distributing it to reporters. Mr. Chenault said American Express never implemented the "battle plan." Moreover, he said, Mr. Golub and other senior Amex executives did not attend Bain & Co.'s presentation of the report.

Mr. Chenault also described meetings he had with senior bank card executives from such firms as MBNA Corp. and Capital One Financial Corp. He said he had met with Capital One's two top leaders - Richard Fairbank and Nigel Morris - at a hotel in Fairfax, Va., to discuss partnerships, but they had told him that a deal in the United States was out of the question, because of Visa's and MasterCard's rules preventing members from issuing Amex cards. Instead, Capital One signed an agreement to issue Amex cards in the United Kingdom.

Mr. Chenault also disclosed some details of his discussions with Citibank in the mid-1990s, when Amex and Citibank had considered a merger. He said one reason the deal fell apart was Amex's concern about how its brand would be managed. American Express had wanted senior Amex people running the new entity, to protect the Amex brand and the Amex strategy of partnering with banks.

Mr. Chenault also revealed - apparently for the first time - that Amex is interested in offering an offline, signature-based debit card, one that would undercut Visa's and MasterCard's products on prices charged to merchants.

M. Laurence Popofsky, a Visa attorney, challenged Mr. Chenault's version of the events between Amex and Citi. He said the deal fell through because Mr. Golub wanted the job of Citi's chairman and chief executive officer at the time, John Reed. Mr. Chenault denied this. Mr. Popofsky said there were other disagreements, including Mr. Reed's desire, if the merger transpired, to withdraw Citi's membership from both Visa and MasterCard.

"I made it known that I didn't agree with that strategy," because Amex wanted to stay within the Visa and MasterCard system and work with many banks, Mr. Chenault said.

Mr. Chenault said his company's goal is to get savvy bank card issuers to issue American Express cards in addition to Visa and MasterCard cards, so that more transaction volume flows over the Amex network. This would increase both the number of consumers who carry the Amex card and the number of merchants that accept the Amex brand, he said. Amex's pitch to banks is that they will increase their profitability, because Amex charges merchants a higher fee, and because Amex customers generally spend more on their cards.

"The lever that we had as a competitive advantage was a higher merchant discount rate," Mr. Chenault said.

The bank card associations say Amex has the opportunity to increase its market share in many ways that do not involve partnerships with U.S. banks.

"So if you want more scale, more volume on the Amex network," Mr. Popofsky asked, "it can come from anywhere in the world, right?"

Mr. Chenault frequently answered questions from the government's attorney, Melvin A. Schwarz, and Mr. Popofsky the same way: Amex needs access to banks' relationships with their customers. He said Amex's recently launched online bank, Membership Banking, has about 30,000 customers, and they have access to online debit cards. "But it is difficult to grow without having access to banks," he said.

Miriam Kreinen Souccar contributed to this story.

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