New Hampshire regulators charged American Express Co.’s financial-advisory unit with deluding customers by forcing its sales team to sell poorly performing in-house mutual funds rather than investments from competitors.

American Express Financial Advisors awarded great bonuses for selling proprietary funds, investigators said. E-mails collected by the state prove the allegations that company supervisors praise advisers who sold American Express funds and reprimand those who didn’t. In one sales contest, for instance, American Express awarded advisers with prizes for promoting a new in-house fund - free one-year leases on Mercedes-Benzes.

The New Hampshire Bureau of Securities Regulation said in an administrative complaint that the American Express unit violated state and federal securities laws requiring advisers to act in clients’ best interests and to disclose conflicts of interest that could taint their recommendations, according to the Wall Street Journal report. The agency, after investigating practices from 1999 to 2003, asked a hearing officer to impose fine of up to $17.5 million, including restitution.

The complaint which presents the details of incentives offered to sell in-house funds questions the image of American Express as company serving customers’ needs.

"American Express had a pervasive sales culture that was established and managed with one thing in mind -- to push American Express products and other products that in many cases benefited American Express at the expense of its clients," said Mark Connolly, the bureau’s director.

American Express customers were provided with disclosure materials showing that bonus programs are based in part on sales of proprietary products and "present a potential conflict of interest in choosing your products."

Jeffrey Spill, the agency’s deputy director, said that acting as a registered investment adviser -- not merely a broker –American Express should act in the client’s best interest, in addition to disclosing conflicts.

The American Express Financial Advisors’ representative James Cracchiolo denied all the accusations saying that the company had no intention to pressure advisers to sell propriety products.

But New Hampshire regulators state the firm promoted sales of proprietary funds in calculating bonuses to senior executives. In 2003, Larry Post, American Express Financial Advisors group vice president for New England, was awarded more than $1 million as compensation, including $900,000 in bonuses, some of which were tied to sales of proprietary products, reports the state’s complaint. Mr. Post declined to comment.