nyone who thinks payments acquiring is not a risky business could learn a thing or two from Global Payments Inc. The company reported at the end of March that it could be on the hook for upward of $40 million in charges rung up by an online retailer that was processing transactions tied to a multilevel marketing scheme the government took down earlier this year.

On a March 31, 2006 earnings call, Global said that it had processed $86 million in credit card sales between October 2005 and January 2006 from a newly signed merchant when it grew suspicious and set aside cash reserves to minimize potential liability from chargebacks.

By the end of February, Global had incurred several million dollars in chargebacks tied to that merchant, a loss that prompted Global to tap into the reserve.

Industry experts say that Global, which reported on that call third quarter earnings (for its third fiscal quarter ended Feb. 28, 2006) and year-end estimates of revenue increases in the 15% range, isn't in serious trouble. But investors, apparently, aren't convinced.

Global's stock tumbled six points, or about 9%, following its revelation and news that two securities analysts, Thomas Weisel Partners LLC and Morgan Keegan & Co. Inc., had downgraded the company's stock. Weisel's downgrade was from "outperform" to "peer perform"; Morgan Keegan's rating went from "outperform" to "market perform."

"At a company the size of Global, this kind of thing is not unanticipated," said Paul Martaus, a Mountain Home, Ark.-based consultant. "If you look at their financials, they're doing fine."

In his presentation to investors, Paul R. Garcia, Global's Chairman, President and Chief Executive Officer, predicted full year revenues ranging from $896 million to $903 million. As we went to press, the company's stock was trading at about $48 a share, down from a high of $54.78 on March 21.

It's also worth noting that the ISO that signed up the merchant with Global gave a personal guarantee, which leaves it on the hook for losses ultimately sustained by Global, according to Martaus and others who were briefed by Garcia. While rumors have been swirling over which ISO that was, Global has remained mum.