The United States Department of Justice (DOJ) has just announced that United Airlines will pay $49 million to resolve criminal fraud charges and civil claims relating to fraud on postal service contracts for transportation of international mail.
In this post:
United Airlines’ international mail scheme
According to the non-prosecution agreement and civil settlement agreement, United Airlines entered into International Commercial Air (ICAIR) contracts with the United States Postal Service (USPS), meaning United transported US mail internationally on behalf of USPS.
United was obligated to provide bar code scans of mail receptacles to USPS when United took possession of mail, and when United delivered the mail to intended recipients abroad. United was entitled to full payment only if accurate mail scans were provided and mail was delivered in a timely fashion.
However, between 2012 and 2015, United engaged in a scheme to defraud USPS by submitting false delivery scan data to make it appear that United was complying with ICAIR requirements, when in fact the airline wasn’t. United submitted automated delivery scans that didn’t correspond to the actual movement of mail.
Because the scans weren’t connected to the actual delivery of mail, United was overpaid — the airline secured millions of dollars in payments from USPS that it wasn’t entitled to.
United also admitted that it had concealed problems related to scanning and mail movements that would have subjected United to financial penalties under the ICAIR contracts. Certain individuals at United works to conceal United’s automation efforts from USPS, knowing the data transmitted was fabricated. Among other things, these people tried to hide the automation practices by revising falsified delivery times to make the automated scans seem less suspicious.
United will pay $49 million to settle this case
United entered into a non-prosecution agreement (NPA), and has agreed to pay:
- $17,271,415 in criminal penalties and disgorgement to resolve the criminal investigation into the fraud scheme
- $32,186,687 as part of a False Claims Act settlement for related conduct
- United has also agreed to report any evidence or allegation of a violation of US fraud laws, and to strengthen its compliance program, especially with reporting requirements
As Acting Assistant Attorney General Nicholas McQuaid of the Justice Department’s Criminal Division describes this:
“United was entrusted by the U.S. Postal Service with fulfilling a critical government function – the transportation of U.S. mail abroad. Instead of performing this duty with transparency, United defrauded the U.S. Postal Service by providing falsified parcel delivery information over a period of years and accepting millions of dollars of payments to which the company was not entitled. Today’s resolution emphasizes that companies that defraud the government – no matter the context, contract, or federal program – will be held accountable.”
It’s worth noting that all of this happened under Jeff Smisek’s tenure as CEO of United (he resigned in late 2015). While he may very well not have known about this specifically, there’s no denying that this was in line with some of the other behavior we saw at the airline.
Smisek’s tenure as CEO of United is marked with a fair bit of corruption. Famously Smisek was involved in a bribery scandal, as United operated a once-weekly flight between Newark and Columbia, South Carolina, for the Chairman of the Port Authority of New York and New Jersey.
Bottom line
Like most major airlines, United Airlines transports international mail on behalf of USPS. Between 2012 and 2015 the company was falsifying its delivery timelines in order to maximize the compensation it got for delivering mail — rather than reporting the actual timeline with which it delivered mail, the airline reported an aspirational timeline that didn’t reflect reality.
A DOJ investigation has now revealed all the details of that, and United is on the hook for $49 million related to fraud charges in this case.
The fraud committed by UAL Corp in
2012-2015 under the CO Management
(Jeff Smisek). Keeping & implementing an the antiquated Continental reservations system, sketchy deal dumping Starbucks Inflight coffee for his buddy's Houston based coffee distributor Freshbrew (worst substandard quality) Continental Board of Directors member Robert Sakowitz was also (Partner + Non-Executive Chairman + Member, Board of Directors FreshBrew Group 1994 - Present 27 years)
https://www.bizjournals.com/chicago/news/2015/11/17/united-airlines-coffee-decision-goes-back-years.html
and.... Finally...
Smisek Involved in...
The fraud committed by UAL Corp in
2012-2015 under the CO Management
(Jeff Smisek). Keeping & implementing an the antiquated Continental reservations system, sketchy deal dumping Starbucks Inflight coffee for his buddy's Houston based coffee distributor Freshbrew (worst substandard quality) Continental Board of Directors member Robert Sakowitz was also (Partner + Non-Executive Chairman + Member, Board of Directors FreshBrew Group 1994 - Present 27 years)
https://www.bizjournals.com/chicago/news/2015/11/17/united-airlines-coffee-decision-goes-back-years.html
and.... Finally...
Smisek Involved in a bribery scandal,
https://www.google.com/amp/s/www.nytimes.com/2017/06/09/business/united-airlines-ceo-scandal-lawsuit.amp.html%3f0p19G=0232
So not surprised!!
Question? How many millions is earmarked to United via the new stimulus package? Sooo. It's a fine but it's costing them nothing. Got it.
The way underneath an airline is indeed open airliner is an open forum of open operations of being political too many times.
I am not surprise of United Airlines cheating behavior. I have not flew United for four years because of what they did to me. I did an itenery change on a pair of tickets within the 'no charge' 24 hour period. They charged me for the new tickets, which only changed the departure time by two hours, but never refund the cost of the original tickets. I tried for a favourable remedy for months to no avail. This is a corrupted company.
At least mail was delivered in a timely fashion back then. Now I receive domesgic mail in 3-4 weeks sometim6e. It's a joke and a major problem if you need to make sure your mortgage payment or any other payment gets paid on time. When I visited my post office because II tracked my package at that location where it was just sitting for over a week and not delivered even though it was shipped...
At least mail was delivered in a timely fashion back then. Now I receive domesgic mail in 3-4 weeks sometim6e. It's a joke and a major problem if you need to make sure your mortgage payment or any other payment gets paid on time. When I visited my post office because II tracked my package at that location where it was just sitting for over a week and not delivered even though it was shipped priority mail and already weeks late. The askwe was simply COVID. Best excuse of 2020 for everyone.
And that #2 engine fire. Pulling planes from storage with no FOD training. Some tool left near the intake.
United is one of the most disliked companies for better, or worse reasons.
Were they trying to give a completely different picture to reality, or was it some accountants idea that by guessing the times based on expectation , that it would save them $millions in time that would otherwise be wasted scanning each parcel ? I wonder how their true performance compared to their pre-determined times ? If it wasn't by much, is this a valid argument? Yes/No?
American Airways was once caught defrauding the Federal government on a mail contract and banned from all. such future contracts.
CR Smith changed their name to American Airlines, and the rest is history.
R. Jirda. So true . what else are they compromising in exchange for money , flight passengers ?
I've seen documentaries where airplanes crash because airline replaced a broken part with the cheapest copy of it to save a few dollars then airplane crashes killing passengers . a few dollars over human lives.
The problem with US / Corporate prosecution is the shareholders and fare paying passengers are ultimately the payers of these crimes. When they charge Corp entities and they settle and agree to pay, it’s just passed on to others. The fact that no one is held to account not any jail time is served for committing fraud is a fraud on us all. Legislation needs to change to put people in stripes for crimes, not increase the fares we all pay.
Again: greed, greed, greed. The American corporate way.
Before ppl use to pay bribe to avoid jail time and now they take bribe on the name of fine to give no jail time. so basically fraud is okay as far you can pay bribe . Amazing
My grandfather worked for United injured on the job and before he passed away United cut his benefits almost 3/4. Nobody cares but the bottom line
Cash fines are the cost of doing business in corporate America and is especially laughable with the multiple bailouts they had, criminal prosecution to intentional bad actors is the only way.
The people paying the fine, the stockholders, are the one party who had noting to do with this unethical behavior. Once employees who perpetrated are forced to pay they fine themselves or go to jail, this behavior will stop and we will all benefit.
One has to be concerned about how likely a culture that can do this would maintain it's aircraft safely for the flying public.
Peak $misek.
Love the endless "United sucks, I miss Continental!" comments too...guess what, your terrible CO CEO & majority of the C-Suite came in and f'd things up and tarnished the best in class United MP loyalty program.
Held accountable? It literally states in the resolution that UA agreed to pay to not to be held criminally accountable.
Guess I'll employ that tactic next time I'm caught robbing a bank. "Yes, I'll give the money back if the police will agree not to prosecute me!"
WTF?
People like Elle are the reason why I read the comments on every article. JFC.
I would be nice (and probably good for you guys from a legal perspective) to cite a source for "Famously Smisek was involved in a bribery scandal..."
The link you provided doesn't show any involvement by Smisek.
I knew before finishing the article that Smisek was involved. Let it be known that he eliminated all original UAL management people from their jobs when CO took over UA. He corrupted the company with routes favoring his buddies and implementing an antiquated reservations system for his own monetary gain..and he lies a free man under his umbrella, when we all know where he should be lying. $49,000,000???? Let the layoffs begin.
Past contactor for United Airlines, I filed a EEOC discrimination charge against this company, this type of behavior, conduct and how they negotiate there contractual terms is not new to me, and why they are paying this penalty. When I read this article from the the DOJ Justice come in other form. I was a parent of two came to work, and gave my all as a contract specialist, and my service to the United...
Past contactor for United Airlines, I filed a EEOC discrimination charge against this company, this type of behavior, conduct and how they negotiate there contractual terms is not new to me, and why they are paying this penalty. When I read this article from the the DOJ Justice come in other form. I was a parent of two came to work, and gave my all as a contract specialist, and my service to the United Airlines was not enough. I would like to thank the DOJ for exposing this criminal activity that many whistleblowers such as myself can't come forward due to threats against them and there family.
My former roommate failed a drug test that United handled which to this day remains an unsolved mystery as she is the most stone cold sober person I know. We called the lab for confirmatory testing which was supposed to be supplied within 72 hours and they didn't get back to us for almost 5 which I thought was a violation of the black and white rules. I'm curious if this 2015 drug screen interacted...
My former roommate failed a drug test that United handled which to this day remains an unsolved mystery as she is the most stone cold sober person I know. We called the lab for confirmatory testing which was supposed to be supplied within 72 hours and they didn't get back to us for almost 5 which I thought was a violation of the black and white rules. I'm curious if this 2015 drug screen interacted with the mail scandal which we now was rife with fraud and so mismanaged with a culture of made up timelines and ethics violations to nickel and dime the government.. not try to stretch but it doesn't seem impossible that United scanned the wrong item or mixed them up. I wonder if the lab that tested her sample still has her information for mailing and test results so many years after the fact (pretty sure it was Quest diagnostic). Sounds worthy of more investigative research and already fills in a few of the blanks that left us dumbfounded at the time.
If an amazon delivery driver pulled the same stunt, they will be promptly charged and will definitely get some jail time.
But when its a big corporate entity then its a case of 'oh its too big to fail... lets give them billions and billions of tax payers money to get back on their feet' and then fine peanuts with no criminal liability on anyone.
But then what are we talking about. Look at Boeing...
If an amazon delivery driver pulled the same stunt, they will be promptly charged and will definitely get some jail time.
But when its a big corporate entity then its a case of 'oh its too big to fail... lets give them billions and billions of tax payers money to get back on their feet' and then fine peanuts with no criminal liability on anyone.
But then what are we talking about. Look at Boeing they literally got away with murder!
when you have money you can purchase justice.
No way good Americans would cheat on even better Americans. Unthinkable.
@Tim — I wouldn’t be so sure. This is mail that was actually delivered and possibly even on time.
The fact that there was a civil false claims act settlement likely means there was a whistleblower who brought this to light initially.
Disgusting. At the same time, where is UA getting the $49 million to settle the case? Hopefully not from the aid it's getting from the US gov't.
So, they are giving back some of the pandemic bailout. They should be forced to sell stock and dilute their owners to pay the fine.
In a world of data and online pictures, you truly have to wonder how anyone thinks they can get by with crime these days.
All it takes is a little bit of detective work. The USPS knows when mail is supposed to get to it; they have every reason to investigate when there are differences between what was promised and what was delivered.
"It’s worth noting that all of this happened under Jeff Smisek’s tenure as CEO of United"
I'm shocked. What a POS. Should be some jail time for those who knowingly defrauded USPS too. But don't hold your breath.
Very unethical behaviour.