The United States Department of Justice (DOJ) has just announced that United Airlines will pay $ 49 million to resolve criminal fraud charges and civil suits related to fraud in postal service contracts for the transportation of international mail.
United Airlines international mail scheme
Under the non-proceeding and civil settlement agreement, United Airlines has entered into International Commercial Air (ICAIR) contracts with the United States Postal Service (USPS), which means that United has transported US mail internationally on behalf of the USPS.
United was obliged to provide barcode scans of mailboxes to the USPS when United took possession of the mail and when it delivered it to intended recipients abroad. United was entitled to full payment only if accurate mail scans were provided and mail was delivered in a timely manner.
However, between 2012 and 2015, United became involved in a scheme to defraud the USPS by sending false delivery scan data to make it appear that United was meeting ICAIR requirements, when in fact the airline was not. United submitted automated delivery scans that did not match the actual movement of the mail.
Because the scans were not connected to the actual delivery of the mail, United was overpaid – the airline secured millions of dollars in USPS payments to which it was not entitled.
United also admitted that it hid problems related to scanning and moving mail that would have subject United to financial penalties under the ICAIR contracts. Certain individuals at United work to hide United’s automation efforts from the USPS, knowing that the data transmitted was manufactured. Among other things, these people tried to hide automation practices by reviewing fake delivery times to make automated scans look less suspicious.
United will pay $ 49 million to resolve this case
United entered into a non-charge agreement (NPA) and agreed to pay:
- $ 17,271,415 in criminal penalties and restitution to resolve the criminal investigation into the fraud scheme
- $ 32,186,687 as part of a False Claims Act agreement for related conduct
- United has also agreed to report any evidence or allegation of violation of United States fraud laws and to strengthen its compliance program, especially with reporting requirements.
As acting deputy attorney general, Nicholas McQuaid of the Department of Justice’s Criminal Division describes this:
“United was tasked by the United States postal service to fulfill a critical government function – transporting mail from the United States abroad. Instead of performing this task transparently, United defrauded the United States postal service by providing falsified package delivery information over a period of years and accepting millions of dollars in 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 responsible. “
It is important to note that all of this happened during Jeff Smisek’s tenure as United CEO (he resigned in late 2015). Although he may well not know about this specifically, there is no denying that it was in line with some of the other behaviors we saw at the airline.
Smisek’s tenure as United’s CEO is marked by a bit of corruption. Smisek was notoriously involved in a bribery scandal, as United operated a weekly flight between Newark and Columbia, South Carolina, for the president of the New York and New Jersey Port Authority.
Result
Like most major airlines, United Airlines transports international mail on behalf of the USPS. Between 2012 and 2015, the company forged its delivery schedules in order to maximize the compensation obtained for mail delivery – instead of reporting the actual schedule with which it delivered the mail, the airline reported an aspirational schedule that did not reflect reality.
A DOJ investigation has now revealed all the details of this, and United is about to receive $ 49 million related to charges of fraud in this case.
(Hat tip to live and let’s fly)