The US Department of Justice (DOJ) has just announced that United Airlines will pay US $ 49 million to solve criminal charges and civil claims related to postal service contract fraud for the transportation of international mail.
United Airlines International Postal Program
Under the Non-Law Enforcement Agreement and Civil Law Settlement Agreement, United Airlines has signed International Commercial Air (ICAIR) contracts with the United States Postal Service (USPS), which means that United has transported US mail internationally on behalf of USPS.
United was required to provide USPS barcode scans of inboxes when United took possession of the mail and when United delivered the mail to intended recipients overseas. United was only eligible for full payment if accurate mail scans were provided and mail was delivered on time.
However, between 2012 and 2015, United ran a USPS fraud program by submitting false delivery scan data to create the impression that United met ICAIR requirements when the airline did not. United submitted automated delivery scans that did not reflect actual mail movement.
Because the scans weren’t tied to actual mail delivery, United was overpaid – the airline secured millions of dollars in payments from USPS to which it was not entitled.
United also admitted it had been hiding scanning and mail movement issues that United had fined under the ICAIR contracts. Certain people at United work to hide United’s automation efforts from USPS, knowing that the data being transferred was fabricated. Among other things, these people tried to hide the automation practices by revising fake delivery times to make the automated scans less suspicious.
United will pay $ 49 million to resolve this case
United has entered into a Non-Law Enforcement Agreement (NPA) and agreed to pay:
- $ 17,271,415 in criminal penalties and disgorgations to resolve the criminal investigation related to the fraud program
- $ 32,186,687 as part of a False Claims Act settlement for related conduct
- United has also agreed to report evidence or allegations of a violation of US fraud laws and strengthen its compliance program, particularly with regard to reporting requirements
As Assistant Attorney General, Nicholas McQuaid of the Department of Justice’s Criminal Division describes the following:
“United has been entrusted with an important government role by the US Postal Service – shipping US mail overseas. Rather than fulfilling this duty with transparency, United defrauded the U.S. Postal Service by providing fake package delivery information and accepting millions of dollars in payments over a period of years to which the company was not entitled. Today’s resolution emphasizes that companies who defraud the government – regardless of 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 United’s CEO (he resigned in late 2015). While he may not have known this for sure, it cannot be denied that it was consistent with some of the other behaviors we saw at the airline.
Smisek’s tenure as United CEO has been a bit of a corruption. As is known, Smisek was involved in a bribery scandal when United operated a weekly flight between Newark and Columbia, South Carolina, for the chairman of the New York and New Jersey Port Authority.
Like most major airlines, United Airlines delivers international mail on behalf of USPS. Between 2012 and 2015, the company falsified its delivery times to maximize compensation for the delivery of mail. Instead of specifying the actual schedule for delivery of the mail, the airline reported a targeted schedule that did not match reality.
An investigation by the DOJ has now revealed all the details, and United is on the hook with $ 49 million related to fraud allegations in the case.
(Top of the hat live and let’s fly)