The US Department of Justice (DOJ) has just announced that United Airlines will pay $ 49 million to resolve criminal fraud and civil claims related to fraud on postal service contracts for the transport of international mail.
United Airlines international mailing schedule
Under the non-prosecution agreement and the civil settlement agreement, United Airlines International Commercial Air (ICAIR) has entered into contracts with the United States Postal Service (USPS), which means that United has transported U.S. mail internationally on behalf of USPS.
United was required to provide barcode scans of mailboxes to USPS when United took possession of mail, and when United delivered the mail to the intended recipients abroad. United were only entitled to full payment if accurate mail scans were provided and mail delivered on time.
Between 2012 and 2015, however, United was engaged in a scheme to defraud USPS by submitting false reading data to show that United complied with ICAIR requirements, when in fact the airline was not. United has submitted automatic delivery scans that do not match the actual mail delivery.
Because the scans were not related to the actual delivery of mail, United was overpaid – the airline secured millions of dollars in USPS payments to which it was not entitled.
United also acknowledged that they were hiding problems related to scanning and postal movements that would financially penalize United under the ICAIR contracts. Certain individuals at United are working to hide United’s automation efforts for USPS, knowing that the data sent has been fabricated. Among other things, these people tried to hide the automation practices by reviewing falsified delivery times to make the automated scans look less suspicious.
United will pay $ 49 million to settle this case
United entered into a non-prosecution agreement (NPA) and agreed to pay:
- $ 17,271,415 criminal fines and atrocities to solve the criminal investigation into the fraud scheme
- $ 32,186,687 as part of a settlement for false claims for related conduct
- United has also agreed to report evidence or allegations of a violation of U.S. fraud laws, and to strengthen its compliance program, particularly with reporting requirements.
As Acting Assistant Attorney-General Nicholas McQuaid of the Justice Department’s Criminal Justice Division describes it:
“United has been entrusted by the US Postal Service to fulfill a critical government function – the transport of American mail abroad. Instead of fulfilling this duty with transparency, United defrauded the US Postal Service by providing falsified parcel 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 businesses that defraud the government – regardless of the context, contract or federal program – will be held accountable. ”
It is noteworthy that all of this happened during Jeff Smisek’s tenure as United’s CEO (he resigned at the end of 2015). While he may not have known specifically about this, he can not deny that it is consistent with the other behaviors we saw at the airline.
Smisek’s tenure as CEO of United is marked by a fair bit of corruption. Smisek is known to have been involved in a bribery scandal, as United managed a flight once a week between Newark and Columbia, South Carolina, for the chairman of the New York and New Jersey Port Authority.
Bottom line
Like most major airlines, United Airlines transports international mail on behalf of USPS. Between 2012 and 2015, the company falsified its delivery timelines to maximize the compensation it received for delivering mail – rather than reporting the actual timeline with which it delivered mail, the airline had an aspiring timeline reported that does not reflect reality.
An investigation by the DOJ has now revealed all the details of this, and United are in the case for $ 49 million in connection with fraud charges in the case.
(Hint of the hat to live and let’s fly)