United Airlines has agreed to pay a $49 million fine for fraud relating to international postal delivery contracts. Just another chapter in the troubled Smisek era…
United Airlines Must Pony Up $49 Million For Mail Delivery Fraud
The fraud occurred from 2012 to 2015, centering on United’s submission of automated delivery scans to the United States Postal Service (USPS) “based on aspirational delivery times,” rather than the actual pickup or delivery times. At the time, USPS had contracted with United to deliver mail under an International Commerce Air (ICAIR) contract.
The U.S. Justice Department (DOJ) noted that United defrauded millions from the postal service:
Between 2012 and 2015, United engaged in a scheme to defraud USPS by submitting false delivery scan data to make it appear that United and partner airlines with which it worked were complying with the ICAIR requirements, when in fact they were not.
Instead of providing USPS accurate delivery scans based on the movement of the mail, United submitted automated delivery scans based on aspirational delivery times. These automated scans did not correspond to the actual movement of the mail, as mandated by the contracts.
Because this scan data was not tethered to the actual delivery of mail to the foreign recipients, payment was inappropriate under the ICAIR contracts. Through this data automation scheme, United secured millions of dollars in payments from the USPS to which United was not entitled under the ICAIR contacts.
United Airlines also admitted that it was aware of the issue and concealed it. This does not appear to be a company-wide conspiracy, but the actions of a number of rogue employees who have since been dismissed.
Who was CEO during 2012-2015 you might ask?
That’s right, disgraced Jeff Smisek whose tenure at the helm of United was not only marked by poor operational performance, but a number of embarrassing scandals. He has not been directly implicated in this latest scandal, but it serves as another painful reminder of his stormy years as CEO.
The fine was announced Friday afternoon by the DOJ as part of a non-prosecution agreement with United Airlines. As part of the deal, United will pay $17 million in criminal penalties and $32 million as part of a settlement for a civil compliant. United will also return all funds received through the perpetration of fraud by former United Cargo employees.
A simple case: United fudged its delivery dates and got caught. Now it must pay up to the tune of $49 million. While nothing would surprise me from the Smisek era, it appears to be an inside job of a handful of cargo employees rather than a practice condoned by C-Suite officials.
$49 million certainly not chump change, though the USPS is still facing a $48.2 billion deficit in its employ pension program. But every penny counts…