United Airlines has escaped prosecution by US authorities following a corruption probe, and has agreed to pay a $2.25 million penalty.
The US Attorney’s Office (USAO) for the District of New Jersey cites the carrier’s “extensive” cooperation and its acceptance of responsibility as factors behind why it chose to not pursue further action against the carrier.
The probe had involved United’s dealings with former Port Authority of New York and New Jersey (PANYNJ) chairman David Samson, who had used his official authority to pressure United to launch nonstop service between Newark and Columbia, South Carolina. PANYNJ is the operator of Newark airport, where United operates a hub.
Samson, who pleaded guilty today to bribery in the case, had faced a maximum penalty of 10 years in prison and a fine of $250,000 or twice the gross gain or loss from the offense. But a plea agreement has shortened the maximum prison term on Samson to 24 months.
The case had led to the resignation of former United chief executive Jeff Smisek in September 2015. Two other United executives who were involved had also resigned.
Samson, who had owned a home near Columbia, had repeatedly exerted pressure on the airline to relaunch nonstop service between Newark and Columbia. During a September 2011 dinner with United executives including Smisek, Samson had referred to nonstop service between Newark and Columbia once operated by United subsidiary Continental Airlines, and how it had made travel to his home in Columbia “more convenient”.
United executives subsequently told Samson that the route will not be profitable, but Samson used his official authority to pressure United to re-establish flights. At that time, an agreement between United and the PANYNJ to build a maintenance hangar at Newark airport was slated for presentation to the PANYNJ board.
Samson and Jamie Fox, who was then a paid consultant and lobbyist for United, had threatened to keep the agreement off the board’s agenda if United did not reinstate the loss-making Newark-Columbia route.
In an e-mail exchange between Samson and Fox in November 2011, Fox had referred to the hangar agreement and suggested to Samson that “[m]aybe it needs further review”.
“Following through on this exchange with Fox, Samson caused the hangar agreement to be removed from the Port Authority’s agenda,” says USAO.
“On multiple occasions, Fox communicated to United that its failure to reinstate the route had made Samson angry and was having a negative impact on United’s relationship with the Port Authority.”
United reinstated the route in September 2012 and operated it until March 2014, during which time Samson flew on the route on 27 occasions between October 2012 and January 2014. The route was referred to as the “chairman’s flight” by Samson and others, and “Samson Air” by Fox.
“United’s decision to reinstate the route departed from its standard process for adding a route to United’s network, which included forecasts on how the route could be expected to perform, multiple levels of review, and presentation to a group of senior United executives,” says the USAO.
The carrier admitted that it did not consult with any legal or compliance personnel before making the decision to reinstate the route. The airline operated the flight twice weekly, with a schedule that catered to Samson's preference. United discontinued the route after Samson resigned in March 2014.
Besides agreeing to the $2.25 million penalty, United also committed to report to the USAO during a two-year period on its compliance efforts, and has implemented a series of measures to prevent and detect bribery.
Smisek’s successor Oscar Munoz says in a statement: "We will continue to act with the utmost integrity in everything we do, ensuring that we are always conducting business ethically and with the best interests of all of our stakeholders in mind."
Fox, the former United consultant, was charged in a separate criminal complaint with conspiring to commit bribery and will appear in court at a later date. Fox subsequently was the commissioner of the New Jersey department of transportation from September 2014 to October 2015. He faces a maximum penalty of five years in prison and a fine of $250,000 or twice the gross gain or loss from the offense.
Source: Cirium Dashboard