Getting away with bribery


Can the DoJ go "retro" on recent mergers by blocking slot swap deals?

It turns out that crime does pay. At least that seems to be the lesson that United Airlines is learning this week. Some two years after axing the “Chairman’s Route” between Newark and Columbia, South Carolina – a route operated twice weekly so that the Chairman of the Port Authority of New York and New Jersey could more easily fly to his vacation home – the company signed an agreement this week with federal prosecutors, agreeing to stop bribing people and pay $2.25mm in exchange for no criminal charges being filed against the company.

The route was placed in the schedule specifically to gain approval from the PANYNJ to lease land and build a new wide-body maintenance hangar at the airport. Progress on the negotiations stalled as the PANYNJ refused to consider the request at its board meetings until the route was added. Once that happened the topic made it on to the meeting agenda and was quickly approved. And so long as the route was operating it seems that United continued to be able to have topics it saw as important discussed and resolved. Once the route was terminated in March 2014 the relationship soured again. Later that same year a public fight over landing fees and funding priorities cropped up, a topic that had been “mysteriously” avoided for the prior three years. Funny coincidence, that.

Of course, I’m not entirely sure how you send a company to jail so I don’t know what criminal charges would really accomplish, but I have to think that the $2.25mm fine is FAR less than the value, both in real money and in kind favors, the company realized during the three years that the route operated. Yeah, there is a small PR hit for being known as the company that bribes people to get what you want, but the business got done and the company profited from it, even with the fine. That’s shitty.

A United pilot gets the news about the CEO's departure. On his EFB/iPad on the flight deck of a UA aircraft.
A United pilot gets the news about the former CEO Smisek’s departure. On his EFB/iPad on the flight deck of a UA aircraft.

The route authorization and associated fallout eventually led to the sacking of former CEO Jeff Smisek. He walked away with a princely sum of cash though also the likelihood that he’ll never work in the industry again. Though keeping that golden parachute depends on him not being convicted of a crime “involving moral turpitude.” At least the agreement does not preclude that from happening, best I can tell:

This Agreement does not include potential criminal tax charges, as to which this Office can make no agreement, and it does not provide any protection against prosecution for any other crimes except as set forth above. This Agreement also applies only to United and its present or former parents, subsidiaries, and affiliates as of the date of this Agreement, and not to any other entities or to any individuals.

Oh, and United is not allowed to take a tax deduction on the fine paid. I guess that’s something.

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Seth Miller

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I fly ~200,000 miles annually; these are my stories. You can connect with me on Twitter, Facebook, and LinkedIn.

14 Comments

  1. United didn’t bribe so much as respond to the unethical demands of a key Port Authority individual. Nevertheless, the company shouldn’t have reinstated the flight.

  2. This may involve United Airlines, but getting away with corporate bribery is truly the American way. Wanna bet that the beneficiary of this Chairman’s Route, David Samson, does not spend a single day in prison despite pleading guilty to a felony count of bribery? Although I do wonder if the timing of his plea has any connection to Trump’s apparent decision not to choose longtime Samson buddy Chris Christie for the veep spot.

  3. Regardless of his motivation for doing so, the individual who broke the law should be the one to pay the price for his indiscretion.

    1. Sure, but he did so on behalf of the company, for company gains and with the knowledge and cooperation of others at the company. I get that you cannot throw a company in jail but the fine is sufficiently small as to not be a reasonable deterrent towards future transgressions. And it is not a restitution of the gains realized by the illegal actions.

      That bothers me.

      1. Agree. While the individual should face some sort of consequence, criminal or otherwise, the organization for which the individual(s) worked is ultimately held accountable.

        In reference to David Samson, PANYNJ chairman who basically forced UA’s hand, he pleaded guilty to the bribery charges. His political career is over, and another reason why Christie (close friend and ally to Samson) isn’t Trump’s veep candidate. Ironic that Samson is also a former NJ Atty General. I guess NJ is at least as corrupt as my current state of residence, IL.

    2. Then, I was vicariously involved. That explains the bribery CBT I’m compelled to complete by the end of August.

      Mea culpa, mea culpa, mea maxima culpa.

    3. I was involved in a legal issue during my brief period in airline management. I was informed that the company indemnified me as long as my actions did not reach beyond the limits of the law. In that case, I would be flying solo.

  4. If United were a person, then this would count as #WhitePrivilege. I honestly don’t know why these guys were allowed to skate with a slap on the wrist.

  5. Loved the line “the company signed an agreement this week with federal prosecutors, agreeing to stop bribing people”. It does appear that they are getting off lightly. That said, I think Oscar appears to be the right person to take United forward.

  6. Hope you’re being sarcastic about not putting a company in jail. You can still criminally prosecute the individuals who did it, and they can go ahead and serve the time for the company’s trouble. Of course, no one will, because you know…white collar corporate America.

    And the way to stick it to a company is not by levying a flat fine. Hit them for 10% of all profits for 10 years and that practice will stop. Of course, congress and the SEC would never institute such a law because you know…white collar corporate America.

    The sad part is that we will all end up paying for the $2.5M, which will just get passed on to consumers.

  7. Hilarious. So what’s the government gonna do with this penalty money? Use it to invest in aviation infrastructure, or can they like offset (forgive) my income tax for a few years pls? Nah, it will just be wasted. Lost in the porkroll.

  8. I wonder if anyone has told Jeffy-Poo that the Feds don’t like to knock during daylight hours. He will find that to be useful information.

Comments are closed.

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