United to Pay $2.4 Million Over “Chairman’s Flight”

United got into trouble last year when they were found to be operating a flight from Newark (EWR) to Columbia, South Carolina (CAE). The Federal prosecutor found that the flight was operated for the benefit of David Samson, who was the Chairman of Port Authority of New York and New Jersey. Samson served as Chairman from 2011 to 2014, and would take the flight to spend the weekend in Columbia with his wife. Internally, the twice-a-week route was referred as the “Chairman’s flight,” and the planes were only half full on average. The route ultimately lost almost $1 million before it was grounded; the tab was picked up by shareholders.

United's Embraer E175 Aircraft. Source: United Airlines chairman's flight

United’s Embraer E175 Aircraft. Source: United Airlines

United received favors, including a hangar for widebody aircraft at Newark, as a result of operating the “Chairman’s flight.” Samson had taken it off the agenda after United ended the EWR-CAE route in early 2011, but put it back on after United reinstated the flight. The ordeal led to an internal investigation, and Jeff Smisek ultimately had to step down as United’s CEO.

Earlier this year, Samson pleaded guilty to bribery, and admitted to taking the flight 24 times. His sentencing was originally scheduled for October 20, but has been pushed back to December, and then again to January 5, 2017. The maximum penalty is 10 years in prison and a $250,000 fine, though it’s likely that Samson would receive a less severe punishment.

United, on the other hand, agreed to pay $2.25 million penalty to avoid prosecution at the time. Today, according to Reuters, it was announced that United will be paying an additional $2.4 million penalty to resolve their violations. In a statement, Andrew, Ceresney, director of SEC’s Division of Enforcement, said:

United disregarded the books and records and internal accounting controls provisions of the securities laws while casting aside its normal decision process to re-enter one of its hub’s poorest performing markets.

The SEC says that despite the penalty, they are continuing their investigation.

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Comments

  1. White collar corporation crime pays .
    Just pay a fine and move on , imagine if we an individual person offered a government official a bribe go stright to jail do not pass go and collect two hundred dollars

    • Shareholders get stuck both with the losses to operate the flight and with the fines. The CEO leaves with riches beyond your imagination.

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