(Correction: An earlier version of this story said Polar Air Cargo had ceased to exist. Although the joint venture arrangement was terminated, Atlas Air continues to operate Polar Air Cargo on a limited basis.)
The Polar Air Cargo joint venture between Atlas Air and DHL Express ended earlier this year, but the people involved in a scheme to defraud the airline of $32 million are still paying the price.
The U.S. government on Thursday announced the latest sentencing in the case. Skye Xu was sentenced to two years in prison by U.S. District Judge Jesse Furman for paying around $4.4 million in kickbacks in a nine-month span starting in November 2020 to shell companies controlled by three senior Polar executives.
The kickbacks earned Xu and his California-based Sky X Airlines, an airfreight wholesaler, two lucrative business contracts with Polar, according to court records. The contracts earned Sky X Airlines about $46 million in gross revenue and nearly $10 million in net revenue based on the sales of unused cargo space during the COVID pandemic.
Xu previously pleaded guilty to conspiracy to commit wire fraud and money laundering.
In total, the Polar executives received more than $20 million in kickbacks and other financial benefits from Polar customers and vendors over a dozen years in exchange for favorable business arrangements with Polar. Kickback payments were often calculated per kilo of cargo shipped with Polar or as a percentage of the revenue earned as a result of the vendor’s relationship with Polar.
“The fraud that Xu and his coconspirators perpetrated – which involved a substantial portion of Polar’s senior management and at least ten customers and vendors of Polar – led to pervasive corruption of Polar’s business, touching nearly every aspect of the company’s operations, for over a decade,” the U.S. Attorney’s Office for the Southern District of New York said in a news release.
The senior Polar executives also reaped substantial benefits as a result of secret ownership interests in some of the company’s vendors.
Xu was the last of 10 defendants charged in this case to be convicted. Five of the 10 charged defendants have previously been sentenced. In addition to the prison term, Xu was sentenced to three years of supervised release and ordered to forfeit $4.5 million and make restitution to Polar in the amount of $1.4 million.
In October, Abilash Kurien, a former vice president of marketing, revenue management and network planning at Polar Air Cargo, was sentenced to two years and eight months in prison. Carlton Llewellyn, who served as Polar’s vice president in charge of operations systems performance and quality, was sentenced to six months in prison. In late August, Robert Schirmer, who was senior director of customer service for the Americas at Polar, received an 18-month prison sentence.
The ringleader of the scheme was Lars Winkelbauer, Polar’s chief operating officer for three years until July 2021. Winkelbauer joined DHL from Polar in 2007 and, in an unusual arrangement, the courier allowed him to hold dual leadership positions at both companies. Between 2014 and 2018, he served as DHL’s vice president for aviation and network planning in the Asia Pacific region and had a similar role at Polar. In May 2024, he was sentenced to four years in federal prison.
During the first quarter, Atlas Air and DHL Express ended their Polar Air Cargo joint venture after 18 years. Atlas Air operated the aircraft and sold unused DHL capacity to freight forwarders. Last year, Polar Air Cargo had eight widebody freighters in its fleet, according to aviation databases.
The companies said ending their partnership was a mutual decision. During a March earnings call with investors DHL executives said the company is streamlining its list of contract carriers as part of a sweeping cost-cutting campaign. Atlas Air said at the time that the Polar Air decision was made in the context of a new strategic focus of diversifying its customer base and concentrating on high-margin, long-haul flying.
Atlas Air holds Polar Air Cargo’s air operators certificate. Polar continues to provide airline operations in some locations for certain services, according to Atlas.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
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