United Airlines (NYSE: UAL) has agreed to pay more than $49 million to resolve criminal charges and civil claims alleging it defrauded the U.S. Postal Service for transport of international mail, the Department of Justice said Friday.
The world’s third-largest airline falsified bar code scans of mail bins delivered to foreign postal services or military bases between 2012 and 2015 to make it appear it was performing to contract specifications and ensure full payment, which was conditioned on timely delivery, according to the federal complaint. It said United used automated delivery scans based on aspirational delivery times, not actual scans in real time.
United further admitted that it concealed problems related to scanning and mail movements that, if known, would have subjected the airline to financial penalties. The Justice Department said several individuals at United Cargo tried to cover up their actions to avoid detection.
“United was entrusted by the U.S. Postal Service with fulfilling a critical government function — the transportation of U.S. mail abroad,” said Nicholas McQuaid, the acting assistant attorney general for the Criminal Division, in a statement. “Instead of performing this duty with transparency, United defrauded the U.S. Postal Service by providing falsified parcel delivery information over a period of years and accepting millions of dollars of payments to which the company was not entitled. Today’s resolution emphasizes that companies that defraud the government — no matter the context, contract or federal program — will be held accountable.”
Under the settlement, United has agreed to strengthen its compliance program and adhere to specific reporting requirements, which require it to submit yearly reports to the Fraud Section regarding the status of remediation and efforts to strengthen internal controls.
In a statement, United said, “The U.S. Postal Service is a valued customer for United, and we are glad to have remedied these procedures and look forward to serving the Postal Service in the future.”
In August 2019, American Airlines paid $22.1 million to resolve similar civil claims that it altered on-time data under a Postal Service contract.
The Justice Department said the penalty was based on the seriousness of the offense, United’s failure to timely and voluntarily self-disclose the violations and United’s prior history, including a 2016 nonprosecution agreement in relation to potential criminal bribery to gain a slot at Newark Liberty International Airport in New Jersey. In United’s favor was the fact that it cooperated with the investigation, removed the principal manager who led the criminal scheme and hired outside counsel and advisers to establish a compliance program with regular employee training.