United Airlines fined $2.4m for executive’s ‘convenient flights’
The Securities and Exchange Commission today announced that the parent company of United Airlines has agreed to pay $2.4 million to settle charges in a case where shareholders wound up footing the bill so a public official could get more convenient flights.
According to the SEC’s order, United reinstated a nonstop flight between Newark, N.J., and Columbia, S.C., at the behest of David Samson, the then-chairman of the Port Authority of New York and New Jersey who sought a more direct route to his home in South Carolina.
The route previously experienced poor financial performance and was canceled by Continental Airlines prior to its merger with United, and a preliminary financial analysis conducted after Samson began privately advocating for the route’s return revealed it would likely lose money again.
Nevertheless, the SEC’s order finds that United officials feared Samson’s influence could jeopardize United’s business interests before the Port Authority, including the approval of a hangar project to help the airline at Newark’s airport. The company ultimately decided to initiate the route despite the poor financial projections. The same day that United’s then-CEO approved initiation of the route, the Port Authority’s board approved the lease agreement related to the hangar project. United employees were told “no proactive communications” about the new route.
According to the SEC’s order, United circumvented its standard process for initiating new routes, and no corporate record at United accurately and fairly reflected the authorization to approve the money-losing flight route from Newark to Columbia. The route ultimately lost approximately $945,000 before it ceased again roughly around the time of Samson’s resignation from the Port Authority.
“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,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.
Andrew M. Calamari, Director of the SEC’s New York Regional Office, added, “United initiated a money-losing flight solely to curry favor with a public official, and failed to reflect in its books and records a fair and accurate depiction of the rationale behind the decision and its projected financial impact.”
Samson has pleaded guilty to bribery in a criminal case announced in July by the U.S. Attorney’s Office in New Jersey. United entered into a non-prosecution agreement with the U.S. Attorney and paid $2.25 million.
The SEC’s continuing investigation is being conducted by Osman Nawaz, Kenneth Gottlieb, and Celeste Chase of the New York office. The case is being supervised by Sanjay Wadhwa.
United Airlines starts service between Houston and Havana, Cuba
After months of planning and anticipation, the first flight from Houston George Bush Intercontinental Airport (IAH) to Havana is scheduled to depart today, connecting Cuba to Texas’ largest city and United’s premier Latin American gateway.
United will operate Saturday nonstop flights from Houston in addition to its daily nonstop service from Newark/New York via Newark International Airport (EWR).
“United has officially launched our first flights from the U.S. into Havana,” said Steve Morrissey, United’s vice president of regulatory and policy. “Houston has long been our Latin American and Caribbean gateway, so the importance of this route, for both our airline, employees and our customers, can’t be understated. It has the power to open the door to Cuba for travelers in a large portion of the U.S., and that’s something that we’re very excited about.”
Since the DOT announced its preliminary Havana route awards in July, United has been working closely with the Cuban government and local airport service providers to prepare for the start of its operation into José Martí International Airport, the airline’s 14th new international route launched this year.
Saturday nonstop service from Houston (IAH)
Recognized by “Trusted Traveler Network” as one of the most international-friendly points of entry for foreign travelers, Houston Bush Intercontinental Airport is United’s gateway to Latin America. United offers 91 daily nonstop flights to 52 destinations across Latin America and the Caribbean from its Houston hub. Bush Intercontinental will be an important gateway for service to Havana and will directly connect 20 markets across the central and western United States to Cuba with just one stop. The Cuban-American population in the Houston metropolitan area ranks among the top ten cities in the country.
Daily nonstop service from New York/Newark (EWR)
United’s daily nonstop flight from Newark Liberty International Airport will provide an important gateway to Cuba from the Newark/New York City region, the largest metropolitan area in the country and home to the second-largest population of Cuban Americans. For more than 20 years, United has offered the Newark/New York City region the most flights to the most destinations around the world.
United will operate both services with Boeing 737 aircraft.