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December 2, 2016

Posted  January 13, 2017

The parent company for United Airlines will pay $2.4 million to settle charges that it violated the books and records and internal accounting controls provisions when it reinstituted a poorly-performing flight route to curry favor with a public official.  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 wanted a more direct route to his home in South Carolina.  The route had experienced poor financial performance and was canceled by Continental Airlines prior to its merger with United.  Additionally, a preliminary 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 route was approved on the same day that the Port Authority’s board approved the lease agreement related to the hangar project.  The route lost approximately $945,000 before it ceased again, roughly around the time of Samson’s resignation from the Port Authority.  SEC

Tagged in: Accounting Fraud,