CHICAGO – United Airlines’ parent company has agreed to pay a $2.4 million penalty for reinstating a money-losing route that gave a public official easier access to his vacation home.
The U.S. Securities and Exchange Commission and United Continental Holdings said they settled charges over records violations in a civil case in which shareholders bore the cost of the route so the official – then the chairman of the agency that controls New York City-area airports, bridges and tunnels – could get more convenient flights.
United reinstated the unprofitable nonstop flight between Newark, N.J., and Columbia, S.C., in 2012 under pressure from David Samson, who was then chairman of the Port Authority of New York and New Jersey, the SEC found in its investigation.
Samson had sought a more convenient route to his South Carolina vacation home. The route previously lost money and was canceled in 2009 by Continental Airlines before its merger with United, and an early financial analysis conducted after Samson began privately advocating for the route’s return showed it probably would lose money again.
United feared that Samson’s influence could jeopardize its Port Authority prospects, including the approval of a hangar to help the airline at Newark’s airport, the SEC said. The company relented and restarted the route.
The same day that Jeff Smisek, then United’s CEO, unilaterally approved the reinstatement of the route, the Port Authority board approved the lease agreement related to the hangar project, the SEC said.
United circumvented its standard process for initiating new routes, the SEC said.
The SEC said the route lost $945,000 before it was discontinued again in 2014, four days after Samson resigned from the Port Authority.
Samson pleaded guilty in July to bribery in a criminal case brought by the U.S. Justice Department. United entered into a non-prosecution agreement with the department and paid a separate $2.25 million. That’s in addition to its $2.4 million civil penalty agreed to with the SEC.
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