In February it was revealed that federal prosecutors were
investigating United Airlines operating twice-weekly Newark – Columbia, South Carolina service for the possible private benefit of the David Samson, who served as Chairman of the Port Authority of New York and New Jersey between 2011 and 2014.
The United flight, convenient to Samson’s weekend home, offered service departing Thursday evening and returned to Newark Monday morning. Samson is said to have referred to this service as “the Chairman’s flight.” It was a money loser. The service was cancelled three days after Samson stepped down from the Port Authority.
Now Bloomberg reports on documents which draw a ‘direct link’ between providing this flight and obtaining approval for projects.
It began, apparently, with a dinner between United CEO Jeff Smisek and Port Authority Chairman David Samson.
Halfway through dinner at Novita, an Italian restaurant in Manhattan, Port Authority Chairman David Samson surprised the group with a request of his own. He complained that he and his wife had grown weary of the trip to their weekend home in Aiken, South Carolina, because the best flight out of Newark was to Charlotte, North Carolina, 150 miles away. Until 2009, Continental had run direct service from Newark to Columbia, South Carolina, 100 miles closer.
In a tone described by one observer as “playful, but not joking,” Samson asked: Could United revive that route? An awkward silence fell over the table.
Bloomberg reports that “United agreed to add the Newark-to-Columbia flight after Samson twice threatened to block Port Authority consideration of one or more of the airline’s favored projects.”
The piece makes this look like a clear shakedown of United, more extortion than bribery.
About a month after the dinner, United rejected the flight request as an unprofitable route. But Samson pressed on, according to people familiar with the situation. At the time, United was negotiating an extension of its Newark lease with the Port Authority and needed approval, and funding, to build a wide-body maintenance hangar for its new generation of jets.
…[Samson communicated] in early November that he’d removed one of the airline’s requests from the agenda of that month’s Port Authority board meeting.
…On Dec. 7, 2011, the day before the next board meeting, Samson inquired about the flight once more and said he’d pulled a United item from the agenda again, the documents show.
To be fair, I asked United for its take and a spokesperson said “As the Company has previously disclosed, it is cooperating with the government’s investigation and has no further comment.”
Five reactions:
- What else were they supposed to do? (Other than contact the FBI, perhaps) This person says they want that flight, and you have huge decisions in front of them…
- This is normal. It’s New Jersey.
- United isn’t very good at this game. The fact that there are records and comment from people at the dinner makes me think this isn’t the sort of thing that they do all the time.
- I think more highly of them as a result of the reveal than I did without it. If this were in their company culture, they’d be better at covering it up.
- They really need to stop complaining about the subsidies that other world airlines get when you have the airline’s CEO making pitches like this one:
After small talk about wine, Smisek pushed the Port Authority to re-orient its spending in ways that would benefit United. He urged Samson to scuttle plans to take over the money-losing Atlantic City airport and asked that the authority focus on upgrading United’s exclusive terminal at Newark, rather than the terminal it shared with competitors. And he asked the authority to revive the long-dormant initiative to extend the PATH line, which would make United’s Newark terminals a convenient “one-seat ride” for travelers from Wall Street and others in downtown Manhattan.
Finally, of course, it remains just as Mel Brooks said: It’s good to be King.
“Forget it, [Gary}. It’s Chinatown.”
I’ve always felt that accepting a bribe is the crime, not offering it. Offering it in no way damages UA’s business – indeed, if the calculations are correct, it enhances it. UA, its shareholders and its other stakeholders all benefit. It’s the recipient of the bribe who commits the real crime by doing things which are presumably not in the interests of his or her stakeholders.
I’m from New Jersey, and work in an industry that has the Port Authority all over it. So I’m somewhat familiar with how a lot of this works.
I don’t blame United at all for this. They wanted to expand, and a person directly in control of whether they were able to do that – Pretty much demanded a special flight to his vacation home. United certainly could have said no. They would have also certainly not been able to expand, and probably lost out to other airlines willing to play ball. Not to mention they could have found themselves in violations of a number of “codes” and such. In Uniteds spot, they really had only one option that was the best for their company, and no matter how repulsive – The CEO’s job is to do whats best for his company, employees, and yes – Shareholders.
I’d call it extortion, and sadly – It’s nothing new.
If the facts in this report are true, it does appear that UA is a victim of extortion by the Port Authority Chairman and won’t face any legal action. They certainly didn’t concoct a scheme to bribe the Chairman in exchange for favors. But we’ll see.
Meanwhile, your constant irrelevant references to the Middle East subsidy issue are getting outright weird. Obviously, this issue has nothing to do with that one. Here, we have a rogue public official wanting a personal favor from an airline in exchange for green-lighting some infrastructure improvements. His actions cost the airline money. In the Middle East, the airlines are in cahoots with government (heck, they ARE the government) and get billions in subsidies.
The headline is misleading. They didn’t want favors from New Jersey. They wanted favors from The Port Authority of New York and New Jersey, which (as the name suggests) is a two-state agency with a lot of autonomy.
‘Here, we have a rogue public official…’
Rogue?!?
This is par for the course for those in the bureaucracy. Only thing that makes him ‘rogue’ here is he got outed and the media actually chose to report on it. Regardless, no punishment will be delivered onto him. The bureaucracy also protects their own.
@Mangar A publicly traded company like United probably needed to contact the FBI
UA certainly has a chief counsel and outside counsel who could have easily –and likely did -explain the ramifications of bribery. This looks like a corrupt practice by United, and I’d hardly call them a victim.
A “victim” in my view is someone who sits at Rikers for a year without a trial because his family can’t come up with $1000 for a bondsman.
There is no victim here. Only 2 possible criminals
I remember reading some of Warren Buffets letters and him talking about the importance of picking companies run by honest and ethical leaders. Basically he believes it’s a wise financial decision long term to invest in companies with ethical CEOs.
Which is to say… I wouldn’t invest in United.