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The Domestic Corrupt Practices Act Arrives According to the SEC

by   |   December 2, 2016

The Securities and Exchange Commission announced that the parent company of United Airlines has agreed to pay $2.4 million to settle charges for providing  a public official with more convenient flight options. The parent company did not admit or deny the SEC’s findings.

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.

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.

Wow. So the books and records provisions can be interpreted like it’s the Domestic Corrupt Practices Act.  I wonder if it will become in vogue to self-report these sorts of issues and spawn another web of FCPA, Inc. like practices to advise on these matters.