Ten suspects, including four former senior executives of Polar Air Cargo (PO, New York JFK), have been charged and nine arrested in connection with a massive, decade-long fraud scheme that cost the cargo specialist an estimated USD52 million in lost revenue, the US Attorney's Office in the Southern District of New York has announced.
The suspects are facing up to 20 years in prison on fraud and money laundering charges for their alleged widespread scam "that led to pervasive corruption of nearly every aspect of the company's operations", the Department of Justice (DOJ) disclosed in a statement.
The executives are:
- former Vice President & Chief Operations Officer Lars Winkelbauer, 47;
- former VP of Marketing, Revenue Management and Network Planning Abilash Kurien, 45;
- former VP of Operations, Systems Performance & Quality Carlton Llewellyn, 55; and
- Senior Director, Customer Service & Capacity (Americas) Robert Schirmer, 58.
The other defendants are vendors who had business arrangements with Polar. They are Skye Xu, 40; Benjamin (Ben) Wei, 58; Alvaro Lopez, 50; Fabiola Cino, 45; Orlando Wong, 60; and Patrick (Pat) Lau, 43.
Nine suspects were arrested, and eight have appeared in federal courts in New York, California, and Florida. Winkelbauer has been arrested in Thailand and is awaiting extradition to the United States, but Xu of West Covina, California, remains at large.
According to the four-count indictment, the former Polar executives accepted USD23 million in kickbacks or disbursements received due to their ownership of conflicted companies between 2009 and July 2021.
The United States Department of Justice said the fraud scheme touched on each aspect of Polar's operations, which relied heavily on third-party general sales agents (GSAs) in the US to sell cargo space on its aircraft. In turn, the GSAs hired by Polar often sold available cargo space to freight forwarders, which downstream customers hired to coordinate transportation logistics for large quantities of goods. Polar also contracted with ground handling vendors to load and unload cargo and trucking vendors to transport cargo from domestic locations to the appropriate airports. In addition, the airline contracted with other partners for various business reasons, including securing cargo space on airline routes it does not serve.
"Together, the executive defendants and the vendor defendants defrauded Polar by corrupting Polar's relationships with GSAs, freight forwarders, and other vendors, including those providing ground handling and trucking services," the DOJ said. It alleges the former executives used their positions to secure favourable contracts and shipping rates, cargo space, and enrollment in various incentive programmes for the vendors and their entities. In return, the vendors allegedly paid them kickbacks. In addition, the executives allegedly held concealed ownership positions in certain companies that contracted with Polar, which were associated with the vendors in at least one case. As a result, they allegedly received ownership distributions based, in large part, on revenue derived from contracts with Polar.
To conceal the scheme, the former managers allegedly directed the kickbacks and ownership distributions to limited liability companies with non-descript names that they controlled.
In mid-2021, Polar discovered documentary evidence of the conflicted ownership arrangements and kickback agreements. Shortly after that, the company terminated the employment of Winkelbauer, Kurien, Llewellyn and Schirmer and reported the conduct to law enforcement authorities. The DOJ said Polar continued to cooperate with law enforcement authorities throughout the investigation.
The DOJ case echoes one brought by New York-based air freight forwarder Cargo on Demand (COD) against Polar Air last year for USD18 million plus costs on eight counts, namely racketeering, fraud, conspiracy, aiding and abetting, unfair trade practices, common law conspiracy, breach of contract, and tortious interference with prospective contractual relations.
