Polar Air Cargo – Bribery is Like a Resort Fee

You don’t see much in the way of straight-up bribery these days. It’s incredibly rare for a politician to be handed a suitcase full of cash in exchange for a vote. We are much more sophisticated these days. Instead of stacks of cash, we engage people and organizations as consultants adding a veneer of respectability to the process. Theoretically, it makes explaining the wire transfers easier, but not always.

Polar Air Cargo Worldwide is a cargo airline jointly owned by DHL and Atlas Air. In April of 2023, the US brought bribery charges against 10 people related to Polar. The list of 10 people includes Polar’s VP of Marketing, VP of Operations, and Senior Director of Customer Service. They allegedly ran a pay-to-play scheme where customers and vendors would pay Polar for shipping and the executives for access. This went on for more than 10 years. From 2009 to 2021 Polar Air’s owners had no idea this was happening.

The way the scheme worked was customers would contract with freight forwarders to arrange shipping. Polar Air would quote a great rate or arrange priority for a shipment. To get that rate or move to the front of the line, the freight forwarders had to make an additional payment to one of several other entities controlled by the executives.

Polar management would instruct forwarders that the additional “consulting fees” were part of Polar’s normal way of doing business. It was compared to a resort fee, a mandatory fee that is either not disclosed or poorly disclosed but is nevertheless, required. The fee amounts were based on the tonnage of cargo being shipped. As part of the indictment, there is an 8-page spreadsheet with rates for one shipment as an example. Fees were typically paid monthly via ACH to entities controlled by the executives, with a spreadsheet detailing how payments should be split.

This scheme applied to vendors too. Polar Air executives arranged favorable terms for vendors secretly controlled by the executives. The situation at Polar was described as “pervasive corruption”. Accountants never want to hear words like “catastrophic failure of internal controls”, but “pervasive corruption” is barely in their vocabulary. FTX was described as “a complete absence of internal controls”, but even it didn’t rise to “pervasive corruption”.

Polar Air is said to have lost as much as $52 million in direct losses and missed revenue. The executives are accused of pocketing about $23 million.

So how did they get caught? This is where the story gets even better. One of Polar’s customers, Cargo On Demand paid a total of $1.6 million in kickbacks from 2016-2021 and got tired of it, so they sued under the Racketeer Influenced and Corrupt Organizations Act (RICO). RICO statutes are often used to target organized crime, which technically I guess this was.

As a result, the CEO of Cargo On Demand has also been indicted for paying bribes to Polar Air. This feels a little like calling the police because your drugs have been stolen.

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