Smisek’s Abrupt Exit Could Signal Break in Criminal Probe

  • United says departures tied to Port Authority investigation
  • U.S. said to be weeks away from decision on criminal charges

What Led to United CEO Jeff Smisek's Ouster?

Jeff Smisek’s sudden exit as United Continental Holdings Inc.’s chief executive officer deepens questions about whether he was more than simply a victim of pressure by Port Authority officials who made demands during business negotiations with the carrier in 2011.

Prosecutors are looking into whether United’s creation of the so-called 
chairman’s flight amounted to a bribe by the airline or a shakedown by then-Port Authority Chairman David Samson, according to people familiar with the matter. They said the U.S. Attorney’s Office in New Jersey is investigating United’s decision to launch twice-weekly flights between Newark Liberty International Airport and Columbia, South Carolina, near Samson’s weekend home after Samson pressed United to do so. At the time, United was seeking millions of dollars in investments from the authority.

Samson first mentioned his interest in the flights a year before they began, at a September 2011 dinner in Manhattan attended by Smisek and two other United executives who also resigned Tuesday, Bloomberg News reported in April, citing people familiar with the event.

United said the resignations were tied to an ongoing internal inquiry “related to the federal investigation associated with the Port Authority of New York & New Jersey.”

U.S. Attorney Paul Fishman, who is leading the probe in Newark, is probably weeks from deciding whether to charge anyone from the airline, according to a person familiar with the case who isn’t authorized to discuss it publicly.

“The easiest knee-jerk reaction is he stepped down because criminal charges are imminent,” said Michael Koenig, a former federal prosecutor now with Hinckley, Allen & Snyder LLP who isn’t involved in the case. But Smisek and the two others may have violated a company policy, or it may be a situation where “the very existence of an investigation brings unnecessary publicity on the company -- and someone has to pay the price.”

Manhattan Dinner

The other resignations United announced Tuesday were of Nene Foxhall, executive vice president of communications and government affairs, and Mark Anderson, senior vice president of communications and government affairs. Investigators were caught off-guard by their abrupt departures, the person said.

For months after the 2011 Manhattan dinner, United asked for lower flight fees, construction of a Port Authority train to the Newark airport and investments in facility upgrades. Samson threatened to block any Port Authority actions unless United agreed to fly from Newark to Columbia, near a house he owned in Aiken, South Carolina, according to records first reported on by Bloomberg News in April.

Smisek, Foxhall and Anderson couldn’t be reached for comment. A spokesman for Fishman, Matthew Reilly, declined to comment. Karen Kessler, a spokeswoman for Samson, said: “This is a United Airlines matter.”

Christie Ally

“The fact that these departures have occurred now suggests not only that the internal investigation has concluded, but also that it raised serious questions about the conduct of the executives,” said Daniel Richman, a Columbia University law school professor and a former federal prosecutor. “What conclusions the U.S. attorney will draw from its investigation and the internal investigation remain to be seen.”

The twice-weekly flights to South Carolina ran from September 2012 until a few days after Samson resigned from the Port Authority in March 2014. Samson, a longtime confidant of New Jersey Governor Chris Christie, stepped down amid a U.S. probe that initially focused on intentional lane-closings in 2013 that clogged traffic near the George Washington Bridge, which the Port Authority runs. Three people have been charged, including a former political ally of Christie’s who pleaded guilty and is helping investigators. Samson hasn’t been charged.

Chairman’s Flight Subpoena

About a month after Samson requested the route in September 2011, United rejected it as unprofitable, but Samson pressed on, according to people familiar with the situation. United at the time was seeking a more favorable Port Authority lease in Newark, and funding for a wide-body maintenance hangar for its new generation of jets.

The chairman communicated through a United lobbyist in early November 2011 that he’d removed one of the airline’s requests from the agenda of that month’s Port Authority board meeting, according to documents obtained by Bloomberg. The lobbyist, Jamie Fox, is now New Jersey’s transportation commissioner. Fox didn’t respond to a request for comment.

On Dec. 7, 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. The next day the Port Authority approved United’s new hangar and pledged $10 million toward the $35 million facility.

Prosecutors have subpoenaed the Port Authority for records on the chairman’s flight, “communications with certain United Airlines executives and/or lobbyists” and any travel by Samson or members of his family on the airline’s flights, according to an agency bond statement.

At United, Smisek is eligible for separation payments worth at least $28.6 million, according to data compiled by Bloomberg from the company’s statement and regulatory filings.

Though Smisek hasn’t been accused of a crime, his conduct during the investigation, as well as his dealings with the Port Authority, could put some of that money in jeopardy. Under Smisek’s severance agreement, United could require him to repay a portion if he fails to cooperate with investigators or if he’s convicted or pleads guilty to a crime related to his job.

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