Federal law enforcement officials on Wednesday arrested nine individuals in connection with a plot to defraud Polar Air Cargo, partially owned by express delivery giant DHL, of millions of dollars for over a decade.
Four former executives were charged with accepting millions of dollars in kickbacks from six co-conspirators who owned or operated companies that provided services to Polar Air Cargo, or were customers, in exchange for ensuring the airline gave them favorable business deals, according to the indictment unsealed by the U.S. Attorney’s Office for the Southern District of New York.
The senior Polar executives also reaped substantial benefits as a result of secret ownership interests in some of the company’s vendors. They were each charged with four counts of wire fraud, each punishable by up to 20 years in prison. Some defendants were indicted on three counts.
Officials said the “pervasive corruption” cost Polar Air Cargo $52 million and touched nearly every aspect of the airline’s business between 2009 and July 2021. A 10th individual was indicted but remains at large.
Among the former Polar executives indicted by the Justice Department is Lars Winkelbauer who was chief operating officer for three years until July 2021. Winkelbauer joined DHL from Polar in 2007 and, in an unusual arrangement, the courier allowed him to hold dual leadership positions at both companies. Between 2014 and 2018, he served as DHL’s vice president for aviation and network planning in the Asia Pacific region and had a similar role at Polar. After leaving Polar, Winkelbauer served as a consultant to a retail tycoon who unsuccessfully tried to launch the first all-cargo airline in Vietnam.
Winkelbauer was arrested in Thailand and will be extradited to the United States.
Charging documents allege the high-level Polar employees received payments from third-party general sales agents, ground handlers involved in loading and unloading cargo, trucking companies, and freight forwarders that bought cargo space on its aircraft. Polar also contracted with forwarders to move shipments on other airline routes not serviced by Polar. The fraud involved at least 10 customers and vendors of the company.
The executive defendants utilized their positions at Polar to secure favorable contracts, priority cargo space, favorable shipping rates and enrollment in various incentive programs for their outside partners and their businesses. In return, the vendor defendants paid kickbacks in various forms, including in payments calculated per kilo of cargo shipped with Polar or as a percentage of the revenue earned as a result of the vendor’s relationship with Polar.
The Polar executives also allegedly concealed ownership positions in certain service providers and received ownership distributions based, in large part, on revenue derived from contracts with Polar — contracts that had been secured and, often, renewed largely due to the recommendations of the executives.
“The defendants … allegedly showed a blatant disregard for the integrity of their companies in favor of lining their own pockets. Their pervasive fraud ends today,” said U.S. Attorney Damian Williams.
The other defendants who worked at Polar Air Cargo are Abilash Kurien (vice president of marketing, revenue management and network planning), Carlton Llewellyn (vice president, operations systems performance and quality) and Robert Schirmer (senior director, customer service for the Americas). In the summer of 2021, Polar discovered documentary evidence of the secret ownership arrangements and kickback agreements and fired the four men. The company also reported the conduct to the FBI and has continued to cooperate with the investigation, authorities said.
To conceal the kickbacks and conflicted ownership interests from Polar, Winkelbauer and the others often directed that the kickbacks and ownership distributions be paid to limited liability companies with nondescript names that they, in fact, controlled. In total they pocketed about $23 million, according to authorities.
Parties charged in the kickback scheme include Benjamin Wei, the owner of sales agency Griffin Cargo; an unnamed operator of Ultimate Logistics, which served as Polar’s sales agent in the Midwest and had its contract expanded in 2019 to cover the lucrative Chicago region without any competitive bidding process; and the owners of Gateway Cargo Consolidators, which sold domestic cargo space for the Miami region. Vision Logistics, a freight forwarding company also controlled by Wei, also was indicted.
Other companies involved in the fraud were forwarders Cargo on Demand and Fato LLC, as well as Los Angeles airport ground handling firm A-1Handling and Sky X Airlines, an airfreight wholesaler.
The executive defendants communicated among themselves and with the vendor defendants about the scheme primarily using personal email accounts, while the vendor defendants conducted official Polar business with the executives primarily using their professional email accounts, according to the U.S. attorney’s office.
Polar Air Cargo is a joint venture between Purchase, New York-based Atlas Air and DHL Express, which owns 49% of the company and utilizes the aircraft to ship express parcels around the world. The company was formed in 2007 in part to ensure that DHL had dedicated cargo space on Polar flights. Atlas Air operates the flights, but DHL determines the route network and Polar Air markets the remaining capacity to freight forwarders. Polar has 16 all-cargo aircraft in its fleet, including eight Boeing 777s, six 747-8 jumbo jets and two 767-300s, according to Planespotters.net
Twitter: @ericreports / LinkedIn: Eric Kulisch / [email protected]
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