10 people arrested in fraud scheme that cost Polar Air $52 million

The United States (US) Department of Justice (DOJ) revealed that 10 people have been charged in connection with a decade-long scheme to defraud Polar Air, which resulted in the cargo airline losing an estimated $52 million.

US Attorney Damian Williams stated that the 10 defendants “conducted a widespread scheme that tainted nearly every aspect of Polar Air Cargo Worldwide’s operations and that cost the company an estimated $52 million in losses”. Williams noted that the defendants either worked at Polar Air or were employed by “vendors reliant on business arrangements with Polar”.

“Their pervasive fraud ends today, and each defendant now faces substantial prison time for their alleged crimes,” Williams added.

The indictment from the DOJ alleged that the 10 defendants, with the executives employed by Polar Air agreeing “to accept millions of dollars in kickbacks from the Vendor Defendants and also reaped substantial financial benefits as a result of their secret ownership interests in certain Polar vendors, in exchange for ensuring that those vendors received favorable business arrangements with Polar”. As such, the scheme “led to pervasive corruption of Polar’s business, touching nearly every aspect of the company’s operations, for over a decade” the document added.

According to the department, Polar Air relied on third-party general sales agents (GSA) to sell cargo on its aircraft, while the GSAs “often sold available cargo space to freight forwarding vendors, which had been hired by downstream customers to coordinate transportation logistics for large quantities of goods”. Furthermore, the airline worked with ground handling companies to load and unload cargo, as well as transport companies to carry the freight to airports by trucks. Polar Air also used third-party cargo providers to carry freight on routes where its own aircraft did not fly.

The DOJ noted: “The scheme to defraud Polar touched on each aspect of these operations.”

All 10 defendants corrupted the carrier’s relationships with all third-party providers, which is why, unbeknown to the airline, executives working at Polar Air “utilized their positions within Polar to secure, among other things, favorable contracts, valuable cargo space, favorable shipping rates, and enrollment in various incentive programs for the Vendor Defendants and their entities,” the DOJ added.

The defendants who worked at suppliers are accused of paying executives of Polar Air “kickbacks in various forms, including, for example, in payments calculated per kilo of cargo shipped with Polar or as a percentage of the revenue earned as a result of a vendor’s relationship with Polar,” the document continued.

According to the DOJ, “a financial analysis conducted at Polar’s direction” estimated that “as a result of the fraudulent scheme, Polar suffered at least approximately $52 million in losses between in or about 2009 and in or about July 2021”.

All 10 defendants were charged with conspiracy to commit or committing wire fraud. Both charges carry a maximum 20-year sentence in prison.

Polar Air currently has 16 aircraft in its fleet, including six Boeing 747-8Fs, according to ch-aviation.com data. Atlas Air, which was recently privatized by several equity firms, owns 51% of the airline, while DHL Express holds the remaining 49%.