In a development that caught many by surprise, on Monday afternoon the CEO of United Airlines ($UAL) and two senior executives at the airline were forced out of their jobs following an internal investigation into their dealings with the Port Authority of New York and New Jersey and the agency’s former chairman, David Samson.
For the last year Samson, an appointee of and political godfather to N.J. Gov. Chris Christie, has been under investigation by U.S. Attorney for New Jersey Paul Fishman, an inquiry that was itself a metastasis of the federal probe of the September 2013 ‘Bridgegate’ lane closures at the George Washington Bridge. Earlier this year, prosecutors seemed to settle their attention on Samson’s role as a power broker among the Christie administration, the Port Authority, and United Airlines during the period when the airline was negotiating a 20-year, $150 million lease to continue using Newark Liberty International Airport as its hub.
Elements of that lease seem to have been negotiated by trading favors among the three parties – something that is hardly criminal in and of itself. But what caught prosecutors’ attention was a unique deal: at a September 2011 dinner with now-former CEO Jeff Smisek at an Italian restaurant not far from the Port Authority’s Park Avenue headquarters in Manhattan, David Samson asked the airline executive to begin running a flight from Newark Liberty Airport to Columbia, South Carolina, a location convenient to Samson’s vacation home.
Samson’s ‘ask’ surprised some at the table. It was, after all, a somewhat social dinner; Samson’s wife was in attendance. According to a Bloomberg report, however, Samson was “playful, but not joking.”
As part of the lease negotiations, Smisek had been pressing the Port Authority to build an extension to its PATH rail system to connect Newark Airport to Manhattan for a ‘one seat’ ride that would deliver passengers to United’s hub. The airline is responsible for 70 percent of the traffic at Newark. Although the PATH extension was initially projected to cost the Port Authority $600 million, more current estimates are that it would cost far more – $1.5 billion, or about $575 million per mile of rail. It was nevertheless included in the 10-year, $27.6 capital plan adopted by the Port Authority under Samson’s leadership in early 2014.
Although Smisek did not agree to begin running the South Carolina flight over that 2011 dinner, the airline did subsequently re-instate the route in 2012. The planes that traveled from Newark to Columbia were among the emptiest commercial flights in the nation and the route was not well publicized by the airline. Moreover, according to a source the former Port Authority chief was fond of calling the flight, which allowed him to travel from his nearby law office in West Orange to his vacation home on Thursday evenings and return on Monday mornings, “the chairman’s flight.”
Samson resigned from the Port Authority in the wake of investigations into Bridgegate in early 2014. Without explanation, United stopped running its flight to Columbia three days later.
United’s dealings with the Port Authority stretched well beyond its lease at Newark. In the fall of 2013, the carrier was pressed by Samson and Gov. Christie to initiate flights to Atlantic City’s international airport, which the Port Authority took control over as part of an effort by the Christie administration to bolster the fortunes of the long-suffering seaside resort. According to documents released by the New Jersey legislative committee that investigated Bridgegate, the confluence of events surrounding the lane closures, the PATH extension and the Newark Airport negotiations in September 2013 weighed heavily on the agency’s then-deputy executive director Bill Baroni, who told David Wildstein that he felt “overwhelmed” by the scale of that work. (Baroni is due to stand trial in the Bridgegate matter later this fall.)
This August, the Port Authority received a federal subpoena from U.S. Attorney Paul Fishman seeking records surrounding three of the agency’s board meetings in late 2011 concerning the renegotiation of United’s lease at Newark. The subpoena went after emails, draft minutes, and memoranda and specifically sought records from Samson and Baroni.
It is unclear whether that subpoena specifically mentioned United Airlines, but it was nevertheless taken as a sign that prosecutors are building a historical pattern to claim that Samson abused his position as the chairman of the agency. Any indictment of Samson would likely be a devastating blow to Christie, as it was the governor who appointed Samson to the top job. Samson, a former state attorney general, also chaired Christie’s 2009 transition team.
As is common in bribery prosecutions, both the party offering the bribe and the party accepting the bribe are subject to indictment. United’s firings may therefore be taken as a sign that their internal inqury, led by the Chicago-headquartered law firm Jenner & Block (which was also the outside counsel to the N.J. legislature’s investigative committee), found evidence that the company – as a corporate entity – faces a risk of being prosecuted if and when Fishman’s office charges Samson.
Jeff Smisek had been United’s CEO since 2010; joining him in resigning are Nene Foxhall, United’s executive vice president for communications and government affairs, and Mark Anderson, the senior vice president for corporate and government affairs.
Smisek, Foxhall, and Anderson were among a group of United executives who donated a total of $31,500 toward Christie’s 2013 re-election effort. Those donations all were made between June 5 and June 17, 2013, just months before an August 23, 2013 meeting between Christie, Samson, and Smisek to discuss the airline’s operations in Atlantic City and other matters, presumably including the PATH extension referenced by Baroni weeks later.
Only two of the twelve United contributors to Christie’ listed New Jersey residences, and it was the only time that United’s management collectively donated to a New Jersey political campaign. In that particular cycle they represented the single largest pool of contributions from a publicly traded company and the third-largest pool overall, trailing a medical group and state employees.