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The [Wednesday] Papers

"Chicago-based United Continental Holdings, parent of United Airlines, on Tuesday replaced its CEO and two other top executives, saying the departures are linked to internal and federal probes associated with the Port Authority of New York and New Jersey," the Tribune reports.

Whatever's going on must be quite serious, because United is in a run of record profits, though its competitors are going gangbusters too - expanding fees and contracting leg room is doing wonders for the industry.

"United officials would not elaborate Tuesday, except to say the investigations are ongoing and the company will cooperate with the government. It also said the investigations 'do not raise any accounting or financial reporting concerns' about United."

So it's not about money? If it was, after all, I'm pretty sure they'd have to file some sort of notice with the SEC.

"Oscar Munoz, 56, president at railroad company CSX and longtime United board member, will take over as president and CEO, replacing Jeff Smisek, a former Continental executive who has headed United since its 2010 merger with Continental. Smisek receives nearly $5 million plus other benefits on his way out."

Whew, so he'll be okay. That does seem kinda low, though, relatively speaking. Don't outgoing CPS CEOs get a better deal?

"United, headquartered in Chicago's Willis Tower, said earlier this year that the company and some of its executives received subpoenas from a federal grand jury for information about dealings with the Port Authority of New York and New Jersey. United said at the time that, in response, it was conducting its own internal investigation."


"The Port Authority of New York and New Jersey, a joint venture between the two states since 1921, manages bridges, tunnels, airports and transit activities in New York City and Northern New Jersey.

"Former Port Authority Chairman David Samson's activities have been the subject of document requests from the U.S. attorney's office in New Jersey, including Samson's votes on United Airlines projects at Newark Airport at the same time United was restarting flights from Newark to Columbia, S.C., near where Samson has a vacation home.

"United began direct flights from Newark to Columbia, reportedly called the 'chairman's flight,' after Samson became chairman and canceled the flights days after he resigned last year."

Dude, you shoulda called it the For The Kids Flight. That's how Chicago pols do it.

"Besides Smisek, also stepping down in connection with that investigation Tuesday were the airline's executive vice president of communications and government affairs, Nene Foxhall, and its senior vice president of corporate and government affairs, Mark Anderson."

The PR person is out too? That's odd.

Let's turn to a Bloomberg article from April for more:

United Airlines Inc. was seeking hundreds of millions of dollars in public investment for the airport in Newark when its chief executive dined with New Jersey Governor Chris Christie's top Port Authority official in September 2011.

Jeffery Smisek wanted funding for several projects, including an estimated $600 million extension of the PATH train from downtown Newark to the airport, as the airline worked through its merger with Continental Airlines.

Halfway through dinner at Novita, an Italian restaurant in Manhattan, Port Authority Chairman David Samson surprised the group with a request of his own. He complained that he and his wife had grown weary of the trip to their weekend home in Aiken, South Carolina, because the best flight out of Newark was to Charlotte, North Carolina, 150 miles away. Until 2009, Continental had run direct service from Newark to Columbia, South Carolina, 100 miles closer.

In a tone described by one observer as "playful, but not joking," Samson asked: Could United revive that route? An awkward silence fell over the table.

Though the United CEO didn't agree to the request at the dinner, according to the accounts of some who attended, the airline ultimately added the money-losing route that became known as "the chairman's flight." Now federal prosecutors are looking into whether its genesis crossed the line from legitimate bargaining into illegal activity.

The U.S. Attorney's Office in New Jersey is investigating whether United employees made improper attempts to influence Samson at the Port Authority of New York & New Jersey, according to people familiar with the investigation . . .

At the Novita dinner described by people involved in the investigation, Samson was joined by Bill Baroni, the Port Authority deputy director. Smisek was accompanied by Nene Foxhall, United's executive vice president of communications and government affairs, and Mark Anderson, the airline's senior vice president of corporate and government affairs.



Also from that Bloomberg article:

"Previously undisclosed details - gleaned from Port Authority records, people involved in talks between United and the authority and others close to the investigation - indicate that United agreed to add the Newark-to-Columbia flight after Samson twice threatened to block Port Authority consideration of one or more of the airline's favored projects.

"The new details about the origins of the flight shed light on the expansion of a federal investigation into Port Authority actions. The probe initially focused on the intentional lane- closing that clogged traffic near the George Washington Bridge in 2013."

That's the Chris Christie thing.


The kicker:

About a month after the dinner, United rejected the flight request as an unprofitable route. But Samson pressed on, according to people familiar with the situation. At the time, United was negotiating an extension of its Newark lease with the Port Authority and needed approval, and funding, to build a wide-body maintenance hangar for its new generation of jets.

After making requests for the flight, Samson ratcheted up the pressure, according to the documents, working through a United lobbyist to communicate in early November that he'd removed one of the airline's requests from the agenda of that month's Port Authority board meeting. The lobbyist, Jamie Fox, is now New Jersey's transportation commissioner.

On Dec. 7, 2011, 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.

It's unclear whether Samson was bluffing or actually followed through with the agenda changes.

At the board meeting on Dec. 8, the Port Authority approved United's new hangar and pledged $10 million toward the $35 million facility.

Within weeks, United had moved ahead with plans to resume the Columbia flight. Managers from Columbia Metropolitan Airport traveled to United headquarters in Chicago for a routine meeting in January 2012. The airline's representatives surprised them by saying United was interested in flying again between Columbia and Newark, said Dan Mann, executive director of the South Carolina airport.

The twice-weekly flight began on Sept. 6, 2012. Two weeks later, the Port Authority approved a study to extend the PATH rail to the Newark airport. (The proposal, whose estimated cost has ballooned to $1.5 billion, is now in jeopardy.)

Another Chicago miracle.


Back to today's Tribune:

While news of the shake-up was a surprise in the airline industry, it could be good for United, said Henry Harteveldt, a travel industry analyst with Atmosphere Research Group.

"I see this as a positive development for United and especially for its employees," he said. "Frankly, I think the board was tired of seeing United be the laughingstock of the industry."

Yeah, possible pending indictments - or plea deals - are always good for boosting a company's credibility.


"The board appointed Henry L. Meyer III, United's lead independent director, to serve as nonexecutive chairman of the board of directors . . . He added, 'The board thanks Jeff (Smisek) for his service to both United Airlines and Continental Airlines.'"

Thanks, Jeff! Good luck with the investigation and everything!


"The resignations also complicate the fortunes of Mr. Christie, a Republican, as he moves ahead on his presidential bid, by underscoring the accusations of cronyism that have dogged his administration since the bridge scandal broke," the New York Times reports.

"The governor has distanced himself from other figures implicated in the scandal, saying they had deceived him. But Mr. Samson, despite his resignation, has remained one of the governor's closest advisers."

More interesting, for our purposes:

"Several months ago, United asked the law firm Jenner & Block to conduct an internal investigation into the airline's dealings with Mr. Samson and the Port Authority. At the time, lawyers close to the case predicted that it would lead to the resignation of Mr. Smisek and possibly other executives, in the hope that the airline could avoid prosecution."


Bonus callback:

"United discontinued the flight to South Carolina within days of Mr. Samson's resignation from the Port Authority."


Not just the chairman's flight:

"Records also indicated that federal investigators were looking into United's introduction of flights to the Atlantic City airport. The Port Authority had taken over the operations of that airport, which had been run at a loss by one of Mr. Samson's clients."

So we're already running government like a business. And vice versa. It's all the same.


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Unsurprising. But who cares?

Posted by The Beachwood Reporter on Wednesday, September 9, 2015


Unsurprising. But does anyone care?


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A sampling.









The Beachwood Tip Line: The counselor is in.


Posted on September 9, 2015

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