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DOJ charges 10 with fraud in global air freight kickback scheme

aircargonews.net

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Re: DOJ charges 10 with fraud in global air freight kickback scheme

#11

Post by PragmaticPulp »

datadeft wrote: post #4
idopmstuff wrote: post #2

From what I've heard about a lot of global freight contracting, it seems like there's a lot of favoritism - with ocean freight, for example, when ships are packed, you're not getting your shipments onto them unless you have good relationships with the carriers/brokers/other folks in the chain who can make it happen for you. I suppose blatantly taking kickbacks crosses the line, but it definitely seems like an industr…

I would be surprised if there was an "industry" without kickbacks.

You can find kickbacks everywhere, but in some industries it's so deeply embedded in the culture that it's nearly impossible to find any alternatives.

The common theme is that there is usually a bottleneck, monopoly, gatekeeper, or government-mandated middleman. This is what enables the kickback scheme to work without the threat of clean alternatives competing with it.

Ports are ripe for corruption and kickbacks because there aren't many of them. If you want to get your cargo in or out, you have to go through a nearby port. Trucking the freight to a different port is more expensive than any bribes/kickbacks/corruption (by design) so people just settle and pay it.

Re: DOJ charges 10 with fraud in global air freight kickback scheme

#12

Post by slavboj »

pc86 wrote: post #8
A_D_E_P_T wrote: post #6

The article doesn't make it clear what the crime actually was. I got curious, so I dug up some more details: https://archive.ph/gvYFE And the indictment is here: https://www.justice.gov/usao-sdny/press-release/file/1579271... Long story short, the indicted executives had fly-by-night LLCs that they used to accept payments from Polar Freight clients for preferential service. (Or for access to Polar Freight's shipping…

> The kicker is that some poor bastard was indicted for paying the "consulting" fee! I mean the system works best if people on both sides of the equation are punished, right?

It aligns incentives on both sides to keep the scheme secret.

Re: DOJ charges 10 with fraud in global air freight kickback scheme

#13

Post by A_D_E_P_T »

PragmaticPulp wrote: post #9
A_D_E_P_T wrote: post #6

The article doesn't make it clear what the crime actually was. I got curious, so I dug up some more details: https://archive.ph/gvYFE And the indictment is here: https://www.justice.gov/usao-sdny/press-release/file/1579271... Long story short, the indicted executives had fly-by-night LLCs that they used to accept payments from Polar Freight clients for preferential service. (Or for access to Polar Freight's shipping…

> The kicker is that some poor bastard was indicted for paying the "consulting" fee! Can you point me to where I can read more about that? I'm assuming the indicted person knew exactly what he was doing, but it's still terrible to be stuck in a business situation where the only way to get your job done is to go along with something like that.

It's in the article I linked to:

> "Also the owner of Cargo On Demand was himself indicted, for paying the bribes, which seems a bit harsh. He was dealing with a company, and all the senior executives he dealt with told him that he had to pay these fees! He thought they were a resort fee!"

It's also in the indictment. The defendant from Cargo On Demand is Patrick Lau, referred to as "Lau" throughout. As far as I can tell, there's nothing in the indictment to suggest that he was in on the scheme. Also, he had sued Polar in a Civil case a while back, which is probably how all of this had come to light in the first place! It seems bizarre that the Feds charged him.

Re: DOJ charges 10 with fraud in global air freight kickback scheme

#15

Post by cperciva »

A_D_E_P_T wrote: post #13
PragmaticPulp wrote: post #9

Earlier quoted context omitted.

> The kicker is that some poor bastard was indicted for paying the "consulting" fee! Can you point me to where I can read more about that? I'm assuming the indicted person knew exactly what he was doing, but it's still terrible to be stuck in a business situation where the only way to get your job done is to go along with something like that.

It's in the article I linked to: > "Also the owner of Cargo On Demand was himself indicted, for paying the bribes, which seems a bit harsh. He was dealing with a company, and all the senior executives he dealt with told him that he had to pay these fees! He thought they were a resort fee!" It's also in the indictment. The defendant from Cargo On Demand is Patrick Lau, referred to as "Lau" throughout. As far as I can…

He's indicted, not convicted. "I'm a sucker and didn't realize what was going on" is absolutely a possible defense; I would assume that the DOJ will lead evidence to show that he knew what was going on and willingly participated, but that's why there's a trial.

Re: DOJ charges 10 with fraud in global air freight kickback scheme

#16

Post by IG_Semmelweiss »

I really wonder which cog exposed the whole scheme, a whistleblower from 1) company stumbled on it, or a 2) vendor staff did, or, 3) a vendor started asking questions of the random invoices, 4) a dispute in the corrupted amounts between both (seems likely!) or 5) misreported earnings or high income tripped some flag at the irs level.

so many possibilities!

Re: DOJ charges 10 with fraud in global air freight kickback scheme

#17

Post by [deleted] »

slavboj wrote: post #12
pc86 wrote: post #8

Earlier quoted context omitted.

> The kicker is that some poor bastard was indicted for paying the "consulting" fee! I mean the system works best if people on both sides of the equation are punished, right?

It aligns incentives on both sides to keep the scheme secret.

[deleted]

Re: DOJ charges 10 with fraud in global air freight kickback scheme

#18

Post by babyshake »

PragmaticPulp wrote: post #9
A_D_E_P_T wrote: post #6

The article doesn't make it clear what the crime actually was. I got curious, so I dug up some more details: https://archive.ph/gvYFE And the indictment is here: https://www.justice.gov/usao-sdny/press-release/file/1579271... Long story short, the indicted executives had fly-by-night LLCs that they used to accept payments from Polar Freight clients for preferential service. (Or for access to Polar Freight's shipping…

> The kicker is that some poor bastard was indicted for paying the "consulting" fee! Can you point me to where I can read more about that? I'm assuming the indicted person knew exactly what he was doing, but it's still terrible to be stuck in a business situation where the only way to get your job done is to go along with something like that.

IANAL and not sure of the exact name for this concept, but I believe when there's a practice that is very standardized it can be used as a legal defense that you're just doing what everyone else does.

Re: DOJ charges 10 with fraud in global air freight kickback scheme

#19

Post by giantg2 »

idopmstuff wrote: post #2

From what I've heard about a lot of global freight contracting, it seems like there's a lot of favoritism - with ocean freight, for example, when ships are packed, you're not getting your shipments onto them unless you have good relationships with the carriers/brokers/other folks in the chain who can make it happen for you. I suppose blatantly taking kickbacks crosses the line, but it definitely seems like an industr…

Kickbacks, gifts, favors, or other customary considerations is basically how it works in many parts of the world. Just like a dowery or haggling is customary in some areas.

Re: DOJ charges 10 with fraud in global air freight kickback scheme

#20

Post by giantg2 »

PragmaticPulp wrote: post #11
datadeft wrote: post #4

Earlier quoted context omitted.

I would be surprised if there was an "industry" without kickbacks.

You can find kickbacks everywhere, but in some industries it's so deeply embedded in the culture that it's nearly impossible to find any alternatives. The common theme is that there is usually a bottleneck, monopoly, gatekeeper, or government-mandated middleman. This is what enables the kickback scheme to work without the threat of clean alternatives competing with it. Ports are ripe for corruption and kickbacks beca…

And of course the government embraces kickbacks and "political horse trading" when it benefits them, just like the recent Apple tax thing.
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