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Polar Air Cargo Execs Charged in $52 Million Fraud Case

Ten former executives and vendors of Polar Air Cargo Worldwide, Inc. have been charged in connection with a scheme to defraud the company of tens of millions of dollars in revenue.

The U.S. Attorney for the Southern District of New York, along with officials from the FBI and IRS, last week charged Lars Winkelbauer, Abilash Kurien, Carlton Llewellyn, Robert Schirmer, Skye Xu, Benjamin Wei, Alvaro Lopez, Fabiola Cino, Orlando Wong and Patrick Lau with engaging in corruption and fraud across “nearly every aspect” of Polar Air’s operations for more than a decade and depriving the logistics company of about $52 million.

Between 2009 and 2021, “The defendants allegedly utilized a complex set of schemes at the expense of Polar Air to line their own pockets,” FBI assistant director Michael J. Driscoll said. Winkelbauer, Kurien, Llewellyn and Schirmer received kickbacks from Polar vendors and customers owned and operated by Xu, Wei, Lopez, Cino, Wong and Lau, according to authorities. The defendants reaped “substantial financial benefits” resulting from these dealings, ensuring that the vendors who were in on the scheme received favorable business deals with Polar. According to the indictment, the fraudulent activity involved a sizable portion of Polar’s senior management team and at least 10 Polar customers and vendors.

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“The defendants, all of whom were either employed in high-level positions by Polar or were vendors reliant on business arrangements with Polar, allegedly showed a blatant disregard for the integrity of their companies in favor of lining their own pockets,” U.S. Attorney Damian Williams said. 

Polar’s business relied on numerous outside vendors and customers, with third-party general sales agents (GSAs) in the U.S. selling cargo space on its planes. Polar-employed GSAs often sold cargo space to freight forwarders hired by customers to coordinate their logistics, and they also contracted with ground handling vendors and trucking companies to transport cargo to airports. The executive defendants and vendor defendants charged last week allegedly corrupted Polar’s relationships with all of these parties, leveraging their positions to get favorable contracts and shipping rates and valuable cargo space. Executive defendants received cash kickbacks from the vendor defendants and held secret ownership positions with contracted companies, allowing them to profit off of revenue derived from contracts with Polar. The money was often disbursed to shell LLC accounts that obscured the recipients’ identities.

The suit alleges that these payouts amounted to about $23 million over 12 years, and a financial analysis conducted on behalf on the company estimated that the fraudulent activity cost Polar Air $52 million during that period. The air cargo firm said it first discovered documented evidence of the problem in the summer of 2021, before firing the executives in question and reporting the issue to law enforcement.

Companies embroiled in the scheme have started hitting back. In December 2022, New York freight forwarder Cargo On Demand (COD) sued Polar, accusing it of RICO violations, fraud, conspiracy and breach of contract. It alleged that it engaged in a “mutually beneficial” relationship with Polar between 2014 and 2021, wherein Polar would secure a set amount of cargo space at preferable rates for COD’s customers. But in order to use the space allotment, COD was forced to pay the company, along with additional third party entities, “consulting fees” separate from the business deal. Polar executives were principals of the consulting companies, which COD paid $4 million over seven years. The fees reduced, or sometimes negated, the company’s profits on freight forwarding deals.

Last week’s charges represent “the opening salvo against a decade-long scam by a small group of Polar’s executives and others that allegedly tainted every aspect of its business operations,” IRS criminal investigation special agent in charge Thomas Fattorusso said. The arrests “will hopefully begin the process of righting the alleged wrongs of those charged and put the company on a path to integrity, which its hardworking employees and legitimate customers deserve,” he added.

DHL, which owns a 49-percent stake in Polar, declined to comment on the issue. Majority owner Atlas Air did not respond to a request for comment by the time of publication.