Execs' Kickback Scheme Cost A Purchase-Based Airline $52M: Feds

PURCHASE, NY — Ten defendants have been charged in a decade-long, multi-million-dollar scheme to defraud a Westchester County-based international cargo airline.

Senior executives of Polar Air Cargo, a subsidiary of Purchase-based Atlas Air, engaged in criminal conduct that led to pervasive corruption of nearly every aspect of the company's international operation, according to federal law enforcement officials.

Federal officials from the Justice Department, including the FBI, the IRS and the United States Attorney for the Southern District of New York announced the unsealing of a four-count indictment charging ten defendants in a massive fraud scheme targeting the Westchester-based company.

SEE ALSO: Westchester-Based Atlas Air Acquired In $5.2 Billion Deal

Lars Winkelbauer, Abolish Kurien, Carlton Llewellyn, Robert Schirmer, Skye Xu, Benjamin Wei, Alvaro Lopez, Fabiola Cino, Orlando Wong and Patrick Lau were charged in connection with a massive scheme to defraud Polar Air Cargo Worldwide of tens of millions of dollars in revenue and the honest services of its employees. Damian Williams, the United States Attorney for the Southern District of New York, Michael J. Driscoll, the Assistant Director in Charge of the New York Field Office of FBI, and Thomas Fattorusso, the Special Agent in Charge of the Internal Revenue Service, Criminal Investigation announced the charges on Wednesday.

Nine defendants were arrested today. One remains at large.

Winkelbauer was arrested today in Thailand and is pending extradition to the United States. Skye Xu remains at large.

"As alleged, the 10 defendants charged today 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 said. "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. Their pervasive fraud ends today, and each defendant now faces substantial prison time for their alleged crimes."

The defendants are accused of taking and, in some cases, paying themselves kickbacks to steal space and the transport of goods on the airline's fleet of cargo planes. The company executives are accused of agreeing to accept millions of dollars in kickbacks from their vendor co-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, according to the indictment.

"For more than a decade, the defendants allegedly utilized a complex set of schemes at the expense of Polar Air to line their own pockets," Director Driscoll said. "The indictments today serve as a reminder to any unscrupulous actors attempting complex frauds – the FBI will hold you accountable in the criminal justice system."

The fraud they perpetrated — which involved a substantial portion of Polar’s senior management and at least 10 customers and vendors of Polar — led to pervasive corruption of Polar’s business, touching nearly every aspect of the company’s operations, for over a decade, prosecutors said.

"Today’s charges are 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-CI Special Agent in Charge Fattorusso said. "These arrests and charges today 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.”

As a result of the scheme, the co-conspirators received unlawful payments, either directly or through various limited liability companies they controlled, in excess of approximately $23 million in kickback payments or disbursements received as a result of their ownership of conflicted companies, federal officials said.

A financial analysis conducted at Polar’s direction estimates that, as a result of the fraudulent scheme, Polar suffered at least approximately $52 million in losses.

In the summer of 2021, Polar discovered documentary evidence of the conflicted ownership arrangements and kickback agreements.

According to court documents, Polar relied heavily on third-party, general sales agents in the United States to sell cargo space on its planes. In turn, the GSAs hired by Polar 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. Polar also contracted with ground handling vendors to load and unload cargo and with trucking vendors to transport cargo from domestic locations to the appropriate airports. In addition, Polar contracted with other partners for a variety of business reasons, including to secure cargo space on airline routes not serviced by Polar flights.

The scheme to defraud Polar reportedly touched on each aspect of these operations.

As a result of the scheme, the Executive Defendants, along with two co-conspirators who also worked as senior executives at Polar, received unlawful payments, either directly or through various limited liability companies they controlled, in excess of approximately $23 million in kickback payments or disbursements received as a result of their ownership of conflicted companies. Additionally, a financial analysis conducted at Polar’s direction estimates 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.