Jetblue Former Employee Charged in Kickback and Money Laundering Scheme

The aviation industry is highly competitive, and yes, considered highly susceptible to the risks of bribery and corruption.

Corruption stories associated with the aviation industry have often made headlines and have involved an array of misconduct whether during the course of buying, selling, maintaining, servicing or supplying an aircraft, an airport, or simply through the supply chain.

Companies and individuals in the aviation industry face daily pressures and temptations to break the law to gain market share or personal advantage.

However the consequences of engaging in bribery are severe, and this latest example is another somber reminder to illustrate the consequences of misconduct, from an individual liability perspective.

This example is even more insightful as it involves a case of private bribery at airlines, rather than public bribery misconduct that we often come across.

The Private Bribery Scheme

An indictment was unsealed last week in federal court in Brooklyn, NY charging Keily Nunez, Julien Levy, Ivan Santos and Ramnik Soni with conspiracy to commit honest services wire fraud and money laundering conspiracy

The case concerns a US airline headquartered in Long Island City, New York (only referred to as “Company 1” by the DOJ). A quick Google search suggests the airline in question to be Jetblue.

Nunez, a former employee of said “Company 1”, accepted more than $1 million in kickbacks in exchange for granting the airline’s aircraft part purchase orders to Summit Aviation Supply LLC (Summit LLC), a New Jersey-based company controlled by Levy and Santos; and to Alaris Aerospace Systems LLC (Alaris), a Florida-based company controlled by Soni. 

Summit LLC and Alaris managed to secure more than $1.5 million and more than $8.5 million, respectively, in purchase orders from the airline. 

In their roles with the airline, Nunez and another Co-Conspirator  were responsible for contacting after-market aircraft parts sellers on behalf of the airline and filling the airline’s part requisitions using a solicitation process that typically involved three price quotes and a comparison to historical prices the airline had paid for a given part.

In their roles, Nunez and the Co-Conspirator could request that the airline add new aircraft part sellers as business partners to the airline’s internal ordering system. 

Upon making such a request, Nunez and his Co-Conspirator were required by the airline’s policies to disclose whether they had a business or financial relationship with the new business partner.

In order to pull off such a scheme, Nunez allegedly used his position within the airline to establish Summit LLC as an airline business partner and falsely represented to the airline that Summit LLC was another entity with a very similar name, Summit Corp., that the airline had previously partnered with.

In reality, Santos established Summit LLC and opened bank accounts in its name. Levy, in the meantime, created an email account in the name of an individual who had been associated with the defunct Summit Corp., and used it as an alias to communicate with the airline on behalf of Summit LLC.

Nunez approved approximately 37 purchase orders between Summit LLC and the airline valued at over $1.5 million.  In exchange, Nunez received multiple kickback payments representing a percentage of the purchase orders directed to Summit LLC.

In addition, following the termination of Nunez’s employment with the airline, Nunez contacted his Co-Conspirator about steering the airline’s purchase orders to Summit LLC and Alaris in exchange for a portion of the invoiced amounts.

The Co-Conspirator agreed and subsequently directed the airline purchase orders, at inflated prices, to Summit LLC and Alaris in exchange for a percentage of some of the invoices the Co-Conspirator approved.

Nunez carried out a similar scheme with Soni and Alaris.  Between approximately March 2017 and July 2019, Nunez allegedly approved approximately 109 invoices between Alaris and the airline valued at over $8.5 million.

In exchange, Nunez received wires totaling hundreds of thousands of dollars sent from Alaris to bank accounts held in the name of FI USA Consulting LLC (FI USA), an entity controlled by Nunez.  For example, between approximately October 2017 and January 2021, the FI USA accounts received approximately 17 wires from Alaris totaling approximately $536,940.

In order to disguise the source and nature of the funds Summit LLC received from the scheme, Santos and Levy made multiple transfers of the proceeds from the airline payments between bank accounts in their names.

Breon Peace, United States Attorney for the Eastern District of New York, and Ricky J. Patel, Special Agent-in-Charge, Homeland Security Investigations, New York (HSI), said when announcing the arrests and charges in this case:

“This Office is committed both to protecting the integrity of the bidding process and ensuring that businesses compete on a level, honest playing field.” 

If convicted, the defendants face up to 20 years in prison.

Some Thoughts on Private Bribery

Public and private bribery are twin forms of corruption, with public officials and private persons, respectively, abusing entrusted power for personal gain by accepting bribes.

Both bribery forms involve fiduciary duty violations and betrayals of trust. The only main difference between the two is that in private bribery, the recipient is a private individual rather than a public official.

Research findings demonstrate that private bribery (also referred to as commercial bribery) is equally harmful to the public and private sectors through its anti-competitive effects.

“Private bribery provides the bribers with an unfair competitive advantage by eliminating from consideration products or services offered by the bribing company’s competitors in the usual course of business.

This method of unfair competition may severely disadvantage industry competitors, potentially forcing them from the marketplace, and thus distort any smooth functioning of domestic and international markets.

In addition, research findings demonstrate that private bribery’s anti-competitive effects harm consumers through higher prices and poorer quality goods and services.

Consumers bear the final cost of private bribery through an “undue surtax” on the goods and services affected by the bribery.”

In other words, the flying public may bear the increasingly high ticket prices partly due to private bribery issues.

It is worth mentioning that despite its harmful effects, private bribery is not prosecuted everywhere, unlike public bribery.

In the U.S., private bribery is heavily prosecuted.

It is often prosecuted under the federal mail and wire fraud statute. The gentlemen in this cases were charged with honest services fraud, which is defined in federal statute 18 U.S.C. §1346, as a scheme to defraud another of the intangible right to honest services through a scheme to violate a fiduciary duty by bribery or kickbacks.

A fiduciary duty in this case would be a duty to act only for the benefit of  an employer.

Prosecutors may also seeking money laundering charges as a way of charging commercial bribers. The criminal penalties for money laundering are severe, often exceeding the penalties under US domestic and foreign anti-bribery laws.

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