UPS to pay $5.3 million to resolve international mail investigation

United Parcel Service Inc. (UPS) has agreed to pay about $5.3 million to resolve allegations that the company falsely reported information about delivery times for mail carried internationally for the U.S. Postal Service (USPS), which contracted with the carrier to transfer U.S. mail to foreign posts and other intended recipients.

UPS is an international package delivery company incorporated in Delaware with headquarters in Atlanta, Georgia.

USPS contracted with UPS to pick up U.S. mail at six locations in the United States and at various Department of Defense and State Department locations abroad, and then deliver that mail to numerous international and domestic destinations.

To obtain payment under the contracts, UPS was required to submit electronic scans to USPS reporting the time the mail was delivered at the identified destinations.

The contracts specified penalties for mail that was delivered late or to the wrong location.

Established in 1775 to promote the free exchange of ideas across the colonies, the Postal Service is among the country’s oldest government institutions — yet it operates with few of the financial benefits of being a federal agency while still bearing many of the costs.

Unlike other government agencies, the USPS generally does not receive taxpayer funding, and instead must rely on revenue from stamps and package deliveries to support itself.

And unlike private courier services such as UPS and FedEx, the USPS cannot excise unprofitable routes because Congress stipulates that the Postal Service delivers to all homes in America — including a remote community in the Grand Canyon, where the mail is delivered by mule.

Postal Service pricing must be approved by the Postal Regulatory Commission, an independent government agency.

Republicans have often criticized the agency, calling it a poster child for government waste and incompetence, even as the delivery service won high marks for approval and trust from the public.

A 2006 law signed by President George W. Bush Jr. required it to annually pre-fund retirees’ health care costs, imposing an unnecessary burden as the Postal Service struggled through years of losses triggered by slumping mail volumes.

The Postal Service Reform Act, which President Biden is expected to sign into law, provides financial flexibility for the mail agency to take on improvements that have been debated for years.

“The passage of this legislation, on a strong bipartisan basis, is a monumental victory for postal workers, the wider postal community, and the communities we are proud to serve,” said American Postal Workers Union (APWU) President Mark Dimondstein. “This legislation strengthens the public Postal Service, a national treasure that has connected us for over 250 years.”

“It is not an exaggeration to say that this bill is one of the most critical pieces of postal legislation in modern history — the struggle to win Postal Reform has been 15 years in the making,” said APWU Legislative and Political Director Judy Beard.

The Postal Reform bill will place the United States Postal Service on the path toward financial stability by repealing the onerous and financially debilitating pre-funding mandate, ensuring six-day delivery, adding much-needed transparency to postal operations, and maximizing participation in Medicare — a program which the Postal Service and its employees have contributed over $34 billion toward — by enacting prospective Medicare integration.

Union leaders said the postal reform bill is fair to active and retired postal workers and is a crucial development in the fight to preserve and strengthen the peoples’ Postal Service.

The settlement resolves allegations that scans submitted by UPS falsely reported the time and fact that it transferred possession of the mail.

“Companies doing business with the government must meet their contractual obligations,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The Department of Justice will pursue those who knowingly fail to live up to their bargain and falsely bill the government for goods or services that they did not provide.” 

“The USPS contracts with commercial airlines for the safeguarding and timely delivery of U.S. mail to foreign posts, including the mail sent to our soldiers deployed to foreign operating bases,” said Executive Special Agent in Charge Ken Cleevely of the USPS Office of Inspector General.

“The Office of Inspector General supports USPS by aggressively investigating allegations of contractual non-compliance within the mail delivery process, including the falsification of delivery information,” said Cleevely. “Our special agents worked hand-in-hand with the Department of Justice to help ensure a reasonable resolution and we applaud the exceptional work done by the investigative and legal teams.”

This is the fifth civil settlement involving air carrier liability for false delivery scans under the USPS International Commercial Air Contracts, and collectively the United States has recovered more than $70 million as a result of its investigation of such misconduct.

United Airlines Inc., the world’s third-largest airline, agreed on February 26, 2021, to pay over $49 million to resolve criminal charges and civil claims relating to fraud on postal service contracts for the transportation of international mail.

Investigators learned that between 2012 and 2015, United Airlines engaged in a scheme to defraud USPS by submitting false delivery scan data.

American Airlines Group Inc, the largest U.S. airline, paid $22.1 million in 2019 to settle claims it falsely reported the times it transferred possession of U.S. mail to foreign postal administrations.

British Airways and Iberia paid $5.8 million in 2018 to resolve their liability under the False Claims Act for falsely reporting the times they transferred possession of United States mail to foreign postal administrations.

In 2010, the USPS stopped using American Airlines and US Airways to deliver domestic mail because the carriers failed to meet performance goals.

The USPS has increased its use of contractors in recent years, but USPS employees continue to serve 98% of all U.S. homes and businesses.

The resolution obtained in this matter was the result of a coordinated effort between the Civil Division’s Commercial Litigation Branch, Fraud Section, with substantial assistance from the USPS Office of the Inspector General and the USPS Office of General Counsel. Senior Trial Counsel Don Williamson of the Civil Division’s Commercial Litigation Branch, Fraud Section, represented the government in the civil case.

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