Saturday, May 21, 2011

SEC IG looks into United Airlines bankruptcy

David Kotz, inspector general of the Securities and Exchange Commission, acknowledged that the agency did not respond appropriately to allegations made in November 2007 by former pilot Dan Hanley that United Airlines violated the Sarbanes-Oxley Act during its post-9/11 Chapter 11 bankruptcy proceedings. The law was passed after financial shenanigans by Enron management cratered the energy company.

In a Nov. 3 letter, Kotz told Hanley, now head of the Whistleblowing Airline Employees Association ( that after reviewing his complaint, “we did not believe that sufficient action was taken by the Office of Investor Education and Advocacy.” Kotz said he was referring the matter directly to SEC Enforcement Division senior counsel Michelle Barrans for possible criminal action.

One of Hanley’s allegations was that the Department of Justice worked out a deferred prosecution agreement with United management, essentially giving them a pass on criminal charges and allowing them to collect millions of dollars in exit bonuses while United vendors, shareholders and employees – who lost their pensions – were hung out to dry.
Hanley, a veteran pilot who was forced out of his job after complaining about lax safety at the airline,  also alleges that the Chicago judge who presided over the United Airline bankruptcy proceedings maintained a $40 million bribery fund, part of which was held in a land trust in Arizona under his initials.

Read more at the Washington Examiner: