United Airlines chief executive officer Jeff Smisek stepped down “effective immediately” on Tuesday with the airline citing an ongoing federal corruption investigation into the company.
The airline is under investigation over whether it improperly sought to influence officials at the Port Authority of New York and New Jersey in a scandal that has embarrassed Republican presidential hopeful Chris Christie.
United also announced that its executive vice president of communications and government affairs and its senior vice president of corporate and government affairs had stepped down.
The investigation has focused on apparent favors for the chairman of the Port Authority, David Samson, who allegedly asked Smisek to reopen what Bloomberg characterized as “a money-losing route” from Newark to Columbia, South Carolina, near Samson’s weekend home in Aiken.
Newark, a hub for United and doubly important after its merger with Continental Airlines, has seen expansions including a $600m lengthening of the local railroad line, the Path train, to the airport.
Samson resigned last year after a scandal around lane closures on the Fort Lee bridge that also embroiled New Jersey governor Christie. Samson also resigned from his own law firm, Wolff & Samson, in April after heightened scrutiny around the firm during the Port Authority investigation.
In a regulatory filing, United said: “The company and certain of its executive officers and employees have received federal grand jury subpoenas requesting records and testimony related to certain individuals formerly associated with the Port Authority of New York and New Jersey and related operations of the Company.”
According to the filing, Smisek will receive a payment of $4.875m as severance, in addition to a portion of his performance bonuses received in 2013, 2014 and 2015, which are still outstanding. He will also remain eligible for his bonus this year. In exchange, he is subject to a non-disparagement clause and a two-year-long non-competition agreement in his termination deal. He will also “hold in strict confidence any confidential information related to the companies”.
The company said it would be able to “clawback” its severance payments if Smisek is convicted or pleads guilty to any crime involving “moral turpitude” related to his service at the company.
Smisek will be replaced by Oscar Munoz, who has served on the board of directors for United Continental Holdings, Inc since 2010, and is an experienced executive who most recently served as president and chief operating officer of CSX Corporation.
United is cooperating with the government’s investigation, it added. During the Q&A portion of a conference call with investors Monday afternoon, executive vice president and general counsel for United Brett Hart reiterated that the company would not answer any questions on the topic. He added that “all of our disclosures were appropriate” and said that the federal investigation was ongoing, as well as United’s own internal investigation.
“It is truly a privilege to serve as United’s CEO. United has an incredible opportunity for improving an experience that is essential to the vitality of global business and to the personal lives of millions of people, for innovation, and for earnings growth,” Munoz said in a statement. “In my years serving on the board, I have been impressed by the dedication and skill of my new coworkers. Together, we will make United the top-performing airline.”
Munoz will continue to serve on United’s board of directors. Henry L Meyer III, United’s lead independent director, will serve as non-executive chairman of the board of directors.
