Postal service

UPS pays $5.3 million for alleged postal service fraud

UPS has agreed to pay nearly $5.3 million to resolve an investigation into allegations that it defrauded the U.S. Postal Service to transport international mail, the Justice Department announced Monday.

The express delivery company tampered with barcode scans of mail containers delivered to Postal Service facilities or federal facilities to give the impression that it was meeting on-time delivery requirements and guaranteeing full payment, according to federal allegations.

The Postal Service engaged UPS (NYSE: UPS) to pick up mail at six locations in the United States and various Department of Defense and State locations overseas, and deliver that mail to numerous destinations. The contract included penalties for mail delivered late or to the wrong place.

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

“Companies doing business with the government must meet their contractual obligations,” said Brian Boynton, senior assistant deputy attorney general and chief of the civil division. “The Department of Justice will prosecute those who knowingly breach their covenant and wrongly charge the government for goods or services they failed to provide.”

This is the fifth civil settlement involving an air carrier’s liability for false delivery scans under the Postal Service’s program for international commercial air contracts. Collectively, the US government raised more than $70 million as a result of its investigation into international mail delivery, including $49 million from United Airlines (NASDAQ: LAU) a year ago, $22 million from American Airlines (NASDAQ: AAL), $4.7 million from Northern Air Cargo and $5.8 million from partners British Airways and Iberia Airlines.

“UPS has not admitted any liability and UPS continues to be a high quality, cost effective and valued supplier to the USPS and the US Government. The parties have agreed to resolve this matter to avoid the expense and uncertainty that would accompany any litigation,” the company said in a statement provided to FreightWaves.

The USPS Office of Inspector General initially investigated the allegations and referred the investigation to the Department of Justice. No charges have been filed.

Click here for more FreightWaves/American Shipper stories by Eric Kulisch.

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