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Post date: December 13 2018

A.G. Underwood Announces $12.3 Million Settlement With Airport Ground Handling Company GSI For Fraudulent Business Practices In Payment Of Kickbacks

News from the New York Attorney General's Office 

December 13, 2018

Attorney General's Office Press Office / 212-416-8060


Ground Handling Company Made Undisclosed Payments to Executives of Key Clients at JFK Airport to Secure and Maintain Contracts at JFK and Elsewhere

Settlement Follows Felony Conviction of TOGA Executive; Part of Ongoing Investigation “Operation Greased Runway,” Examining Contracting Practices at JFK

NEW YORK—Attorney General Barbara D. Underwood today announced a new settlement in her ongoing investigation into the contracting and procurement processes at JFK Airport known as “Operation Greased Runway,” this time with the airport ground handling company Ground Services International (“GSI”), for making fraudulent kickback payments intended to influence various contracts the company had at JFK Airport and in other airports nationwide. The Attorney General’s ongoing investigation revealed that GSI expanded its business and won new contracts with two major companies, British Airways and Terminal One Group Association L.P. (“TOGA”), while at the same time making undisclosed payments to the companies’ key executives. 

GSI has agreed to pay $12.3 million to settle claims pursuant to New York State Executive Law Section 63(12), which bars deceptive and fraudulent business practices, and has also agreed to injunctive relief that will improve the company’s compliance and contracting processes in the future. As a term of the settlement, the company acknowledged its conduct was deceptive, improper, and compromised the integrity of business operations at JFK Airport. 

Today’s settlement follows the criminal conviction of Edward Paquette, the former Executive Director of TOGA; Mr. Paquette was also required to pay a $2 million settlement. The Attorney General’s investigation remains ongoing.

“New Yorkers deserve safe airports where businesses play by the rules. Yet these brazen, longstanding pay-to-play tactics undermined the integrity of contracting at JFK — allowing greed to trump fairness,” said Attorney General Underwood. “Our investigation continues, and we’re committed to rooting out corruption wherever it exists.”

The Attorney General’s investigation uncovered that GSI’s longtime President, Jeff Kinsella, secretly agreed to provide an ownership interest in GSI to a senior British Airways executive who had influence over procurement decisions at the airline, while that executive was promoting GSI’s services within British Airways.

Further, from 2009 to 2016, Mr. Kinsella made regular payments to the British Airways executive that totaled over $1.2 million. During this same period, British Airways expanded its business with GSI substantially, including continuing to service Terminal Seven at JFK Airport. When Mr. Kinsella eventually sold GSI in 2016, the British Airways executive received an additional payment of $3.6 million from Mr. Kinsella for his secret ownership interest. GSI never disclosed either its payments to the executive, or the executive’s financial stake in GSI, to British Airways, the Port Authority, or any other entity in the airline industry.

GSI also made improper payments to TOGA Executive Director Edward Paquette, the key decision maker with respect to the contract for ground services at JFK’s Terminal One. Mr. Paquette previously pled guilty to Commercial Bribe Receiving in the First Degree, a class E felony, after investigation by the Attorney General’s office. The Terminal One ground handling contract, for which Mr. Paquette recommended GSI, became GSI’s largest contract nationwide. Shortly after receiving the Terminal One contract, Mr. Kinsella began directing monthly payments to a company set up by Mr. Paquette specifically to receive the illicit payments. Throughout the period from 2015 through 2017, during which Mr. Paquette oversaw the contract at TOGA, GSI paid him a total of $640,000. 

While secretly making these improper payments, GSI made millions of dollars in profits from its contracts at Terminal One and Terminal Seven at JFK Airport with British Airways and TOGA respectively. 

Michael Nestor, Inspector General for the Port Authority of NY & NJ said, “Today’s announcement exposes a pay to play scheme that enabled Port Authority tenants and vendors to game the system and award business in exchange for payoffs and greed versus integrity and fairness. The Port Authority of NY & NJ Office of Inspector General and the New York State Attorney General will work vigorously to identify and root out corruption and ensure that all tenants and contractors conducting business at our Port Authority facilities do so with the highest degree of honesty, integrity, and fairness.” 

In addition to the $12.3 million monetary fine, GSI is required to implement and maintain an anti-bribery and corruption policy, and to train employees on that policy annually. The company will also establish an anonymous tip line where employees can report suspected violations of the policy. GSI must also submit to review by an outside audit firm, appoint a Chief Ethics and Compliance Officer, reform its internal bidding process to ensure that potential conflicts of interest are identified, and submit an annual affirmation of compliance signed either by the company’s CFO or CEO to the Port Authority Inspector General’s Office.

This civil settlement marks the third resolution in Operation Greased Runway. The first conviction and settlement, involving the airport food company Yankee Clipper Food Services I, was announced on October 19, 2017The second conviction and settlement involved Edward Paquette, former Executive Director of the TOGA, and was announced on November 2, 2017. Operation Greased Runway has now netted over $27 million in penalties and restitution. 

Attorney General Underwood thanks the Office of the Inspector General of the Port Authority of New York and New Jersey for an extensive investigative collaboration with the Attorney General’s office in this investigation, particularly the work of Investigator Jamie King, Investigator Mia Chang, Supervising Forensic Investigator Fred Ferrone, Assistant Director of Investigations Salvatore Dalessandro, and Director of Investigations Steven Pasichow.

The Attorney General’s civil investigation was led by Assistant Attorney General Justin Wagner, with assistance from Legal Support Analyst Justin Meshulam of the Taxpayer Protection Bureau and Investigator Melissa Kaplan of the Investigations Bureau. The Taxpayer Protection Bureau is overseen by Bureau Chief Thomas Teige Carroll and Deputy Bureau Chief Scott Spiegelman. It is part of the Division of Economic Justice, which is led by Executive Deputy Attorney General Manisha M. Sheth.

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