Go Back  FlyerTalk Forums > Miles&Points > Airlines and Mileage Programs > Delta Air Lines | SkyMiles
Reload this Page >

Man Charged With Stealing 42 million DL SkyMiles

Man Charged With Stealing 42 million DL SkyMiles

Old Sep 14, 19, 11:46 pm
  #46  
FlyerTalk Evangelist
 
Join Date: Nov 2005
Location: Phoenix, AZ
Programs: AA Gold AAdvantage Elite, Rapids Reward
Posts: 34,988
Originally Posted by s0ssos View Post
Well, if what you wish happens to him he won't be flying Delta because he is in prison. Or any other airline.
Right! He will never be allowed to flying on any airlines for life. Yes, he going to prison for a long time. Because he is fraud!
N830MH is offline  
Old Sep 15, 19, 6:47 am
  #47  
Suspended
 
Join Date: Sep 2005
Location: SEA
Programs: UA Silver, BA Gold, DL Gold
Posts: 9,779
Originally Posted by mecabq View Post
Wire fraud or mail fraud is what they charge you for when they can't come up with a real crime. No doubt this guy was unscrupulous and he stole from Delta (I suppose the real theft, and probably the basis of Delta's claim of the damages, would be when he redeemed the points for something), but IMHO they shouldn't make a federal criminal case out of it.
Fraud is a crime. Fraud is theft. Are you suggesting that theft of any type should not be prosecuted or only white collar theft?
pbarnette is offline  
Old Sep 15, 19, 8:41 am
  #48  
 
Join Date: Oct 2005
Location: United Arab Emirates & Arizona, USA
Programs: UA MM/1P, EK Ag, QR, TK, Marriott Life Ti, Hilton Dia, IC Spire, Hyatt Glob, Shangri-La
Posts: 4,238
Originally Posted by pbarnette View Post
Fraud is a crime. Fraud is theft. Are you suggesting that theft of any type should not be prosecuted or only white collar theft?
I don't see where I insinuated that theft should not be prosecuted. If the guy stole something, prosecute him for theft, or the victim has civil remedies. Turning into "wire fraud" (or, in the old days, "mail fraud") represents unnecessary federalization and overcharging.
mecabq is offline  
Old Sep 15, 19, 9:42 am
  #49  
 
Join Date: Sep 2002
Location: LAX
Programs: AA PLT / 2MM
Posts: 1,954
I'm pleasantly surprised by the posts by Centurion and mecabq in this thread, which are not the usual corporate bootlicking I've sadly come to expect from the FlyerTalk gang. These posters get it.

The issue totally missed by some is whether the FBI and DOJ should be spending their precious limited resources -- funded by the American taxpayers -- investigating and prosecuting this "crime" as opposed to other crimes, not whether there exists some federal criminal statute on the books that can conceivably be used as a basis for charging this guy with a federal offense.

Nice work by Centurion and mecabq!
jdrtravel likes this.
LAX_Esq is offline  
Old Sep 15, 19, 1:11 pm
  #50  
 
Join Date: Dec 2018
Programs: Flying Blue Gold, Miles & More pleb
Posts: 495
Surely the guy didn't steal anything from delta? He "stole" from his own customers (if i understood the whole thing correctly).
Maestro Ramen is offline  
Old Sep 15, 19, 4:27 pm
  #51  
 
Join Date: Dec 2000
Location: SAN Diego (Hillcrest); soon formerly LEXington, KY; otherwise around and about
Programs: DL still sort-of Elite; Marriott Lifetime Platinum; married to Hilton Elite
Posts: 2,978
Sure hope that you folks who diss on Delta don't fly them. Front cabin seats are hard enough to get as it is. Doug Parker is your friend.
LexPassenger is offline  
Old Sep 15, 19, 4:44 pm
  #52  
 
Join Date: Jul 2009
Programs: DL PM, HH Diamond, Marriott Plat, AA, WP
Posts: 832
Originally Posted by mecabq View Post
I don't see where I insinuated that theft should not be prosecuted. If the guy stole something, prosecute him for theft, or the victim has civil remedies. Turning into "wire fraud" (or, in the old days, "mail fraud") represents unnecessary federalization and overcharging.
18 U.S.C. 1341 and 18 U.S.C. 1343, the mail fraud and wire fraud laws are super broad, which can lead to overcriminalization. Everything is covered, dishonesty is really what's proscribed. But it is what it is, and the feds will use it and the courts will allow it. I think in our circles, 42 million Skybonus points might not rise above a local petty theft!
daloosh is offline  
Old Sep 15, 19, 4:45 pm
  #53  
FlyerTalk Evangelist
 
Join Date: Nov 2005
Location: Phoenix, AZ
Programs: AA Gold AAdvantage Elite, Rapids Reward
Posts: 34,988
Originally Posted by Maestro Ramen View Post
Surely the guy didn't steal anything from delta? He "stole" from his own customers (if i understood the whole thing correctly).
Exactly! He did steal the miles from Delta. That's his problem. Because he is fraud! Don't you understand? He will never be allowed to flying on Delta ever again! He accused to stealing the miles and he did not joins SkyMiles program. He did not earns the miles. He never became Silver, Gold, Platinum, and Diamond medallion.
N830MH is offline  
Old Sep 15, 19, 4:49 pm
  #54  
 
Join Date: Oct 2009
Location: ATL Lost Luggage
Programs: Kettle with Kryptonium Medallion Tags
Posts: 6,262
Originally Posted by LAX_Esq View Post
The issue totally missed by some is whether the FBI and DOJ should be spending their precious limited resources -- funded by the American taxpayers -- investigating and prosecuting this "crime" as opposed to other crimes, not whether there exists some federal criminal statute on the books that can conceivably be used as a basis for charging this guy with a federal offense.
The prosecutor, the current US Attorney for the Northern District of Georgia, is an experienced politician who served two terms as a state representative. He is one of the contenders to replace a US Senator that is retiring at the end of the year. Delta contributed $67,725 (2013 thru 2018) to the retiring Senator's campaigns.
RatherBeOnATrain is offline  
Old Sep 15, 19, 8:26 pm
  #55  
 
Join Date: Jan 2014
Programs: Amtrak Guest Rewards (SE), Virgin America Elevate, Hyatt Gold Passport (Platinum), VIA Preference
Posts: 2,145
Gods, there are so many issues with this indictment/statement:
(1) First, there's the idea that he "took advantage of" those customers. I rather take exception to that phrasing insofar as it implies that the customers in question were victims. I can see Delta being "taken advantage of", but not customers (unless some of them are asserting that they were denied the ability to attach a SkyBonus number to their reservation).

(2) Second, there's the valuation. Either the indictment should get thrown out (or at least, dismissed without prejudice with the prosecutor being told to "try again") on the valuation of the miles, the prosecutor should be formally reprimanded for misrepresenting the value of the points, or Delta should be investigated for accounting fraud: Trying to assert $0.04/mile for SkyPesos would be a stretch. Trying to do it for the (far cheaper) SkyBonus points value? I think you can argue for somewhere between $0.003 to $0.01/point, but with the indictment value that's anywhere from a 4:1 to 12:1 difference. That's not a good-faith upper limit on the value of the points, that's fraudulent misrepresentation.

The argument for accounting fraud would be that asserting that value on unredeemed points would allow Delta to defer a lot of profit into future years (when points either expire unredeemed or get redeemed for far less than their face value). If there are a billion SkyBonus points out there, Delta would be asserting a liability of $40m (versus a realistic liability of anywhere from $3-10m) in "unearned revenues". When the points get "cashed out", they would show the lower cash expense and the balance would get kicked through as profit. Some elements of this could be argued to be reasonable handling of unclear liabilities, but the overall scale reminds me of a sort-of "Enron in reverse" (in this case, effectively hiding assets which can be brought out later and thus smoothing overall fiscal performance, and potentially "hiding" a slump in business through a push on award availability). I would hold this out to be a fairly insidious move because airlines are, in general, probably going to be "sitting on" several large categories of unearned revenues (FFP miles, corporate program points, and advance-purchased tickets), so hiding $50-100m of inflated liabilities from the FFP/corporate program side of things will probably go missing/unnoticed alongside a few billion dollars from prepaid tickets.

...which leads to (3), I'd love to see the prosecutor get called out on this at a town hall on the campaign trail. "Mr. Such-and-such, in that case you asserted an absurd value of Delta SkyMiles. If you can't attach a reasonable value to something like that, how can we expect you to have any clue when it comes to the federal budget?"

Edit: And this is a pretty good example of a case that nobody wants to have end up in front of a jury. The defense won't want it because of what I would argue is effectively over-charging. The prosecution won't because I could see a jury finding the idea of the prosecution's valuations as being so absurd (presuming they stick with the $0.04/point valuation) that, if aggressively impeached, the jury could turn around and find them to be less-than-credible as a result. It wouldn't be jury nullification per se so much as deciding that one side has overstated their case to the point that they lose credibility (e.g. "If you're blatantly lying about the value of the points, are you also lying about how the program was intended to work?"), particularly if they were to determine that Delta gained a good deal of business from the program.

Edit 2: So, I checked. Presuming that the vast majority of the travel in question was Level 2/non-hub travel (6 points per dollar) and that the rest sort-of washed, 42m SkyBonus points would involve about $7,000,000 in travel (before taxes and fees and before accounting for the 10% bonus that would have kicked in). If that was accrued through valid purchases over the course of 13 months (per the indictment, the timeframe was about that long), I have to confess that I have a very hard time feeling sympathy for Delta (especially given the over-statement of the valuation) and I think a worthwhile question to Delta is "Would you have preferred that Mr. Podolsky have booked with another airline?"

On the other hand, if it was mostly Level 1/non-hub (30 points per dollar)? Well, the amount of paid travel drops but at that point the indictment would be worth a stiff question at the next shareholder's meeting (namely, "In this indictment, a value of $0.04/point was asserted for SkyBonus points. Given that non-hub travel in premium cabins generates 30 points per dollar spent, does this mean that Delta has intentionally designed a program to give away more in benefits than Delta generates in revenue from the underlying ticket sales?").
jdrtravel likes this.

Last edited by GrayAnderson; Sep 15, 19 at 9:12 pm
GrayAnderson is offline  
Old Sep 15, 19, 9:39 pm
  #56  
 
Join Date: Jan 2014
Programs: Amtrak Guest Rewards (SE), Virgin America Elevate, Hyatt Gold Passport (Platinum), VIA Preference
Posts: 2,145
So, I've got a theory (that I'm putting in a separate post since the last post is already pretty big): We're going to find out that he was using SkyBonus awards regularly as part of his travel agency's business model, effectively commercially selling SkyBonus awards. If he was doing that in such a way as to undercut Delta's pricing (particularly on one-way international trips with nosebleed sticker prices), I can see a problem for Delta. That's also the only way I can see him actually using 42m SkyBonus points in a reasonable timeframe (since if the points were mostly expiring unused, the allegations of harm from fraud would seem to be rather stretched..."Man racks up 42m SkyMiles" is a headline; "Travel agent who drove $7m in business to Delta and hacked a back door to get a free trip to Hawaii" would seem to be as likely to get a complaint from the jury about why they're even in the courtroom as it would to get a conviction).

If this was concentrated on a few routes, Delta could make a more sensible claim that his actions were suppressing overall ticket prices due to the scale of the action and the pax ultimately paying him less for a ticket than they would have paid Delta. Basically, it isn't "just" that he was pocketing a bunch of miles; he was actually making a hash of their yield management system in a few places.
GrayAnderson is offline  
Old Sep 15, 19, 10:30 pm
  #57  
 
Join Date: Mar 2010
Programs: DL GM, Bonvoy Gold
Posts: 8,062
Originally Posted by GrayAnderson View Post
So, I've got a theory (that I'm putting in a separate post since the last post is already pretty big): We're going to find out that he was using SkyBonus awards regularly as part of his travel agency's business model, effectively commercially selling SkyBonus awards. If he was doing that in such a way as to undercut Delta's pricing (particularly on one-way international trips with nosebleed sticker prices), I can see a problem for Delta. That's also the only way I can see him actually using 42m SkyBonus points in a reasonable timeframe (since if the points were mostly expiring unused, the allegations of harm from fraud would seem to be rather stretched..."Man racks up 42m SkyMiles" is a headline; "Travel agent who drove $7m in business to Delta and hacked a back door to get a free trip to Hawaii" would seem to be as likely to get a complaint from the jury about why they're even in the courtroom as it would to get a conviction).

If this was concentrated on a few routes, Delta could make a more sensible claim that his actions were suppressing overall ticket prices due to the scale of the action and the pax ultimately paying him less for a ticket than they would have paid Delta. Basically, it isn't "just" that he was pocketing a bunch of miles; he was actually making a hash of their yield management system in a few places.
I seriously hope it is something like this. Otherwise, this whole thing is absurd. We're talking about airline bonus points, not real money. Delta can't claim that miles have no fixed cash value and at the same time give them a cash value.
jdrtravel is offline  
Old Sep 15, 19, 10:50 pm
  #58  
 
Join Date: Jan 2014
Programs: Amtrak Guest Rewards (SE), Virgin America Elevate, Hyatt Gold Passport (Platinum), VIA Preference
Posts: 2,145
Originally Posted by jdrtravel View Post
I seriously hope it is something like this. Otherwise, this whole thing is absurd. We're talking about airline bonus points, not real money. Delta can't claim that miles have no fixed cash value and at the same time give them a cash value.
Eh, they have to carry them on their books at some value since they represent (after a fashion) "unearned revenue" as a liability (e.g. unless Delta decides to void miles, they'll have to presumably carry a liability until you fly with them). It's sort-of like how the airlines have to carry travel vouchers as a liability...but they can adjust the value of that liability in line with how likely they think you are to cash them in (and what portion you're likely to cash in). If a voucher can't be "split up", for example, a $2000 voucher might end up being redeemed for $750...or it might not even get used (if you have an infrequent traveler). The key word is "fixed"...they don't have a direct peg to cash pricing, so the valuation isn't fixed, but they have to put something in place for the accountants.

Also, thinking about it this feels more likely since it would be in line with some previous cases, including this one (from 2001, and there have been a few subsequent cases as well):
https://www.atg.wa.gov/news/news-rel...tive-practices
GrayAnderson is offline  
Old Sep 16, 19, 9:10 am
  #59  
A FlyerTalk Posting Legend
 
Join Date: Sep 2009
Location: Minneapolis: DL DM charter 2.3MM
Programs: A3*Gold, SPG Plat, HyattDiamond, MarriottPP, LHW exAccess, ICI, Raffles Amb, NW PE MM, TWA Gold MM
Posts: 90,076
Originally Posted by GrayAnderson View Post
So, I've got a theory (that I'm putting in a separate post since the last post is already pretty big): We're going to find out that he was using SkyBonus awards regularly as part of his travel agency's business model, effectively commercially selling SkyBonus awards. If he was doing that in such a way as to undercut Delta's pricing (particularly on one-way international trips with nosebleed sticker prices), I can see a problem for Delta. That's also the only way I can see him actually using 42m SkyBonus points in a reasonable timeframe (since if the points were mostly expiring unused, the allegations of harm from fraud would seem to be rather stretched..."Man racks up 42m SkyMiles" is a headline; "Travel agent who drove $7m in business to Delta and hacked a back door to get a free trip to Hawaii" would seem to be as likely to get a complaint from the jury about why they're even in the courtroom as it would to get a conviction).

If this was concentrated on a few routes, Delta could make a more sensible claim that his actions were suppressing overall ticket prices due to the scale of the action and the pax ultimately paying him less for a ticket than they would have paid Delta. Basically, it isn't "just" that he was pocketing a bunch of miles; he was actually making a hash of their yield management system in a few places.
I suggested this in an earlier post. It seemed like too many free tickets to give to friends and family.

Let's not forget that Virtuoso seems to have instantly ended (or at least suspended) the travel agent's affiliation despite that Virtuoso relationship being pushed heavily on their website. My guess is that this 60+ years old business is toast even though the charged person seems to be a managing director who rose throught the travel agent ranks and not the owner of record in the closely held business. Still, if the travel agent was steering business toward DL (despite being based in ORD), perhaps someone there should have noticed.
MSPeconomist is offline  
Old Sep 16, 19, 10:05 am
  #60  
 
Join Date: Jan 2014
Programs: Amtrak Guest Rewards (SE), Virgin America Elevate, Hyatt Gold Passport (Platinum), VIA Preference
Posts: 2,145
Originally Posted by MSPeconomist View Post
I suggested this in an earlier post. It seemed like too many free tickets to give to friends and family.

Let's not forget that Virtuoso seems to have instantly ended (or at least suspended) the travel agent's affiliation despite that Virtuoso relationship being pushed heavily on their website. My guess is that this 60+ years old business is toast even though the charged person seems to be a managing director who rose throught the travel agent ranks and not the owner of record in the closely held business. Still, if the travel agent was steering business toward DL (despite being based in ORD), perhaps someone there should have noticed.
Paradoxically, if someone has a bunch of customers willing to connect that isn't as absurd as it sounds...particularly given Delta's relative premium cabin pricing over the last few years being somewhat less than the competition.

That being said, given the amounts of business involved (no less than $1.3m and probably somewhere in the range of $2m-7m) this sure feels like Delta "didn't care until they did" (the issue with the AAirpass folks being encouraged to do X by company employees and then thrown out of the program for doing some of what they were encouraged to do, or the issues surrounding musical instruments getting their own FFP accounts), particularly if the customers were mostly based out of Chicago, since this would imply that he was providing a not-insignificant share of Delta's business out of Chicago.

My immediate thought on that latter point made me immediately wonder if Delta wasn't clearly taking the wrong message from the situation (and that maybe "leaking" some points to travel agents' SkyBonus accounts would be a smart business move). However, as I typed that I started wondering if maybe somebody at Delta got worried about the appearance of corruption and legal consequences if this were tolerated (I'm no expert but the difference between "travel agent incentives" and a payola scandal could be a lot narrower than one thinks, especially with the games being played).

Of course, now I'm wondering...if we all got together and found a random company to attribute trips to SkyBonus how that would end up for them. Yes, I'm in a bit of a trollish mood with this...but there's just something "off" about this whole situation that's got me feeling a little silly.
GrayAnderson is offline  

Thread Tools
Search this Thread
Search Engine: