In 2006, the Postal Service accounted for over a third of the air cargo business in this country, spending about $700 million on air cargo costs. As one of the nation’s largest air cargo customers, the Postal Service also became the largest government victim in a price-fixing scam in the international air cargo industry. The scheme to fix the rates and surcharges the air cargo carriers charged their customers was uncovered by a Justice Department Task Force that included the U.S. Postal Service Office of Inspector General (OIG). The investigation centered on allegations that dozens of air cargo carriers were artificially increasing profits through a price fixing scheme. The conspiracy by the air cargo carriers also involved, not only base cargo rates charged per kilogram, but also surcharges related to fuel, security, war risk, and U.S. Customs fees.

As a result of the investigation, Nippon Cargo Airlines pled guilty to violations of the Sherman Anti-Trust Act and were fined $45 million. The Postal Service received this $4.5 million check as a result of the multi-agency investigation. The OIG’s new Major Fraud Investigations Division was part of this investigation and is looking into additional allegations involving other air cargo carriers.

Although the Postal Service expected the Flats Sequencing System to revolutionize the way the agency sorts mail and save almost $600 million annually, a recent audit conducted by the Office of Inspector General (OIG) determined large-scale deployment of the system is premature. A contractor designed the system to bundle large mailpieces into delivery sequence without additional sorting. After reviewing performance data for the system, an OIG audit team concluded that although the contractor had made improvements to the system since the prototype’s performance testing, the revised system still failed to meet key performance parameters. The system’s shortcomings subsequently would reduce the agency’s forecasted savings and increase operational burdens.

Postal management partially agreed with the report findings and recommendation. They began testing to ensure future deployments did not adversely affect savings and postal operations. Additionally, the contractor who built the system has presented to the Postal Service a recovery plan, which the agency will consider and base its decision to deploy additional systems. To read “Flats Sequencing System: First Article Retest Results” (Report Number DA-AR-09-012).

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Month after month a postal employee submitted workers’ comp claim forms that said just that: Unable to work due to an on-the-job injury. The employee claimed he was completely disabled and in need of surgery for his injured arm. However, Office of Inspector General (OIG) Special Agents were alerted that these claims might not be true. They videotaped him doing various physical activities, all with full use of his arm. While he was “unable to work,” his fraudulent claims cost the Postal Service almost $55,000 in compensation and medical costs. But they cost the former postal employee even more. He was convicted of workers’ compensation fraud; lost his benefits; and will spend ten months in federal prison, serve three years of probation and has to pay back all that money.

Last year, OIG investigations of workers’ comp scammers saved the Postal Service about $200 million in long-term workers’ comp costs. To help bring attention to these types of scams, the OIG has kicked off a crime prevention and awareness campaign, targeting a crime that costs the Postal Service millions of dollars each year.

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