United Continental announced Tuesday that its chairman and chief executive Jeff Smisek had stepped down amid a federal investigation into improprieties with a former Port Authority chairman.
The shift in leadership came so abruptly that a pay package hadn’t even been negotiated for Mr. Smisek’s replacement, Oscar Munoz. Mr. Munoz is a United board member and chief operating officer of railway operator CSX Corp.
Smisek will receive a separation payment of $4.9 million, as well as stock worth nearly $3.5 million, the company said in a regulatory filing.
Two other senior executives – executive vice president Irene Foxhall and senior vice president Mark Anderson – are also leaving. Both had been in charge of government affairs.
United confirmed that the departures were “in connection with the company's previously disclosed internal investigation related to the federal investigation associated with the Port Authority of New York and New Jersey.”
“The investigations are ongoing and the company continues to cooperate with the government,” said the company.
The probe centers on whether United gave former Port Authority chairman David Samson preferential treatment. The Associated Press reports:
United began a direct flight between Newark, New Jersey, and Columbia, South Carolina, where Samson has a summer home, while he was chairman and ended it days after he resigned last year. United, the dominant airline at Newark Liberty International Airport, was negotiating with the Port Authority over projects at the airport at the same time.
United also launched its own internal investigation in February. Neither of the investigations so far has raised any accounting or financial reporting concerns, said the company on Tuesday.
“We don't expect it to impact our operations,” said United’s general counsel, Brett Hart in a conference call with analysts, according to Reuters.
But news of the departures comes just after its chief financial officer left for the same role at PayPal Holdings Inc., a hint at a lack of stability that may leave investors concerned, said one expert.
“I think some investors are going to be concerned given that degree of management turnover,” said Joseph DeNardi, an analyst with Stifel Nicolaus, in an interview with Reuters.
“We're really not that unstable,” Munoz said Tuesday to reporters.
Mr. Denardi said he was “surprised by” the news of Smisek’s departure. “I would imagine most people were.”
This report contains material from Reuters and the Associated Press.