Did United Airlines Defraud the U.S. Government?

AMR’s (AAMRQ.PK) American Airlines and United Airlines (NYSE:UAL) have run afoul of the Regional Transit Authority. The two airlines have allegedly avoided paying at least $96 million in sales taxes, and the agency noticed; the RTA announced that it will file a lawsuit against United Airlines on Monday.

The agency contends that a United Airlines subsidy, United Aviation Fuels, opened a small “sham” office in the rural city of Sycamore, Illinois that allows the carrier to purchase billions of dollars of jet fuel at a much lower tax rate than it would pay in Cook County. The RTA said that United Aviation Fuels agreed to pay DeKalb County, where Sycamore is located, $300,000 a year, reported The Associated Press. That sum is far less than it would have to pay Chicago and Cook County.

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United Airlines’ office in Sycamore has been labeled a sham office because the RTA has accused the airline of claiming to make purchases from its small, DeKalb County-based office, when the sales are allegedly being made in Chicago for use at O’Hare airport.

While the transportation agency has accused American Airlines of the same offense, the carrier will avoid litigation as it is still in bankruptcy proceedings.

According to the AP, both airlines have claimed their Sycamore operations are legal.

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