My Experience as an Expert Witness in a Federal Criminal Trial About Miles and Points

Back in the Fall I started to write about a legal case surrounding miles and points where I served as an expert witness. The case had concluded, and the attorney who engaged me gave me signoff to post about it, with my commitment not to include any names.

At the time we both thought it would be a good idea for people to know the risks involving small business program accounts, because I know there are plenty of people who have opened accounts in the name of their company out there.

Reader Jess asked me to come back to this, so I thought I’d lay out the story in broad strikes.

Full disclosure: as an expert witness I was compensated for my time advising defense counsel and also for my time in court.

A woman, who served as travel coordinator for her company, had been applying an airline small business account number to travelers’ reservations. The company hadn’t been aware of these programs or made use of the points in the past, so she thought she’d get the points. She viewed the points as hers, she says she was told by her boss that she could have them as a perk of the job although there wasn’t any documentation of this.

When she left her job and the company hired a new travel coordinator, that person went to sign up for small business rewards accounts. She found they already had an account with this airline, that it had accrued points, and that the points had been used.

The new travel manager brought this to the executives of the company, and they were furious — they viewed it as stealing from the company. And in what seems like there must have been an executive on very friendly terms with someone in the US attorney’s office, charges were brought. This wasn’t a state case for theft. These were federal charges. In what struck me as an extreme case of boot-strapping, the woman was charged with federal computer crimes (for accessing a computer account belonging to her company without authorization).

That’s when I got involved in the case, another blogger connected me with the federal public defender representing the woman facing charges for having used the points in a small business account that was in her employer’s name.

Who Do Small Business Programs Reward.. the Small Business, or the Decision-Maker?

Travel loyalty programs are all about conflicts of interest, and indeed about creating conflicts.

Frequent flyer programs are all about created a consumer preference for one carrier over another, and frequent guests programs one hotel chain over another — turning a commodity product like an economy airline seat flying from A to B into a differentiated product, and one that travelers have an incentive to choose and even spend more money to get. In the case of business travelers, the programs create an incentive for the traveler to spend their employer’s money for their own benefit.

An early airline loyalty program was Southwest’s Secretaries Program where assistants were rewarded with free travel for booking their bosses on the airline.

Travel rebates are meant to lock in travelers. Small business programs offer rewards to a business for choosing a carrier. Those rewards can be used to offset business travel expenses, but that’s tough to do because mostly you’re dealing with capacity controls which are a challenge when business travel demands being on specific flights and not wasting time or re-arranging meetings based on availability. They reward the travel manager, who divvies out the points (to employees or to themselves).

Hotel programs are usually even more blatant about rewarding the individual decision-maker rather than the company. Meeting planner programs reward the individual signing the contract (the meeting planner). Starwood recently got rid of points accumulating in a company account in favor of rewarding the individual decision-maker instead.

Airlines usually want to reward the decision maker who is often the travel manager, as well as the traveler themselves. With small business programs they do this in a roundabout way. Hotel meeting planner programs are more blatant. Starwood has shifted from the small business account to the more direct approach.

In some companies it’s customary for the travel manager or meeting planner to receive this perks, although it’s not always clear. And one of the uses some programs suggest in their marketing materials is to use the points for rewarding employees.

My own take is that the best approach is transparency, meeting planners and travel managers should make sure any perks are clearly disclosed to superiors and that an open discussion takes place. The suppliers rewarding an employee can be awkward, the key from an employer’s perspective I think is to make sure it doesn’t influence their decision-making and to make sure it doesn’t increase a company’s costs. And then a discussion can happen about what’s compensation versus what can be used to offset company expenses.

Do Points Have Value to the Company, and How Much Are They Worth?

Points don’t have accounting value. When a company buys a ticket for business travel, they’re going to write the expense off on their taxes. The points they receive aren’t then booked as offsetting income. The points aren’t held on the company’s balance sheet.

Points belong to the airline, not to the company. This has been one of the long held and awkward claims that frequent flyer programs make. But at that point, are they an asset of the company at all? Interestingly, despite terms and conditions to the contrary, the airline’s representative testified that the points do in fact belong to the company rather than the airline.

Points may be of limited use to companies. Some airline small business programs offer awards that book into revenue classes (Delta’s SkyBonus books low level awards into the lower revenue classes), and programs may offer more flexible tickets for more points as well. Where corporate awards have to be used in frequent flyer award classes, those are especially tough to use for business travel where passengers don’t have the same flexibility they may have when planning vacations about when to leave and when to return, or as much ability to plan in advance. A meeting is when it is, it may not come together until the last minute, and companies don’t generally force employees to spend significant extra time at a destination for the cheapest flight or an award flight home.

At issue in this particular case is whether the company, which didn’t know about the program, would have gotten value out of the points at all — or if the points would have expired in a dormant account if they hadn’t been redeemed.

The Outcome of the Case

Neither the company, the prosecutors, nor the public defender were especially familiar with the nuances of miles and points. (As it happens, the airline’s small business program fraud department that had gotten involved wasn’t especially familiar with the workings of some aspects of their program or airline as they provided incorrect information about the similarities and differences between the small business program and frequent flyer program.)

After the federal public defender provided my anticipating testimony to the prosecutors, the government offered a plea agreement that implied no jail time. For a variety of reasons, largely that the deal was ‘too good to pass up’, the defendant took the plea.

I did have to testify at the sentencing. The prosecutors sought sentencing enhancements stemming from their contention that the defendant abused a position of trust (the guidelines here are really for a doctor abusing a patient and the like, and the judge had none of this). There was also the issue of restitution as required by the plea. That meant the small business program points had to be valued. The government originally sought amounts based on the full fare equivalents of tickets redeemed for, and I explained inventory buckets, change policies, and availability and what I thought that implied for value. The ultimate amount agreed to was much, much lower than originally sought.

So, no jail time and an amount she paid back the company that she was able to afford. But a whole lot of heartache.

This isn’t the sort of case that usually winds up in federal court. It’s almost unimaginable that most companies could interest a federal prosecutor in pursuing it. But a cautionary tale nonetheless — especially for anyone out there is accruing miles in a small business account in the name of an employer who isn’t aware of this.


About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. I once worked for idiots who believed points accrued by me on business travel (always in economy) on the designated airline belonged to the company when my employment was terminated. I asked how are try going to get them and tat was it. Burned them (points, not the idiots) with pleasure.

  2. In my company: I am the employer, and I’m aware of our participation in Delta’s small business program (having registered us myself). Last December I got a “coupon” for a future business-class trip to Asia assigned to myself, which I plan to use for both business (a professional conference that the company would otherwise pay for my travel) plus some vacation (which gives me some departure/return date flexibility). Had I not issued this coupon, a lot of those points would have expired. With the recent changes to the Delta small business program, I want to ask my employees to use our company’s number in their profiles when they choose to travel Delta (to help meet the 5 employee minimum to stay in the program), but I’m struggling with an equitable way for future use of the points. And if they also add their spouses/partners/kids to the “company” when they travel, so much the better. I’d like the points to benefit all my employees, and not just me (and I also pay 100% of my employees/families health insurance – so you see what kind of a nut I am). At the same time, I don’t want make an accounting headache, but I want it to be “fair” by some metric. Has anyone else had a similar situation and think they solved it? If so, please share.

  3. It’s ridiculous that they wouldn’t let you publish the names and company involved given that trials/charges are public record.

  4. Kudos to you for testifying for the defendant. What an absurd case and gross misuse of federal resources to prosecute this woman. At best this was a dicey civil suit for the value of miles that allegedly belonged to the company.

    I wish you would at least publish the district so we can single out the rogue US Attorney.

  5. Never thought much of putting my own skybonus number on a work trip, as the company doesn’t have an account. Never got anything out of it other than drink chits, and I’ve certainly shared those with other employees. Hope I don’t end up with federal charges 😛

    @Omar

    I get the sense that it’s a courtesy to the attorney who hired him- not a legal requirement. I’m sure Gary would appreciate being hired as an expert in the future- have you seen what expert witnesses are paid?

  6. It doesn’t seem like this case should have gone to court since the company didn’t know about or ask the travel manager to sign up for the accounts and therefore didn’t incur a loss.

    However, I would argue that it is part of the employee’s job as travel manager to find ways to reduce costs and should have made the company aware of the value of the small business programs even if she was not explicitly told by management to do so. The programs could have been used to offset travel costs when feasible or the offered as incentives to the employees at management’s discretion (which may include the travel manager).

    While not worthy of a lawsuit, it certainly would be grounds for firing in my mind if this had been discovered while she was working there.

  7. If the defendant exited employment on less-than-amicable terms, learning of the small business account and that they had been using for personal benefit may have been the final straw pushing the plaintiff into suing. This is even more likely if the defendant was terminated for cause.

  8. @archon

    Bug the plaintiff didn’t sue, “they” got the feds to file federal criminal charges. Lawsuits are for civil proceedings, which would have been much more appropriate here.

  9. I was a travel agent for almost 30 years. No one, including Gary, has commented on the fact, that some companies actually encourage their travel planning employees to signup and use these incentives for themselves. This type of employee is usually not highly compensated and this is a reward.

    Like Gary says loyalty programs inherently create conflicts of interest. Astute managers monitor the costs and rewards, so they know what is occurring. The organizations that I worked with (all large Fortune 500 companies) had reports for everything. I am assuming that the plaintiff didn’t really have good controls in place, otherwise they would have known about this incentive program. Some incompetent manager probably had his heels held to fire to recover this money. Lawsuit was the avenue. It is a shame that this person had their reputation sullied for something that routinely occurs in the travel business.

  10. Seems ridiculous that this was brought as a Federal case. That said, unless the prior employee had something in writing that the corporate points were hers I would expect she would be found guilty. Perhaps someone did tell her she could use the points…but that’s tough to prove.

  11. @JohnB – indeed one of the published suggestions about how to use points on one of the small business program websites is as a perk for employees.

  12. If the checks , or CC or whatever $ that paid for the travel came from the “Company’s” coffers, then whatever bonuses were accrued belonged to the company, plain and simple.

    That being said, I wouldn’t think most federal prosecutors would show much interest in this case. That is unless the amount of travel that was redeemed was significant.

    How many trips was this person able to take? Did they have a crew of say 20-100 salespeople traveling the country all of which were on the company dime pumping her travel account while she took 25 all expenses paid vacations?

    I would “think” or at least would hope that this case involved a signifcant amount of travel or rewards well exceeding 25k.

    Most federal cases have to involve amounts over 50k, correct?. By the sounds of it , there was a significant amount of money involved here.

  13. Oh and as far as the “belong” statement, yes technically they belonged to the airline, but what I’m stating is that the right of any future benefit bestowed should have been given to the corporate entity that paid the tab.

  14. So if the pts accrued to an employees FF acct came from the company cc or checks then the employee’s FF acct miles for business travel belong to the company too? After all the employee is already getting paid for his time and per Diem and so the airfare and its pts belongs to the company. Then what airlines and hotels need to do is allow employees to hold two different FF accounts at the same time. One for the employers points and one for the employees personal points. This applies to travel manager accts too. Travel mgn accts, regardless of how the program may want to allocate points should be required by law or statue to accrue pts for the employer, otherwise this lawsuit has no merit.

  15. @Gary, thanks for the clarification. Does make it seem a bit overboard.
    @Dan, yes, poor wording on my part.

  16. Gary,

    I am a bit surprised that you might be retained as an expert witness. Not that I doubt your expertise at all, but your blogging for years leaves you in a position where some commentary you have made previously might be claimed to be inconsistent with your paid expert testimony.

    Essentially, your extensive blogging could get you Borked. Although that would leave you in esteemed company.

  17. @jfhscott

    From the sounds of things it looks like the prosecution let up when they read a report from someone who actually knows what he’s talking about. Sure they could try and find a blog post to discredit him if the case made it to trial- but I doubt they’d have better experts on their side. As Gary said, “Neither the company, the prosecutors, nor the public defender were especially familiar with the nuances of miles and points.”

  18. @Kevin,

    Or perhaps they no longer wanted to be copted, essentially using prosecutorial resources in what was largely a private dispute.

    But, in general, any litigator sits in fear of the paper trail an expert has left behind, whether in prior testimony, scholarly articles, or any other source.

    I love this blog and read it every day, but, as a litigator, the thought of putting up an expert who has years of blog posts which could impeach the expert testimony would leave me up all night.

  19. Even assuming the woman was guilty of theft, I just can’t believe this was a federal case. The prosecutor ought to be the one facing federal charges.

  20. It would be useful for IRS disputes to have the valuation decided by the court in a public referance (law journal).

  21. What the US attorney did not want was a PRECIDENT of a loss that points are worthless in the courts. What he got was the accused taking a plea that would never made it past a jury.

  22. The conflict of interest engendered by loyalty programs is nothing compared to that in the “expert”-for-hire industry. This comment isn’t directed at Gary who (I think) is the relatively rare subject matter expert called in very occasionally but rather at those who make their (lucrative) livings providing paid-for testimony on both sides of (for instance) personal injury lawsuits. I sat on a jury on such a case a few years ago, and those “expert” witnesses practically oozed slime on the courtroom floor on their way to and from the stand.

  23. Another dirtbag federal prosecutor abusing the authority of the Federal Government. This is an obscene overreach.

  24. [I’m going to ask that we leave the specifics of the company and the defendant out of the comments, thank you. -gl]

  25. Just read the court pleadings (although not your report, which was not admitted into evidence). I am beyond appalled (but not surprised) that the U.S. Attorney’s office burned time on such a case. Good for you for doing this.

  26. I’m a little confused by the points made about ‘points don’t have account accounting value’ ‘points aren’t owned by company’ ‘points are of limited use to companies’. I work at a Fortune 200 company with sales employees and executives traveling regularly and as a recent cost cutting measure they no longer allow the individual to accumulate points on business travel – they are accumulated by the company who then sells them back to the airline. So they do have a value to the company.

  27. @ not Adam Archuleta

    My comments are not directed towards employees flying for business travel under their own frequent flyer numbers at the direction of their employer, merely , at “small business” program benefits for travel managers who book the travel of such employees. I support the notion that the “Flyer” is the one who earns the miles when they travel regardless of whether their employer paid the fare, however, in this case, it was a travel manager who was taking the benefits simply by rights of having booked flights on behalf of such travelers in the due course of their business duties.

    Never been asked to weigh in on whether true road warriors should be penalized and I don’t believe they should. Nor have I been asked now lol

    Don’t know what help this case would be in terms of PRECEDENT.

    Perhaps the Federal governments prurient interest is not so innocent because yes one can definitely ask this question,

    ” If FF miles have no value and are simply a discount program that one uses in future business with the airline, then how can one be prosecuted for the “theft” of a coupon? But the tax implications are not good either so don’t really like that route either. ”

    And frankly the more and more this winds up in court room circles, the worse and worse it is. C’est La Vie

    All the previous commentary are the worst form of Dicta, but after all that’s what the Internet was made for.

  28. @Jack. Think about it, what else are they doing? lol j/k

    But yes I wouldn’t think this case would rise to the level of their scrutiny absent an absurd amount here, or some other connection.

    Seems very small potatoes.

  29. Oh and I “think” you probably have the “let’s buy several thousands of coins in US Currency and take it immediately back to the bank crowd” for the scrutiny.

    The U.S. Treasury department is located within a few blocks of the Mint and would certainly take “notice” of what went on there. Would they be “interested” ? Nah not really but I could ask my neighbor who’s retired .

  30. You might want to read or recommend a book called “Three Felonies a Day” which explains that most of us here in the US do three things *every day* that could be charged by an over-zealous prosecutor.

    Keep in mind that this plea is considered a WIN for the prosecutor.

  31. @SE Rob,

    You could organize a lottery for everyone in the company and give out free tickets at regular intervals. Much simpler on the accounting and everyone gets to feel like they have a shot.

  32. I’m not saying this story was either made up or highly exaggerated, but this case did not go to federal court and there were no federal charges. Civil court, highly possible.

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