On December 19, AAR Corp. agreed to pay $55 million to settle Department of Justice (DOJ) and Securities and Exchange Commission (SEC) charges of violating the Foreign Corrupt Practices Act (FCPA) by paying bribes to secure business from state-owned airlines in Nepal and South Africa. Apparently, the Illinois-based aviation services company made roughly $24 million in profits from the bribery scheme.
The FCPA prevents US companies (and certain foreign companies with US connections) from bribing foreign government officials to secure any kind of business advantage. The bribes can comprise virtually any form of consideration — including meals, travel, and entertainment — and often are disguised as “consulting fees” or “commissions” given through third-party intermediaries.
According to DOJ, AAR bribed Nepali officials to secure business with the state-owned Nepal Airlines Corporation relating to the sale of two Airbus A330-200 aircrafts. The company likewise bribed South African officials to obtain an aircraft component support contract with state-owned South African Airways. According to the SEC, the company paid millions of dollars in bribes to these officials through intermediary agents.
In announcing the settlement, the DOJ reaffirmed its commitment to enforcing the FCPA and the important policy rationale behind the statute:
“Companies competing on a fair and level playing field is a core value that we expect any U.S. company or anyone doing business in the United States to embrace. Bribery schemes, whether based inside or outside the United States, harm consumers and companies that are trying to lawfully run their businesses. That is why this office, along with our law enforcement partners, will continue to diligently pursue any individual or company that seeks to profit through corrupt or illegal means.”
The SEC was equally emphatic that companies operating in the US must abide by the FCPA’s foreign bribery strictures:
“Here, the bribes schemes took place in both Nepal and South Africa, reflecting that a deficient control environment creates fertile ground for mischief that can cross borders. This matter serves as another reminder that companies must have robust compliance and accounting controls that are commensurate with the FCPA risks they face, including with respect to their work with third parties across their business operations.”
Going after foreign bribes is perennial enforcement priority for both the DOJ and SEC, typically resulting in significant fines to the offending companies. The largest FCPA settlement this year was last March with Swiss-based international commodities trading company Gunvor S.A. The company pleaded guilty and agreed to pay roughly $661 million for a scheme to bribe Ecuadorean officials to secure business with Ecuador’s state-owned oil company Petroecuador.
Whistleblowers often play an important role in uncovering FCPA violations, which are often difficult to detect because of the sophisticated schemes at play to disguise the illicit payoffs. In AAR’s case, the DOJ noted the company self-reported to the agency after several English-language articles in Nepal and South Africa described potential irregularities in the relevant contracts in both countries. It is not clear whether whistleblowers seeded these articles or were otherwise involved in reporting the conduct to the media or working with the SEC or DOJ in their investigation.
If any whistleblowers did work with the SEC and DOJ, they may be entitled to a financial award under the SEC Whistleblower Program. Under the program, individuals who provide information leading to a successful enforcement action may share in up to 30% of the government’s recovery. The DOJ recently launched a Whistleblower Awards Pilot Program, which also offers awards to whistleblowers who provide information leading to successful enforcement actions. One of the specific target areas of the program is foreign bribery not otherwise covered by the SEC program.
So if you think you might have information relating to potential FCPA violations, please do not hesitate to contact us. We will connect you with an experienced member of the Constantine Cannon whistleblower team for a free and confidential consult. Maybe you can help the government bring in the next big FCPA settlement.
Read AAR Corp. to Pay $55 Million to Settle FCPA Foreign Bribery Charges at constantinecannon.com
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