The Justice Department and the SEC  finished 2024 with a coordinated resolution of criminal and civil FCPA charges against AAR Corporation, an Illinois-based provider of aviation products and services.  In addition, DOJ unsealed a criminal indictment and guilty plea dated August 1, 2024, by Deepak Sharma, CEO of an AAR Subsidiary for his role in the FCPA scheme.

Also, the SEC entered into a separate civil resolution with Deepak Sharma under which Sharma agreed to pay disgorgement of $130,835 plus prejudgment interest of $53,762. The SEC noted Sharma’s cooperation in the SEC’s investigation. Julian Aires, a former third-party agent of AAR, pleaded guilty in the District of Columbia on July 15, 2024 to a conspiracy to violate the FCPA for his role in the South Africa scheme.

In the DOJ settlement, AAR entered into a non-prosecution agreement for an 18-month term.  Between the two settlements, AAR agreed to pay a total of $55 million, and to provide compliance reports for the 18 month period. DOJ did not give AAR credit for self-disclosure, but DOJ and the SEC credited AAR for its cooperation and remediation.

While AAR was credited with reporting most of the conduct at issue, it did not earn “voluntary self-disclosure” under its Corporate Enforcement Program. Prior to AAR’s self-report, several English-language articles had been published in media outlets in Nepal and South Africa that described potential irregularities in the relevant contracts in both countries, including that an AAR subsidiary had been summoned by a Nepalese agency investigating irregularities and corruption in connection with the procurement of aircraft. In addition, 12 days before AAR’s self-report, an independent source reported the allegations regarding the Nepal conduct to DOJ.

Between 2015 and 2020, AAR engaged in bribery schemes in Nepal and South Africa.

In Nepal, Sharma orchestrated and implemented a bribery scheme to win a contract for the sale of two Airbus A330 aircraft to Nepal Airlines, a government-owned airline. AAR retained a third-party agent to pay bribes to officials who had control over the contract.

In South Africa, Sharma was involved in a bribery scheme involving a contract for AAR to provide aviation services to a subsidiary of government-owned South African Airways. In all, AAR paid millions of dollars in bribes to Nepalese and South African officials as part of the two schemes and profited by approximately $23.9 million as a result.

As part of the NPA, AAR agreed to pay a $26,363,029 penalty and $18,568,713 in administrative forfeiture. In addition, AAR will pay $29,236,624 in disgorgement and prejudgment interest as part of the SEC resolution. The Justice Department has agreed to credit the forfeiture against disgorgement AAR has agreed to pay to the SEC.

AAR agreed to continue to enhance its compliance program and report to the Justice Department regarding remediation and the implementation of compliance measures during the eighteen-month term of the NPA.

AAR also engaged in extensive and timely remedial measures including, among other things (i) conducting an enterprise-wide review of all existing high-risk third-party representatives and reducing its use of international sales agents; (ii) enhancing protocols regarding onboarding and vetting of third-party engagements, including heightened diligence and senior-level approvals; (iii) taking employment actions, including promptly separating one employee involved in the relevant conduct and disciplining other employees with oversight responsibilities; (iv) strengthening its anti-corruption compliance program by investing in compliance resources and expanding its compliance function with experienced and qualified personnel, including appointing a Chief Ethics & Compliance Officer and hiring a compliance monitoring manager; (v) implementing a compliance risk assessment program that has enabled AAR to proactively identify new areas of risk; (vi) enhancing public bidding policies and monitoring implementation of those enhancements; (vii) beginning to roll out a messaging application retention tool; (viii) implementing compliance auditing and periodic anti-corruption site reviews; and (ix) engaging in continuous testing, monitoring, and improvement of its compliance program.

DOJ awarded AAR a 45% reduction off the applicable guidelines sentence. The Justice Department gave significant weight in evaluating the appropriate disposition of this matter — including the form of the resolution, the reduction in the penalty amount based on cooperation and remediation credit, and the length of the term — to the company’s self-report of the misconduct before the company was aware the conduct had already come to DOJ’s attention.