Yesterday the DOJ announced (see here) that BizJet International Sales and Support Inc. (see here - a Tulsa, OK based provider of aircraft maintenance, repair and overhaul services (MRO)) agreed to pay an $11.8 million criminal penalty ”for bribing government officials in Latin America to secure contracts to perform aircraft MRO services for government agencies.”
The enforcement action involved a criminal information (here) against BizJet resolved through a deferred prosecution agreement (here). The DOJ release states that BizJet’s ”indirect parent company, Lufthansa Technik AG” (see here - a German provider of aircraft-related services) also ”entered into an agreement with the DOJ in connection with the unlawful payments by BizJet and its directors, officers, employees and agents.” The release states as follows. “The DOJ has agreed not to prosecute Lufthansa Technik provides that Lufthansa Technik satisfies its obligations under the agreement for a period of three years. Those obligations include ongoing cooperation and the continued implementation of rigorous internal controls.” There is no mention of Lufthansa Technik in the below described BizJet information.
The information alleges that between 2004 – 2010 BizJet and others conspired “to obtain and retain MRO service contracts and other business for BizJet from foreign government customers, including the Mexican Federal Police, the Mexican President’s Fleet [the air fleet for the President of Mexico], Sinaola [the air fleet for the Governor of the Mexican State of Sinaloa], the Panama Aviation Authority, and other customers, by paying bribes to foreign officials employed by such customers.
The foreign officials included: Official 1 – “a Captain in the Mexican Federal Police,” Official 2 – “a Colonel in the Mexican President’s Fleet,” Official 3 – “a Captain in the Mexican President’s Fleet,” Official 4 – “employed by the Mexican President’s Fleet,” Official 5 – “a Director of Air Services at Sinaloa,” and Official 6 – “a chief mechanic at the Panama Aviation Authority.” According to the information, all of the above officials “had broad decision-making authority and influence over the award of contracts to MRO service providers.”
The information alleges conduct by several executives including: Executive A (a senior executive at BizJet from 2004 to 2010 who “was responsible for the operations and finances of BizJet”); Executive B (a senior executive at BizJet from 2005 to 2010 whose duties included “oversight of BizJet’s efforts to obtain business from new customers and to maintain and increase business with existing customers”); Executive C (a senior finance executive at BizJet from 2004 to 2010 who “was responsible for overseeing BizJet’s accounts and finances and the approval of payment of invoices and of wire and check requests”); and Sales Manager A (a regional sales manager at BizJet from 2004 to 2010 who “interacted with potential and existing customers and was responsible for obtaining business from new customers and maintaining and increasing business with existing customers”).
The information alleges that the purpose of the conspiracy – which BizJet accomplished through its employees including Executive A, Executive B, Executive C, and Sales Manager A – was to make bribe payments “which they called ‘commissions,’ ‘incentives’ or ‘referral fees’ to employees of customers, including foreign government customers, in order to obtain and retain for BizJet contracts to perform MRO services.” The information further alleges that these individuals attempted to conceal the payments to foreign officials by using Shell Company A (owned by Sales Manager A and run out of this personal residence) to funnel the payments from BizJet to the foreign officials and by making payments in cash delivered by hand to the foreign officials.
The overt acts section of the information begins as follows. In November 2005, “at a Board of Directors meeting of the BizJet Board, Executive A and Executive B discussed with the Board that the decision of where an aircraft is sent for maintenance work is generally made by the potential customer’s director of maintenance or chief pilot, that these individuals are demanding $30,000 to $40,000 in commissions, and that BizJet would pay referral fees in order to gain market share.”
The information then alleges various payments made to the above officials in return for the official’s help in securing contracts.
Based on the above conduct, the information charges one count of conspiracy to violate the FCPA.
The DOJ’s charges against BizJet were resolved via a deferred prosecution agreement. Pursuant to the DPA, BizJet admitted, accepted, and acknowledged that it was responsible for the acts of its officers, directors, employees and agents as charged in the Information.
The term of the DPA is three years and its states that the DOJ entered into the agreement based on the following facts: “(a) following discovery of the FCPA violations during the course of an internal audit of the implementation of enhanced compliance related to third-party consultants, BizJet initiated an internal investigation and voluntarily disclosed to the DOJ the misconduct …; (b) BizJet’s cooperation has been extraordinary, including conducting an extensive internal investigation, voluntarily making U.S. and foreign employees available for interviews, and collecting, analyzing, and organizing voluminous evidence and information for the DOJ; (c) BizJet has engaged in extensive remediation, including terminating the officers and employees responsible for the corrupt payments, enhancing its due diligence protocol for third-party agents and consultants, and instituting heightened review of proposals and other transactional documents for all BizJet contracts; (d) BizJet has committed to continue to enhance its compliance program and internal controls, including ensuring that its compliance program satisfies the minimum elements set forth in the” corporate compliance program set forth in an attachment to the DPA; and (e) “BizJet has agreed to continue to cooperate with the DOJ in any ongoing investigation of the conduct of BizJet and its officers, directors, employees, agents, and consultants relating to violations of the FCPA.” With so many executives generically identified in the information as being involved in the improper conduct, it will be interesting to see whether individual FCPA prosecutions are forthcoming.
As detailed in the DPA, the advisory Sentencing Guidelines range for the criminal charge was $17.1 million – $34.2 million. Pursuant to the DPA, BizJet agreed to pay $11.8 million (30% below the minimum amount suggested by the Guidelines). The DPA states as follows. “BizJet and the DOJ agree that this fine is appropriate given the facts and circumstances of this case, including the nature and extent of BizJet’s voluntary disclosure, extraordinary cooperation, and extensive remediation in this matter.”
Interestingly, the DPA was signed by the DOJ, BizJet and BizJet’s counsel – Jay Holtmeier (here – Wilmer Cutler Pickering Hale and Dorr) in late December 2011, but only made public yesterday.