Month: December 2024

Source: United States Department of Justice

Note: A copy of the non-prosecution agreement and attachments can be found here.

AAR CORP. (AAR), a publicly traded aviation services company headquartered in Wood Dale, Illinois, will pay over $55 million to resolve investigations by the Justice Department and Securities and Exchange Commission (SEC) into violations of the Foreign Corrupt Practices Act (FCPA) arising from AAR’s participation in corrupt schemes to pay bribes to government officials in Nepal and South Africa. A former AAR subsidiary executive previously pleaded guilty for his role in the Nepal scheme, and a third-party agent of AAR previously pleaded guilty for his role in the South Africa scheme.

AAR entered into an 18-month non-prosecution agreement (NPA) with the Justice Department. According to the company’s admissions in connection with the resolution, between 2015 and 2020, AAR conspired to pay bribes to government officials to obtain and retain business with state-owned airlines in Nepal and South Africa. AAR obtained profits of nearly $24 million as a result of the scheme.

“AAR bribed high-level government officials to obtain business with state-owned airlines in Nepal and South Africa and reaped nearly $24 million in illicit profits as a result,” said Chief Counselor Brent Wible of the Justice Department’s Criminal Division. “The Justice Department continues to hold companies and individuals accountable for engaging in international corruption. Today’s resolution also demonstrates how companies that proactively report misconduct, extensively cooperate, and timely and appropriately remediate will receive credit under the Criminal Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy, including in the form of the agreement, the amount of cooperation and remediation credit, and the length of the term.”

“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,” said U.S. Attorney Matthew M. Graves for the District of Columbia. “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.”

“AAR, through its bribery of government officials in Nepal and South Africa, violated U.S. law enacted to ensure that U.S. businesses do not engage in foreign corruption,” said Special Agent in Charge William S. Walker of the Homeland Security Investigations (HSI) New York Field Office. “Today’s outcome reflects HSI’s steadfast commitment to enforcing accountability within global commerce. HSI New York will continue to pursue all necessary measures to ensure that those who engage in corrupt practices, regardless of their location or position, are held fully accountable under the law.”

In Nepal, AAR corruptly obtained business with Nepal Airlines Corporation, the state-owned airline of Nepal, related to the sale of two Airbus A330-200 aircraft by offering and paying bribes to Nepali officials through various intermediary companies. In South Africa, AAR corruptly obtained the award of an aircraft component support contract with South African Airways Technical, a wholly owned subsidiary of South African Airways, the state-owned airline of South Africa, by corruptly offering and paying bribes to South African officials through a third-party agent.

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 resolution of the SEC’s parallel investigation. The Justice Department has agreed to credit the forfeiture to be paid to the department against disgorgement AAR has agreed to pay to the SEC.

Pursuant to the NPA, AAR has agreed, among other things, to continue to cooperate with the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the District of Columbia in any ongoing or future criminal investigations arising during the term of the NPA. In addition, 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.

The Justice Department reached this resolution with AAR based on a number of factors, including, among others, the nature and seriousness of the offense. AAR self-reported to the department conduct that forms, in part, the basis for the resolution; however, the self-report was not a “voluntary self-disclosure” as defined in the Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP). Prior to the 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 the department. AAR received credit under the CEP for its cooperation with the department’s investigation, which included (i) self-reporting the conduct that forms, at least in part, the basis for the resolution before AAR was aware the conduct had come to the attention of the department; (ii) promptly providing information obtained through its internal investigation, which allowed the government to preserve and obtain evidence as part of its own independent investigation; (iii) proactively preserving, imaging, and conducting extensive forensic analysis of key electronic evidence, which included imaging mobile devices, recovering deleted documents, forensically recreating attachments from log files, and decrypting recovered chat messages; (iv) making regular and detailed presentations to the department; (v) promptly collecting, analyzing, and organizing voluminous information, including complex financial information; (vi) meeting the department’s requests promptly; (vii) voluntarily making employees, including foreign-based employees, available for interviews; (viii) collecting and producing voluminous relevant documents and translations to the department, including documents located outside the United States; and (ix) producing documents to the department from foreign countries in ways that did not implicate foreign data privacy laws.

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.

In light of these considerations, the criminal penalty calculated under the U.S. Sentencing Guidelines reflects 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 the department’s attention.

The Justice Department previously charged two individuals in related matters. Deepak Sharma, a former AAR subsidiary executive, pleaded guilty in the District of Columbia on Aug. 1 to a conspiracy to violate the FCPA for his role in the Nepal scheme. Julian Aires, a third-party agent of AAR, pleaded guilty in the District of Columbia on July 15 to a conspiracy to violate the FCPA for his role in the South Africa scheme.

HSI New York is investigating the case. The Justice Department’s Office of International Affairs provided valuable assistance. 

Acting Assistant Chief Katherine Raut and Trial Attorney Paul Ream of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Madhu Chugh for the District of Columbia are prosecuting the case.

The Fraud Section is responsible for investigating and prosecuting FCPA and Foreign Extortion Prevention Act matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal-fraud/foreign-corrupt-practices-act.

Source: United States Department of Justice

Chemonics International Inc. (Chemonics), a private international development firm based in Washington, D.C. has agreed to pay $3,119,582 to resolve allegations that it violated the False Claims Act by submitting fraudulent claims for payment to the U.S. Agency for International Development (USAID). Chemonics disclosed the fraudulent billing to the United States in 2020.

The settlement resolves allegations that Chemonics acted recklessly in failing to detect fraudulent charges by its subcontractor, Zenith Carex (Zenith), for certain delivery services in Nigeria, and passed the charges on to USAID under the Global Health Supply Chain-Procurement and Supply Chain Management contract. Under this contract, Chemonics provided health care supply chain management services and related technical assistance in Nigeria and other countries. Chemonics subcontracted with Zenith, an in-country logistics provider, to perform last-mile delivery and long-haul delivery of cold-chain commodities throughout Nigeria. Between June 2017 and March 2020, Zenith fraudulently charged Chemonics for its long-haul delivery services based on truck tonnage as opposed to the weight per kilogram of the commodity transported, as the subcontract between Chemonics and Zenith required. During the same time period, Zenith charged Chemonics more for last-mile delivery services than the subcontract allowed. Chemonics failed to detect Zenith’s fraudulent overcharging for more than two years due to systematic process and personnel failures, including inadequate financial controls, monitoring and oversight and inadequate employee training, direction and support.

“Government contractors must exercise responsible oversight and management of their subcontractors to ensure contract compliance and appropriate billing,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “Today’s settlement demonstrates the department’s commitment to hold accountable those who knowingly or recklessly submit false claims for payment to the United States no matter where in the world the underlying conduct occurs.”

In connection with the settlement, the United States acknowledged that Chemonics took a number of significant steps entitling them to credit for cooperating with the government in connection with the resolution of this matter. Chemonics disclosed the fraudulent billing to the government in connection with an investigation by another entity for which it provided delivery services in Nigeria and took remedial actions, including terminating an employee for conduct related to the submission of fraudulent invoices, conducting a comprehensive review of subcontractor billing and enhancing internal oversight in Nigeria. Chemonics also assisted the government during its investigation.

“USAID’s Global Health Supply Chain program is designed to provide uninterrupted supplies of health products and services to the vulnerable populations worldwide,” said Special Agent in Charge Sean Bottary of the USAID Office of Inspector General (OIG). “This settlement underscores that justice has no borders, and that USAID’s contractors and grantees must have systems in place to detect and prevent false invoices submitted by subawardees. The USAID OIG will vigorously investigate those who seek to defraud U.S.-funded foreign assistance programs, and we are relentless in our pursuit of holding awardees and subawardees accountable. We appreciate our partnership with the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, and the U.S. Attorney’s Office for the Western District of Missouri and commend them on their hard work in bringing this case to a resolution.”

The resolution obtained in this matter was the result of a coordinated investigation conducted by the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, U.S. Attorney’s Office for the Western District of Missouri and USAID OIG.

Trial Attorneys Robin Overby and Samuel Lehman of the Justice Department’s Civil Division and Assistant U.S. Attorneys Matt Sparks and Cari Walsh for the Western District of Missouri handled the matter.

The claims resolved by the settlement are allegations only. There has been no determination of liability.

Source: United States Department of Justice Criminal Division

A former sheriff of Culpeper County, Virginia, was convicted by a jury in Charlottesville, Virginia, yesterday for accepting over $75,000 in bribes in exchange for appointments as auxiliary deputy sheriffs.

According to court documents and evidence presented at trial, Scott Howard Jenkins, 53, of Culpeper, Virginia, accepted cash bribes and bribes in the form of campaign contributions from co-defendants Rick Rahim, Fredric Gumbinner, and James Metcalf, as well as at least five others, including two FBI undercover agents. In return, Jenkins appointed each of the bribe payors as auxiliary deputy sheriffs, a sworn law-enforcement position, and issued them official Culpeper County Sheriff’s Office badges and credentials. The bribe payors were not trained or vetted and did not render any legitimate services to the Sheriff’s Office. In addition, Jenkins pressured other local officials to approve a petition filed in Culpeper County Circuit Court by Rahim, a convicted felon, to restore his right to possess a firearm and which falsely stated that Rahim resided in Culpeper County.

Jenkins was convicted of one count of conspiracy, four counts of honest services fraud, and seven counts of bribery concerning programs receiving federal funds. He is scheduled to be sentenced on March 31, 2025, and faces a maximum penalty of five years in prison on the conspiracy count, 20 years in prison on each of the honest services fraud counts, and 10 years in prison on each of the bribery counts. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Rahim, Gumbinner, and Metcalf all previously pleaded guilty for their roles in the bribery scheme and will be sentenced at a later date.

Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division; U.S. Attorney Christopher R. Kavanaugh for the Western District of Virginia; and Special Agent in Charge Stanley M. Meador of the FBI Richmond Field Office made the announcement.

The FBI Richmond Field Office, Charlottesville Resident Agency is investigating the case.

Trial Attorneys Celia Choy and Lina Peng of the Criminal Division’s Public Integrity Section (PIN) and Assistant U.S. Attorney Melanie Smith for the Western District of Virginia are prosecuting the case, with assistance provided by PIN Paralegal Specialist Lauren Fastenau.