In 2016, AAR Corp. (a U.S. based aviation services company) announced that it had teamed with a joint venture partner – JM Aviation South Africa (Pty) Ltd. – to secure a five year contract to provide inventory management and repair services to South Africa Airways Technical (SAAT) Ltd. (a wholly-owned subsidiary of South African Airways – SAA).
Recently, the DOJ charged Julian Aires (a U.S. citizen who resided in San Diego and associated with JM Aviation South Africa) with conspiracy to violate the FCPA’s anti-bribery provisions in connection with an SAAT contract as well as another contract involving Swissport (an airport ground services and air cargo handling company) and SAA.
According to the court docket, Aires has pleaded guilty.
According to the Statement of Offense
“From in or around January 2016 through at least January 2020, Aires, together with others, knowingly and willfully agreed to use the mails and means and instrumentalities of interstate commerce, including U.S. bank accounts, to corruptly pay bribes to and for the benefit of SAA and SAAT officials in their official capacities in order to secure an improper advantage for Company 1 [described as a publicly-traded aviation services company based in the U.S.], Company 3 [described as an aircraft component services company based in South Africa of which Aires was a principal], and others in connection with the award of a five-year aircraft component support contract (SAAT Contract) and disbursement of payments by SAAT pursuant to that contract. Aires knew that this conduct was unlawful.
In or around January 2016, Aires attended a meeting in South Africa with Individual 3 [described as a citizen of South Africa and a director of Company 3], Individual 4 [described as a citizen of South Africa, a director of Company 3 and a close relative of Individual 3], and Foreign Official 1 [described as a citizen of South Africa who served as an official at SAAT], during which it was discussed and agreed that Foreign Official 1, Foreign Official 2 [described as a citizen of South Africa who served as a high-level official of SAA and SAAT], and Foreign Official 3 [described as a citizen of South Africa who served as a high-level official of SAA and SAAT] were to receive a share of the revenue of the SAAT Contract in exchange for helping Company 1 and Company 3 obtain the SAAT Contract. Aires understood Foreign Official 1, Foreign Official 2, and Foreign Official 3 had authority over the award of the SAAT Contract and that bribes were necessary to win the SAAT Contract.
[…]
During the bidding process, contrary to the bid procurement rules, Aires met several times with Foreign Official 1 and obtained confidential information to assist Company 1 and Company 3 in winning the bid.
[…]
Over the course of the SAAT Contract, Aires and a Company 2 [described as an aircraft component services company based in the U.S. of which Aires was a principal] employee maintained records, which they e-mailed to Individual 3 and Individual 4, tracking the bribe payments due to Foreign Official 1, Foreign Official 2, and Foreign Official 3. To disguise the bribes, Aires and his co-conspirators referred to the payments as ‘consulting fees’ and referred to the foreign officials by ‘Cuz’ (Foreign Official 1), “Sisi’ or “Sissy’ (Foreign Official 2) and ‘Boetie” (Foreign Official 3). Proceeds from the SAAT Contract were then divided among Aires, Individual 3, Foreign Official 1, Foreign Official 2, and Foreign Official 3.
During the course of the SAAT Contract, Aires frequently traveled from the United States to South Africa with cash. Aires gave the cash to Individual 3 in South Africa, a portion of which was paid by Individual 3 as bribes to Foreign Official 1, Foreign Official 2, and Foreign Official 3 in exchange for SAAT awarding the SAAT Contract to Company 1 and Company 3.
During the course of the SAAT Contract, between in or around 2016 and 2020, SAAT paid Company 1 approximately $79.6 million for Company 1’s contractual services.
In turn, between in or around 2016 and 2020, Company 1 paid Company 2 and Company 3 approximately $5,397,677 in commissions, success fees, and advance payments in connect with the SAAT Contract, a portion of which was then paid as bribes to Foreign Official 1, Foreign Official 2, and Foreign Official 3.”
According to the Statement of Offense, there was also another bribery scheme.
“Separately, Aires, Individual 3, and others also engaged in a different scheme to bribe Foreign Official 1, Foreign Official 2, and others in connection with two transactions with SAA in or around 2016 (2016 Transactions). In connection with the 2016 Transactions, Aires participated in the drafting of a contract that made it appear as if Company 3 was providing services to a subsidiary of a Swiss airport services company (Company 4) in relation to Company 4’s airport ground handling services for SAA, which in fact Company 3 was used to funnel bribes to South African officials, including Foreign Official 1, Foreign Official 2, and others, in order to obtain and retain airport ground handling services business for Company 4. Pursuant to that scheme, Company 4 made payments totaling the equivalent of approximately $2.7 million to a bank account in South Africa held by Company 3, from which Individual 3 and others then distributed bribe payments to or for the benefit of the South African officials.”
The Aires FCPA enforcement is likely to spawn other FCPA enforcement actions in the future. For instance, AAR’s most recent annual report (July 19, 2024) states:
“Self-Reporting of Potential Foreign Corrupt Practices Act Violations
The Company retained outside counsel to investigate possible violations of the Company’s Code of Conduct, the U.S. Foreign Corrupt Practices Act, and other applicable laws, relating to the Company’s activities in Nepal and South Africa. Based on these investigations, in fiscal 2019, we self-reported these matters to the U.S. Department of Justice (“DoJ”), the U.S. Securities and Exchange Commission and the UK Serious Fraud Office. The Company is fully cooperating with the reviews by these agencies, although we are unable at this time to predict what action, if any, they may take.”
Swissport’s most recent Company Report states:
“Swissport has a zero-tolerance policy for bribery and corruption and therefore forbids all its people from engaging in bribery or corrupt practices. We are in full compliance with the Foreign Corrupt Practices Act (FCPA), the UK Antibribery Act, the Swiss Criminal Code, as well as anti-corruption directives from the European Union and beyond.”
