AAR: The Agent Was Fired, the Payments Continued

In the AAR FCPA case, the aviation company agreed to pay $29,236,624 to resolve Securities and Exchange Commission charges over bribery tied to aircraft sales in Nepal and aviation services in South Africa. Under its criminal non-prosecution agreement, AAR admitted that the schemes produced approximately $23.9 million in profits. The payments traveled through agents and a joint venture partner. In Nepal, firing the agent did not stop the scheme: the executive running the deal arranged for a consortium partner to take over the commission.

The Commission announced AAR’s settlement on December 19, 2024, adding to the Foreign Corrupt Practices Act cases and settlements involving government-owned businesses. AAR was an Illinois-based, publicly traded provider of aviation products and services. Its customers in these transactions were government-owned airlines or their subsidiaries, placing public purchasing decisions inside the ordinary business of selling planes and keeping fleets operating.

A Nepal Aircraft Tender Written for the Seller

The Nepal transaction involved two Airbus A330 aircraft valued at approximately $210 million. According to the Commission’s corporate order, the president of international supply chain at an AAR subsidiary led the deal and arranged bribes through an agent to officials who controlled the Nepal Airlines contract.

The advantage began before bidding opened. The Commission found that the executive obtained an unpublished request for proposals and circulated it inside AAR so colleagues could propose changes favoring the company. He later sent specifications to the airline’s managing director and told colleagues the requirements would leave only AAR able to qualify. When the tender appeared, he described it internally as “designed for us.”

An aircraft sale of this kind can divide the work among companies supplying financing, aircraft purchase rights, spare parts and tooling. AAR’s consortium did exactly that. The procurement advantage sat alongside those commercial arrangements: the bidder had helped shape the customer’s requirements before its competitors saw them. We see a remarkable version of competition here. The seller helped write the test it expected to win.

The chosen agent was a Hong Kong telecommunications business with no aviation experience. The Commission identified vague services, cellphone and electronics references, and an unusually high commission among the warnings raised during diligence. The agreement nevertheless promised the agent 7% of the aircraft sales price.

The Agent Was Fired, the Payments Continued

AAR terminated the Nepal agent after learning that its payments would fund political-party donations. The Commission also recorded an anonymous email alleging bribery before that termination. But the executive then arranged for the consortium partner to pay the agent, moving the payment relationship outside AAR’s own agent agreement.

The replacement agreement promised $8 million for the two aircraft and was backdated to make it appear to predate the consortium’s bid. A later agreement moved responsibility for the commission to the special purpose company handling the aircraft sale. When a financial institution’s customer checks blocked payments to the original agent, the executive helped arrange a successor in Dubai under the same intermediary’s control.

According to the Commission, the consortium’s special purpose company paid the successor $2.6 million. AAR also paid the terminated agent $250,000, recorded as a legitimate commission despite lacking documentary evidence of legitimate services. Termination had changed the contracts. It had not removed the intermediary from the transaction.

That is why third-party diligence reaches beyond an approved-vendor list. The termination agreement, replacement commission contract, assignment and bank rejection describe decisions that a clean vendor record alone would miss. Here, the same commercial relationship survived successive changes in who signed and who received the money.

The Commission alleged a comparable response to an obstacle in Embraer‘s aircraft-sales case. Its complaint described executives responding to legal scrutiny of a promised payment:

The parallel is the decision to preserve the payment after a control gets in the way. AAR’s replacement agreements make that decision visible in the transaction documents themselves.

South Africa’s Success Fee Paid the Customer’s Officials

The South Africa contract covered component support for the Boeing and Airbus fleets served by South African Airways Technical, the government-owned airline’s maintenance subsidiary. The Commission found that AAR’s local joint venture partner bribed officials to obtain the contract and funded the payments with money recorded by AAR as success fees and commissions. This was aviation bribery in the aftermarket business, where the commercial relationship continued as services were delivered.

AAR had repeatedly failed to enter this market. After an unsuccessful bid with a different local partner, the customer’s procurement head told AAR that the customer should help choose the partner. The customer’s chairperson then introduced an AAR executive to a principal of the partner eventually used. That partner claimed a special relationship with the customer.

The Commission found that officials and the partner openly discussed sharing the contract proceeds. The procurement head would ensure that AAR won. During bidding, an official supplied confidential information about competitors’ bids and pricing, which reached AAR through emails and texts. The company knew it was receiving inside information and did not ask how it had been obtained.

The money followed the award. An initial $150,000 advance traveled through U.S. bank accounts and was split among the partner’s principals and the officials. The Commission said the bribes continued during the contract and the partner tracked them monthly. Over the contract, AAR paid the partner $5.4 million in success fees and commissions.

AAR’s own non-prosecution agreement with the Justice Department supplies another view of the scheme. In its admitted statement of facts, the company described an agent obtaining a photograph of confidential bid scores that placed AAR last. The statement also described cash carried from the United States to South Africa and payments disguised as consulting fees. The public customer’s decision-makers were sharing in the business they awarded.

Commissions in the Ledger, Bribes Behind Them

The Commission’s order addressed the bribes, the false accounting and the controls that allowed the payments. It found that AAR recorded commissions and success fees as legitimate expenses or reductions in revenue while failing to record their true purpose. Its vendor-management and accounts-payable controls did not adequately enforce the company’s own anti-corruption policy.

The separate order against the subsidiary executive made the contradiction sharper. The Commission found that he signed internal certifications asserting compliance with company policies and accounting controls while exploiting deficiencies in those controls. AAR relied on those certifications in its disclosures and representations to outside auditors. The person arranging the payments was also signing the assurances about the system meant to control them.

A 2022 review in the Journal of Forensic and Investigative Accounting, How to Avoid Inadvertently Violating the Foreign Corrupt Business Practices Act Abroad, identifies third-party payments as the basis of most Foreign Corrupt Practices Act enforcement proceedings. AAR shows why the intermediary’s invoice cannot answer the whole question. The books name a commission recipient. The agreements and communications explain whose decision the money was buying.

The accounting record matters even when an employee never sees cash reach an official. A commission entered after an agent’s termination, a payment without service documentation and a certification contradicting the approval history each connect a different part of the scheme. Our whistleblower experts know how those parts fit into a case.

Company Admissions and Separate Individual Cases

Under its criminal non-prosecution agreement, AAR admitted that it conspired through employees and agents to bribe officials in Nepal and South Africa between approximately 2015 and 2020. In his criminal plea agreement, the subsidiary executive admitted guilt to a conspiracy to violate the Foreign Corrupt Practices Act. The Commission order records his guilty plea in the Nepal scheme. The South Africa agent separately admitted guilt to the same kind of conspiracy in his criminal plea agreement.

The former executive’s separate Commission resolution set his civil obligation at $184,597. The Commission found that he had concealed arrangements to pay bribes and failed to report them to AAR’s chief financial officer or general counsel.

What Aviation Insiders Can Connect

The most useful whistleblower evidence connects the customer decision with the payment and the record describing it. In AAR’s Nepal deal, that connection ran through draft tender specifications, agent diligence, termination papers, backdated agreements and a successor payee. In South Africa, it ran through confidential bid information, fee requests, transfers and the partner’s monthly accounting.

An employee handling sales, finance or compliance may recognize a different part of that story. The person who saw the draft tender may explain the advantage it gave the bidder. The person who processed the commission may know why the payee changed. The company’s own internal certifications add another comparison: what management said its controls did against what the transaction documents show.

Panasonic Avionics illustrates the service-documentation problem in the same industry. Under its criminal deferred prosecution agreement, the company admitted paying a consultant even when an internal audit found that no services had been requested in the preceding year. The invoices kept getting paid. Knowing what work was actually requested can give an insider a view the payment description conceals.

AAR’s non-prosecution agreement records that an independent source reported the Nepal allegations to the Justice Department twelve days before the company’s own report. Timing and what was already public are questions our whistleblower experts work through with you.

The agreement also describes recovered chats and attachments reconstructed from log files. Those communications help connect the formal agreements with the decisions behind the payments.

Whistleblower Rewards Depend on the Case

The Securities and Exchange Commission can award eligible whistleblowers a combined 10% to 30% of qualifying sanctions collected in a successful enforcement action through its whistleblower award program. Our whistleblower experts build the evidence connecting the customer decision, payment and false record with you.

AAR’s non-prosecution agreement also records a separate, approximately $11 million settlement in 2021 resolving False Claims Act allegations about aircraft-maintenance services, following a former subsidiary employee’s qui tam case. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know Why the Payee Changed

If you saw an agent replaced on paper while the payment continued, tell our whistleblower experts what happened inside the deal. We build the case with you around the contracts, approvals and commercial knowledge that explain the money, and bring in FCPA whistleblower lawyers who understand aviation sales and intermediary payments. We stay beside you as your information becomes the basis for pursuing the case.