AAR Settles SEC Charges Over Bribery Allegations Involving Foreign Officials

WASHINGTON, D.C., December 19, 2024 – L’AAR Corp. Aerospace and Aviation Services Signature entered into an ​agreement with the United States Securities and Change Commission ​(SEC) on allegations of violation of the Foreign Corrupt Practices Act (FCPA). The case concerned ​two corruption systems linked to sales ​contracts with Nepal Airlines ​and South African Airways ​Technical, two public entities. The AAR has agreed on a cessation and ​exit order and other sanctions under the agreement.

Allegations of corruption and corruption

The SEC’s findings revealed that the AAR participated in ​unauthorised payments to obtain lucrative contracts. A high-level ​leader, ​Deepak Sharma, played a central role in orchestrating these projects, including ​bribery of foreign officials through third-party agents ​and ​a joint venture partner. ​These ​payments were disguised as ​legitimate business expenses in ​the ​AAR financial documents, in violation of the anti-corruption ​and record keeping agreements of the ACAP.

The first project involved the sale of two Airbus ​A330 aircraft to Nepal ​Airlines, ​valued ​at approximately $210 ​million. Sharma and her partners ​used relations with Nepali officials to influence contractual conditions. In addition, ​third parties engaged in funnel bribes in exchange for favourable treatment. ​In the second case, AAR hired a joint venture partner to win an air service contract with South African Airways Technical using similar ​tactics.

Response and regulatory sanctions

The SEC stressed that these violations reflected weaknesses in the internal ​control and compliance mechanisms of the AAR. In response, the AAR has taken steps ​to strengthen its policies, ​including ending relationships with affected third parties ​and improving its compliance ​framework for ​the CFPA. The company’s willingness to cooperate ​in the investigation ​was noted positively by the ​SEC.

Although the ​AAR did not accept or reject the finding, the agreement includes a termination and withdrawal order. Further financial ​sanctions and corrective measures should ​strengthen compliance with anti-corruption ​laws. The SEC’s action underlines ​the Agency’s commitment to respect ethical business practices on the ​global market.

Impact on the aviation industry

This ​case illustrates the risks associated with exploitation ​in jurisdictions with high levels of corruption. For airlines, where government contracts are often fundamental and robust internal controls and ​where compliance with global anti-corruption ​standards ​is essential. The AAR case recalls the consequences of reputation and the financial consequences of non-compliance with ethical standards.

The SEC continues to give priority to the ​application ​of the PCPA, particularly in industries likely ​to be ​corrupt because of their dependence on public procurement. Companies are advised to invest in comprehensive compliance programs, including ​regular ​audits, employee training, and due diligence to third-party agents ​and partners.

As the global implementation of the ​fight against corruption is increasingly ​coordinated, ​the AAR case underlines the ​importance of transparency and accountability ​in multinational operations. Stakeholders in all industries can learn from this case to mitigate risks and improve their ​governance frameworks.

The agreement represents an important step in the SEC’s efforts to combat corruption in the aerospace sector, reaffirming the Agency’s commitment to promoting ​the ethical conduct of companies worldwide.