This is the one page summary for the State Department’s July 15th, 2010, settlement with AAR International, Inc (AAR). It’s a unique successor liability case in several respects. There was no fine whatsoever for AAR. Additionally, the State Department did not include the material fact in the settlement that AAR purchased Presidential from Xe Services LLC (formerly Blackwater Worldwide). That begged all sorts of questions and expectations including the distinct possibility of a related settlement involving Xe Services and/or Blackwater for the underlying alleged violations. Indications of a significant settlement with Blackwater or its successor (Xe Services LLC) was rumored for months in an investigation that has apparently been underway for years.

1. AAR INTERNATIONAL, INC. (AAR) [Consent Agreement (CA) Date: 071510]
United States Department of State (DOS) - Settlement Summary (As of 083010)
Trade compliance professionals are encouraged to read all the available related documents at http://www.pmddtc.state.gov/compliance/consent_agreements/AARInternational.html.
Monetary Fines
Counts Charges Mandated Action Plan Highlights
Actual Remedial
General Thirteen alleged violations of the Arms Export None with this DOS settlement - Within 30 days of the CA, appoint and empower a qualified
Control Act (AECA) and International Traffic (see the NOTE below) Internal Special Compliance Officer (ISCO) for the 18 month
term of the CA to monitor, oversee and promote AECA and
in Arms Regulations (ITAR) for unauthorized ITAR compliance in accordance with the CA
Unlike previous successor
export of defense articles including liability cases, AAR, the - Within 120 days of the CA in coordination with the ISCO
technical data by Presidential Airways, buyer, did not incur any conduct an internal AECA & ITAR review and establish actions
Inc., together with its affiliates Aviation monetary penalty. to ensure sufficient resources are dedicated to compliance
Worldwide Services, LLC; Air Quest, Inc; - Within 12 months of the CA institute strengthened corporate
The worse case fine could export compliance procedures to address initial and ongoing
STI Aviation, Inc; and EP Aviation LLC have been $13,000,000 for general and focused training of all personnel at least annually
(hereafter collectively referred to as 13 criminal violations. - Maintain complete training records
”Presidential”). - Implement or make improvements to a comprehensive
NOTE: The settlement does
1-12 - Presidential violated part 127,1(a)(1) of the automated defense trade compliance system to strengthen
not mention the fact AAR internal controls for ensuring AECA and ITAR compliance
ITAR, without authorization, exporting US purchased Presidential from
Munitions List (USML) Categories VIII and - Provide training to all employees to ensure that any type of
Xe Services LLC (formerly electronic transmissions of ITAR-controlled technical data are
XI articles 12 times to Afghanistan, the Blackwater Worldwide).
Bahamas, Burkina Faso and Iraq. sent in accordance with written policies and procedures
Since the violations took place - Under ISCO supervision, have an outside consultant with
13 - Presidential violated part 123.10(a) and before AAR’s purchase and AECA & ITAR expertise conduct an audit during the CA’s term
127.1 of the ITAR once when they failed to did not involve AAR in any - Publicize the means of reporting concerns, complaints and
obtain a Non-Transfer and Use Certificate way there will likely be a violations via a compliance hot-line and anonymous reporting
(Form DSP-83) for the export and re-export subsequent settlement and - While the CA is in effect, arrange and facilitate with advance
of USML categories VIII and XI Significant notice an onsite review by the State Department
fine(s) dealing with the
Military Equipment (SME) defense articles. - Prior to CA conclusion, submit a written certification that all CA
underlying alleged violations. mandated compliance measures have been implemented
ISCO RESPONSIBILITIES in three principal areas: Policy and Procedure includes: staffing, audits, classification and management of defense articles and
services, screening, complying with terms, conditions and provisos, preventing, detecting and reporting violations services…. [CA, Items (a)1-21, pages 5-7];
Oversight includes: CA mandated compliance measures, executive level business plans, verifying reports, automated defense trade control and compliance
systems, audits…. [CA. Items (b)1-8, pages 7-8]; Reporting includes: tracking, evaluating and reporting on ITAR violations and compliance resources, providing
required reports to the Director, DTCC and AAR’s President and General Counsel…. [CA, Items (c)1-3, pages 8-9]; “The ISCO shall have full and complete
access to all personnel, books, records, documents audits, reports, facilities and technical information relating to compliance with this CA.” [CA, Page
9. Para (14)]; “Presidential… shall take no action to interfere or impede the ISCO’s ability to monitor compliance with the CA.…” [CA, Item (15), page 9]
NOTABLE QUOTES: “Prior to AAR Airlift’s acquisition of Presidential, Presidential was involved in several violations of the ITAR. Presidential’s
disclosures demonstrated a lack of commitment to comply with the ITAR.” [See Proposed Charging Letter (PCL), Background, page 2, last paragraph (para)]
“Presidential stated that this violation (the unauthorized export of an SME missile warning system) occurred because it was unaware of its legal and
regulatory obligations when it exported the defense articles. This contention, however, was not supported by the record.” (See PCL, Unauthorized
nd
Exports of Defense Articles, including SME, page 4, 2 para). “Subsequently (between 2006 and 2009) Presidential discovered more ITAR violations and
rd
submitted additional voluntary disclosures.” (See PCL, Unauthorized Exports of Defense Articles, including SME, page 4, 3 para)
AAR DOS PRIOR SETTLEMENT HISTORY: None (AAR also has no settlement history with the US Department of Commerce, Bureau of Industry & Security).
OTHER FACTS/ITEMS OF INTEREST: AAR is a public company and supplier of products and services to the worldwide aviation/aerospace industry.
According to hoovers.com, AAR has more than 6,000 employees around the world and gross annual revenue in excess of 1 Billion dollars. Also NOTE:
Presidental Airways, Inc., prior to AAR’s acquisition and before Blackwater’s name change to Xe Services LLC was doing business as Blackwater Aviation.
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