AAR Corp. has reached an agreement to pay $55 million to resolve allegations from both the U.S. Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ) concerning claims that the aviation services provider engaged in the practice of bribing government officials in Nepal and South Africa to secure business. The resolution was announced on Thursday.

Based in Illinois, AAR entered into an 18-month nonprosecution agreement with the DOJ, which asserts that the company engaged in a conspiracy to offer bribes to government officials to maintain and expand its business relationships with state-owned airlines in Nepal and South Africa between 2015 and 2020. According to the DOJ, the alleged scheme resulted in nearly $24 million in profits for AAR.

Under the terms of the nonprosecution agreement, AAR has committed to paying a penalty of approximately $26.4 million and an additional $18.6 million in administrative forfeiture. Additionally, AAR has agreed to cooperate fully with the DOJ's Criminal Division and the U.S. Attorney's Office for the District of Columbia on any future or ongoing criminal investigations, and to continue enhancing its compliance program throughout the duration of the agreement.

Prosecutors allege that in Nepal, AAR successfully secured a contract with Nepal Airlines Corp. concerning the sale of two Airbus A330-200 aircraft by offering and paying bribes to Nepali officials through various intermediary firms. In South Africa, the company similarly obtained a contract with South African Airways Technical by offering and paying bribes through a third-party agent.

In a separate yet related agreement with the SEC, AAR will also pay $29.2 million in disgorgement and prejudgment interest. Additionally, Deepak Sharma, a former executive at an AAR subsidiary, reached a settlement with the SEC. Sharma had previously pleaded guilty to his role in the bribery scheme, which involved violations of the Foreign Corrupt Practices Act (FCPA) in August, as per the DOJ. As part of the SEC settlement, Sharma has agreed to pay a total of $184,597 in disgorgement and prejudgment interest, with $130,835 having been paid already through a forfeiture order in connection with his previous agreement with the DOJ.

According to the SEC, Sharma played a central role in orchestrating and implementing the bribery scheme to secure a contract for the sale of the Airbus aircraft between 2015 and 2018, which was valued at roughly $210 million. He was also involved in the South African Airways contract, the agency noted.

As part of its consent order with the SEC, AAR has acknowledged that it violated the anti-bribery, recordkeeping, and internal accounting control provisions of the FCPA, the SEC said.

Charles Cain, the chief of the SEC's FCPA Unit, commented in a statement that the alleged bribery schemes underscored the impact of a deficient control environment, which creates opportunities for corruption to transcend national borders. “This matter serves as another critical reminder that companies must establish and maintain robust compliance and accounting controls that are appropriate for the FCPA risks they encounter, including those associated with their engagements with third parties across their global business operations,” Cain said.

In its statement on Thursday, AAR noted that it had self-reported potential violations in 2019 and cooperated fully with both the SEC and the DOJ during their investigations.

“The resolutions with both the DOJ and SEC make clear that the relevant conduct was principally carried out by a former employee of a company subsidiary and former third-party agents,” AAR said in its release.

The company also indicated that it expects to cover the costs associated with the nonprosecution agreement and the SEC settlement using cash resources and borrowings under its revolving credit facility.

John M. Holmes, the president and CEO of AAR, expressed the company's satisfaction at resolving these matters with the DOJ and SEC. “AAR remains committed to transparency and accountability, and to operating in an ethical and compliant manner,” Holmes said.

The DOJ noted that while AAR self-reported the conduct that partially led to the resolution, it did not constitute a "voluntary self-disclosure" under DOJ policy. This is because media outlets in Nepal and South Africa had already reported on the potential misconduct, and an independent source had also brought the allegations to the DOJ's attention prior to the company's self-reporting. Nonetheless, AAR cooperated with the DOJ's investigation, provided information promptly, and engaged in extensive remedial measures, all of which contributed to the company facing a significantly reduced penalty, the DOJ said.

Counsel for Deepak Sharma did not immediately respond to a request for comment late Thursday.

The government is represented by Katherine Raut and Paul Ream of the DOJ's Criminal Division, and Madhu Chugh from the U.S. Attorney's Office for the District of Columbia.

AAR Corp. is represented by Jessica A. Garascia in-house, along with Daniel S. Khan and Mari Grace from the law firm Davis Polk & Wardwell LLP. Deepak Sharma is represented by James Parkinson of Orrick Herrington & Sutcliffe LLP.

The cases are In the Matter of AAR Corp., administrative proceeding file number 3-22369, and In the Matter of Deepak Sharma, administrative proceeding file number 3-22370, both filed before the U.S. Securities and Exchange Commission.