xe services settlement summary
DESCRIPTION
This is an overview and Settlement Summary of the State Department, Directorate of Defense Trade Controls Consent Agreement with Xe Services LLC As anticipated, following the DDTC\’s settlement with AAR International, Inc. (AAR) in mid-July, DDTC has settled with Xe Services LLC (Formerly Blackwater Worldwide), the seller and party responsible for the alleged violations of Presidential Airways, Inc, and numerous other alleged violations. Xe sold Presidential Airways, Inc. to AAR in April 2010 for $200 million. This is a one-page summary of the Xe Services LLC Proposed Charging Letter, Consent Agreement and Order that addresses the 288 alleged violations of the Arms Export Control Act and International Traffic in Arms Regulations (ITAR). It consolidates 67 pages of material into a concise and consistent format that’s particularly useful for C-level executives and trade compliance professional’s education/training at all levels. If you are a trade compliance professional, you are encouraged to read the entire settlement package on the DDTC website. It provides a wealth of valuable information. Thoroughly reading settlements and monitoring various U.S. Government enforcement and compliance resources should be a integral part of any trade compliance professional’s reading and an essential element in any comprehensive Trade Compliance Program. One-page summaries like these help get the word out more quickly in a bite-size way and allow readers to more quickly digest and compare individual cases.TRANSCRIPT
XE SERVICES LLC (Xe) (formerly Blackwater Worldwide) [Consent Agreement (CA) Date: 081810] United States Department of State (DOS) - Settlement Summary (As of 090610)
Trade compliance professionals are encouraged to read all the available related documents at http://www.pmddtc.state.gov/compliance/consent_agreements/XeServicesLLC.html.
Counts
Charges Summary Monetary Fines
Mandated Action Plan Highlights Actual Remedial
General
1-10 11
12-14
15-117
118-194
195-271
272-276
277 278-286
287
288
Two-hundred and eighty-eight alleged violations of the Arms Export Control Act (AECA) and International Traffic in Arms Regulations (ITAR) for unauthorized and other activities including: - Violating firearms license provisos - Unauthorized proposals to a proscribed
country (Sudan) - False statements or misrepresentations and
omissions of material facts - Violating terms of authorizations involving
military/security training - Unauthorized export of technical data and
provision of defense services military/security training (internationally)
- Unauthorized export of technical data and provision of defense services involving military/security training (domestically)
- Unauthorized exports of defense articles, including Significant Military Equipment
- Failure to obtain DSP-83 Certificates - Unauthorized exports to foreign person
employees and contractors - Violations involving administrative
requirements - Failure to maintain required license records
$42,000,000 (Civil Penalty)
* $12,000,000
- Appoint a qualified outside individual as a Special Compliance Officer (SCO) for the first 3 years of the CA
- Between 30-32 months, the SCO, after consultations with Xe, shall recommend for approval by the Director, Defense Trade Controls Compliance (DDTCC) one of Xe’s employees to replace the SCO to serve as an Internal SCO (ISCO)
- Ensure adequate resources are dedicated to ITAR compliance throughout Xe’s ITAR-regulated business units and subsidiaries
- Within 120 days of the CA date, in coordination with the SCO, conduct an internal review of AECA & ITAR compliance resources throughout Xe’s ITAR-regulated business units and subsidiaries and establish the necessary actions to ensure sufficient resources are dedicated to compliance
- Continue compliance policies and procedures referenced in the Audit report and within 12 months of the CA institute strengthened corporate export compliance procedures
- Implement or make improvements to a comprehensive automated defense trade compliance system
- Have outside consultants with AECA/ITAR expertise, approved by the DDTCC, perform two audits during the term of the CA
- Publicize the means of reporting concerns, complaints and violations via a compliance hot-line and anonymous reporting
- While the CA is in effect, arrange and facilitate with advance notice onsite reviews by the State Department
- Prior to CA conclusion, submit a written certification to the DDTCC that all CA mandated compliance measures have been implemented and the current compliance program is adequate
SCO & ISCO RESPONSIBILITIES: (1) Policy and Procedure [CA, Items 16(a)1-22, pages 6-8]; (2) Oversight [CA Items (b)1-9, pages 8-9]; (3) Reporting [CA, Items (c)1-4, pages 9-10]; “…the SCO or 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 and to all munitions authorizations, licenses, and Respondent’s guidance relating to the export of defense articles, including technical data, and defense services.” [CA, page 10, paragraph (para) (17)]; “Respondent’s business units or subsidiaries… shall take no action to interfere or impede the SCO’s or ISCO’s ability to monitor compliance with this CA.…” [CA, Item (18), page 9-10] NOTABLE QUOTES: “The investigation revealed that Respondent historically was in systemic noncompliance with the ITAR… Respondent initially failed to thoroughly and properly investigate its violations.” [See Proposed Charging Letter (PCL), Background, General Overview, page 3, last para]; “…the Department lost confidence in Respondent’s ability and willingness to comply with the ITAR without formal action by the Department… Consequently…the Department placed Respondent under a policy of denial with certain conditions….” (See PCL, Policy of Denial, page 15,1
st para)
DOS PRIOR SETTLEMENT HISTORY: None against Xe or Blackwater; however, Xe sold Presidential Airways to AAR International Inc. (AAR) that resulted in a recent consent agreement (See DOS AAR settlement at http://www.pmddtc.state.gov/compliance/consent_agreements/AARInternational.html). RELATED NOTES: In April 2010 the US Department of Justice (DOJ) announced a 15 count indictment against 5 former senior Blackwater employees for conspiring to violate federal statutes resulting in the acquisitions & dispositions of firearms, filing false forms; unlawful possession of automatic firearms and unregistered firearms; and obstruction of justice. (See DOJ Press Release at http://www.atf.gov/press/releases/2010/04/041610-char-five-blackwater-employees-indicted.html). Sources indicate other Blackwater related enforcement actions continue. Neither Blackwater nor Xe have any settlement history with the US Department of Commerce, Bureau of Industry & Security. OTHER FACTS/ITEMS OF INTEREST: Xe provides private-sector security services to the US Government (USG) and others, including the provision of security services, training, logistics and aviation services for the USG, allies and to multiple private parties, US and foreign. Sources indicate Xe Services LLC is for sale.
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For changes, inputs, suggestions, please contact John Priecko at 703-895-1110 or [email protected]. Trade Compliance Solutions
* $6,000,000 is suspended as a result of Xe’s already self-initiated remedial compliance
measures (RCM).
* Another $6,000,000 is suspended if Xe applies that
amount to CA authorized RCM over the 4 years of the CA.
The total fine of $42,000,000 equates to $145,833.33
per alleged violation.
The actual total civil penalty is 29.2% of the maximum of
$144 milliion that could have been imposed for 288
administrative violations.
The worse case fine for 288 criminal violations could have
been $288 milliion