Overview and One-Page Summary of the State Department’s Settlement with Xe Services LLC

As anticipated, following the State Department's Directorate of Defense Trade Controls (DDTC) settlement with AAR International, Inc. (AAR) in mid-July, DDTC settled about a month later 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.

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) is available at
http://www.scribd.com/Xe-Services-081810-Settlement-Summary-090610/d/37482307. 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.

A unique aspect of the case is that while many of the alleged violations described were clearly knowing and willful, there’s no mention of that anywhere in the settlement documents. In fact, the words “knowing” and/or “willful” are nowhere to be found. That’s interesting in many respects including prior settlement precedents where there were knowing and willful violations and the State Department went out of their way to emphasize the ITAR Parts 127.1(d) and 127.3 violations.

Additionally, it’s interesting to note that Erik Prince, Blackwater’s founder and owner, has moved to Abu Dhabi and has the company up for sale. In closely reading the complete settlement summary and based on other research, it’s clear Blackwater had extensive, ongoing, serious and systemic compliance problems. The nature, multitude and significance of the repeated failures to comply reflect a culture of non-compliance from the top down.

In that regard, in April 2010, the Department of Justice indicted 5 senior Blackwater employees for conspiring to violate federal statutes, filing false forms, unlawful possession of automatic weapons, unregistered firearms and obstruction of justice. Sources indicate enforcement and other related actions continue.

If you are a trade compliance professional, you are encouraged to read the entire Xe Services LLC settlement package. It provides a wealth of valuable information. Monitoring various U.S. Government enforcement and compliance resources should be an 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 in a bite-size way and allow readers to quickly digest and compare individual cases.

*Mr. Priecko is the President and Managing Partner of Trade Compliance Solutions, a network of experienced compliance-related professionals. He is a trade compliance veteran with more than 15 years of experience. He can be reached at 703-895-1110 or jpriecko@comcast.net.