Orde r 2011-6- 3

i^^k \UNITE D STATE S O FAMERIC A Vf^S

j DEPARTMEN T O FTRANSPORTATIO N 'H^ ^ OFFIC E O FTH E SECRETAR Y WASfflNGTON , D.C . Issue db y th e Departmen t o f Transportatio n o n th e 2n dday o f

June , 201 1

Globa l Airlin e Services , Inc. , an d Harol dJ . Pareti , Individuall y Violation s o f

4 9 U.S.C . § § 4110 1 an d4171 2 Docke t OS T 2011-000 3 Serve dJun e 2 , 201 1

CONSEN T ORDE R Thi s consen t

orde r concern s unauthorize dai r transportation b y Globa l Airlin e Services , hic , (Global ) an dHarol dJ . Paret i (Mr . Paret i an dGloba l ar e collectivel y referre dt o a s "Respondents") . Sinc e a t leas t 2009 , Mr . Paret i an dGlobal , abusines s entity ove r whic h h e exercise s absolut e ownership , direction , an dcontrol , hav e engage di n th e provisio n o f ai r transportatio n a s a

n indirec t ai r carrie r withou t holdin g requisit e economi c authority fromth e Departmen t

o f Transportation . Thi s consen t orde r als o concern s separat e an d distinc t violation s o f

th e Department' s prohibitio n agains t unfai r an ddeceptiv e practice s an dunfai r

method s o f

competition , 4 9 U.S.C . § 41712 , arisin g fromRespondents ' marketin g an dsal e o f

ai r transportatio n service s ultimatel y operate db y acompan y that di dno t hol dprope r

authorit y fro mth e Department . Thi s orde r direct s Respondent s t o ceas e an ddesist

fro msuc hfurther

violation s an dassesse s acompromis e civi l penalt y o f $120,000 . Applicabl e La w In orde r t o engag e directl y o r

indirectl y i n ai r

transportation , citizen s o f th e Unite dStates ' ar e require dt o hol deconomi c authorit y fro mth e Departmen t pursuan t t o 4 9 U.S.C , § 41101 , eithe r

i n th e for mo f a"certificat e o f

publi c convenienc e an dnecessity " o r i n th e A "citiie n o f th e Unite dStates " include

s acorporatio

n o r associatio n organize di n th e Unite d State s tha t 1) meet s certai n specifie dstandard s regardin g th e citizenshi p o f it s president , officer s an d directors , an

dholder s o f it s votin g interes t an d2 ) i s unde r th e actua l contro l o f citizens o f th e Unite dStates . 4 9 U.S.C . §40l02(a)(l5) .for

mo f a n exemptio n fromth e certificat e requirement , suc ha s thos e applicabl e t o direc t ai r carriers ^ operatin g a s ai r taxi s unde r

1 4 CF RPar

t 298 , o r indirec t ai r carriers' * functionin g a s publi c charte r operator s pursuan t

t o 1 4 CFRPar

t 380 . Thi s economi c authority i s separat e an ddistinc t fro man y safety authority require db y th e Federal Aviatio n Administratio n (FAA) . "Ai r transportation " include s th e transportatio n o f passenger s o r

propert y b y ai r

a s aconmio n carrie r

betwee n tw o state s i n th e Unite dState s o r betwee n aplac e i n th e Unite dState s an daplac e outsid e o f th e Unite dState s o r

th e transportatio n o f

mai l b y air. ^ In th e contex t o f aviation , a"commo n carrier " i s aperso n o r othe r entit y that , fo r

compensatio n o r

hire , hold s ou t

t o and/o r provide s th e publi c with transportatio n b y ai r

betwee n tw o points. ^ Entitie s o r

persons , suc ha s ai r

charte r brokers , tha t

d o no t hav e economi c audiority from th e Departmen t

ma y not , a s principals , ente r int o contract s withdirec t ai r carrier s for

ai r transportation an dthe n re-sel l that ai r transportatio n pursuan t

t o separat e contract s with charte r customers . Sellin g o r re-sellin g ai r

transportatio n withou t

economi c authority constimte s "engaging " i n ai r transportatio n an dviolate s 4 9 U.S.C . §41101. ^ Unde r Departmen t

enforcemen t

cas e precedent , violation s o f sectio n 4110 1 als o constitut e a n unfai r an ddeceptiv e practic e an dunfai r metho do f

competitio n i n violatio n o f 4 9 U.S.C . §41712. ^ A s aseparat e matter , aperso n o r othe r entit y that

doe s no t hol dauthority t o engag e i n commo n carriag e ma y no t performcommo n carriag e operation s that resul t fromth e holdin g ou t

o f ai r service s b y athir dparty , suc ha s anothe r ai r carrie r o r a n ai r charte r o broker , agent , o r

affiliate dcompany . Th e Departmen t ha s foun dentities , suc ha s ai r

^ A

n entity o r

perso n wh o i s directl y engage di n th e operatio n o f

aircraf t tha t ar e use dt o provid e ai r transportatio n i s a"direc t air carrier. "

^ A

n entity o r

perso n wh o i s no t

adirec t ai r carrier , bu t

who , i n hi s o r he r ow n right , solicit s member s o f

th e publi c t o purchas e ai r transportatio n i s a

n "indirec t

air carrier. "

" 4 9 U.S.C . § § 40102(a)(5) . (a)(23) , an d(a)(25) .

' Woolse

y v . Nationa l Trans . Safet y Bd. . 99 3 F.2 d516 , 522-2 3 (5* ^ Cir . 1993) . * • Fro mth e standpoint o f th e requirement s o f

sectio n 41101 , theholdingou t o f ai r service , a s wel l a s th e actual operatio n o f

ai r service , constitute s "engaging " i n air transportation . Prio r

t o 1994 , whe n Titl e 4 9 o f th e Unite dState s Cod e wa s recodifie dan dsimplified , 4 9 U.S.C . § 4110 1 state dthat n o carrie r

coul d "engage " i n ai r

transportatio n withou t

appropriat e authority . Althoug h th e wordin g o f sectio n 4110 1 no w state s tha t wha t i s prohibite di s "providing " ai r transportatio n withou t

authority . Congres s mad e clea r whe n i l recodifie dTitl e 4 9 that i n doin g s o i

t di dno t inten dan y substantiv e chang e t o th e statute . Ac t o f Jul y 5 , 1994 , Pub . L . 103-272 , § 6(a) , 10 8 Stat . 745 , 1378 .

' See , e.g. , V

I Jets , Inc. , Violation s o f 4 9 U.S.C . § 4110 1 an d4171 2 an d1 4 CFRPar t 399 , Orde r 2009-10-1 ! (Oct . 21,2009) . ^ See , e.g. , ID M Corporat e Aviatio n Services , LLC . Violation s o f 4 9 U.S.C . § § 4110 1 an d41712 , Orde r 2007-2- 6 (Februar y 5 , 2007) .charte r brokers , that

hav e facilitate dth e unlawfu l commo n carriag e operation s of third

partie s t o hav e themselve s engage di n a n unfai r an ddeceptiv e practic e an da n unfair metho do f

competitio n i

n violatio n o f

4 9 U.S.C . § 4171 2 whe n the y kne w o r shoul dhav e know n that

th e unlicense dentitie s lacke deconomi c authority. ^ Backgroun d Mr . Paret i i s aUnite dState s citizen . H e i s th e sol e shareholde r o f Globa l an dserve s a s th e presiden t

o f th e company.' ^ A t

al l time s relevan t

t o this matter , Mr . Paret i ha s bee n th e onl y perso n withauthorit y ove r th e day-by-da y marketing , management , an d operation s o f

Global . Interna l t o Global , Mr . Pareti makes al l significan t decision s affectin g th e company . I n Hgh t o f th e foregoing , Mr . Paret i i s th e animatin g forc e behin d Global' s conduct , a s describe dbelow. " I n suc hinstances , th e Departmen t ha s foun d individual s personall y liabl e for th e unlawfu l conduc t

o f thos e entities . Globa l i s aDelawar e corporatio n tha t specialize s i n arrangin g single-entit y charte r ai r transportation . I

t doe s no t

hol deconomi c authority fro mth e Departmen t t o engag e directl y o r

indirectl y i n ai r

transportation . However , a n investigatio n b y th e Department' s Offic e o f

Aviatio n Enforcemen t

an dProceeding s (Enforcemen t Office ) reveale dthat

durin g 2010 , Globa l engage di n unauthorize dai r transportatio n a s a

n indirec t ai r carrier . Specifically , Globa l obtaine dalarg e portio n o f it s busines s b y biddin g a s aprincipal , actin g i n it s ow n right , o n solicitation s fro mvariou s charte r customers , al l o f

whic hwer e universit y athleti c departments . Whe n Globa l wo n abid , i t woul dthe n sig n what

wa s usuall y style da s a"purchas e order, " provide db y th e university . Upo n signin g th e order . Globa l the n becam e contractuall y boun da s a principa l t o provid e charte r ai r transportatio n t o th e university.'' ^ Then , i n orde r t o fulfill

• ^ See , e.g. . Platinu mJe t Management , LLC . et

al . Violation s o f

4 9 U.S.C . § § 41301 . 41703 , an d 41712 , Orde r

2006-6-1 4 (Jun e \2 , 20^ ) ixn dDarb y Aviation . Inc. , d/b/ aAlphaJe t International . Violation s o f 4 9 U.S.C. § 41712 . Orde r 2005-]2- \(Dec . 1,2005) .

" * Mr . Pareti' s wif

e i s Global' s secretary an dtreasurer , an dGlobal' s onl y othe r full-time employee .

" Persona l responsibilit y fo r corporat e conduc t

may attac h whe n a

n individual' s conduc t

amount s t o a n "animatin g force " tha t cause s th e violatio n o f astatut e an daccompanyin g regulations . Citronelle

Mobil e Gathering , Inc. , v . Herringion . 82 6 F.2 d1 6 (Temp . Emer . Ct . Ap p 1987) , cert , denied , 48 4 U.S . 943(1987) . See , e.g. . Principa l Ai r

Services . LL C an dDavi dBernstein , Violation s o f 4 9 U.S.C . § § 4110 1 an d 41712 . Orde r

2006-7^1 3 (Jul. l I , 2006) ; Ron i Herskovitz , Individiiallv , an dUltimat e Fares . Inc. . Violation s o f 4 9 U.SC.§ § 41712m d1 4 CFR257.5(d) . 399.80(f)and399,84 . Orde r 2009-11- 8 (Nov . 9 , 2009) .

' ^ A single-entit y charte r i s acharie r

fo r th e entir e capacity o f

th e aircraft , th e cos t

o f whic h i s born e b y th e chartere r

an dno t directl y o r

indirectl y b y th e individua l passengers . I n additio n t o th e ai r

charte r services . Globa l wa s sometime s als o responsibl e for groun dhandling , catering , an dothe r

relate dservices .it s contractua l obligation , Globa l woul dente r int o separat e agreement s wit hdirec t ai r carriers , wh o woul dthe n becom e contractuall y responsibl e t o Global , rathe r than t o th e university , for

operatin g th e charte r

flights . O n al l occasion s relevan t herein . Globa l wa s no t authorize dt o ac t

a s a n agen t o f th e universitie s o r

th e direc t

ai r carrier s tha

t provide d th e contracte dservice . Unde r thes e circumstances , Globa l unlawfull y engage di n ai r transportation . A separat e matte r

concern s Global' s marketin g an dsellin g o f ai r transportatio n provide d b y Capita l Airways , LLC , (Capita l Airways ) alarg e aircraf t operato r license db y th e FA A unde r

1 4 CF RPart

125 . Authorit y unde r

this FA A regulatio n i s limite dt o privat e carriag e operations.' ^ Notwithstandin g this condition , i n th e fal l o f 2010 , Globa l contracte dwithCapita l Airway s t o provid e singl e entit y charte r ai r servic e t o certai n colleg e sport s teams . At th e tim e Globa l entere dint o contract s wit hCapita l Airways , Respondent s kne w that

Capita l Airway s wa s license dunde r Part 12 5 an ddi dno t

hav e economi c authorit y fro mth e Departmen t t o engag e i n commo n carriage . O n Januar y 5 , 2011 , Capita l Airway s entere dint o aconsen t orde r withth e Departmen t

i n settlemen t

o f it s violation s o f

4 9 U.S.C . §§4110 1 an d4171 2 arisin g ou t o f this arrangement.' ^ Globa l facilitate dCapita l Airways * unlawfu l conduc t an dhas , therefore , engage di n a n unfai r an ddeceptiv e practic e an dunfai r metho do f

competitio n i n violatio n o f 4 9 U.S.C . §41712 . Mitigatio n I n mitigatio n an dexplanation . Respondent s assert that th e allege dnoncomplianc e wa s unintentiona l an dinadvertent , an dtha t the y ar e committe dt o full complianc e wit hth e Department' s regulation s an dal l applicabl e laws . Respondent s further stat e that

the y alway s viewe dthemselve s a s th e agen t o f th e ai r carrier s an dneve r

intende dt o ac t

a s a principa l withth e charte r customers . Withrespec t t o Respondents ' interactio n with Capita l Airways , Respondent s maintai n tha t the y believe dthat

us e o f Capita l Airway s wa s permissibl e base do n Capita l Airways ' representation s t o Respondents . Furthermore , Respondent s stat e tha t

upo n notificatio n o f

thei r noncompliance , the y cooperate dfully withth e Department , initiatin g promp t remedia l actio n t o addres s th e allegation s an d brin g thei r

operation s int o compliance . In addition , Respondent s als o point s ou t that thi s i s th e onl y consen t

orde r issue dagains t

the mi n ove r

1 4 years . Decisio n Th e Enforcemen t

Offic e ha s carefull y considere dal l o f th e informatio n availabl e t o it , bu t continue s t o believ e tha t

enforcemen t

actio n i s warranted . I

n orde r t o avoi dlitigation , th e Enforcemen t

Offic e an dRespondent s hav e reache dasettlemen t o f this matter . Withou t 1 4 CF R125.11(b ) provide s tha t "[n] o certificat e holde r

ma y conduc t an y operatio n whic h result s directl y o r

indirectl y fromany person' s holdin g ou t l o th e publi c t

o furnis h transportation. "

' ^ See . Capita l Airways . LLC , Violation s o f 4 9 U.S.C . § § 4110 1 an d41712 . Orde r 2011-1- 2 (Jan . 5 , 2011) .admittin g o r denyin g th e violation s describe dabove . Respondent s agre e t o th e issuanc e o f thi s orde r

t o ceas e an ddesist

fro mfuture violation s o f 4 9 U.S.C . § § 4110 1 an d41712 , an dt o th e assessmen t

o f $120,00 0 i n compromis e o f potentia l civi l penaltie s otherwis e assessabl e agains t

them . Thi s compromis e assessmen t i s appropriat e i n vie w o f th e natur e an dexten t

o f th e violation s i n question , serve s th e publi c interest , an destablishe s a deterren t t o future similar

unlawfu l practice s b y Respondent s an dothe r similarl y situate d person s an dentities . Thi s orde r

i s issue dunde r

th e authorit y containe di n 4 9 CFK 1.57 aan d1 4 CF R385.15 . ACCORDINGLY , 1 . Base do n th e abov e discussion , w e approv e thi s settlemen t an dth e provision s o f

th e orde r a s bein g i n th e publi c interest ; 2 . W e findthat

Globa l Airlin e Services , Inc. , an dHarol dJ . Pareti , i n hi s persona l capacity , violate d4 9 U.S.C . §41101 , a s describe dabove , b y engagin g i n ai r transportation withou t

appropriat e economi c authority ; 3 . W e findthat , b y engagin g i n th e conduc t describe di n paragrap h2 , above . Globa l Airlin e Services , Inc. , an dHarol dJ . Pareti , i n hi s persona l capacity , engage di n a n unfai r an ddeceptiv e practic e an da n unfai r metho do f

competitio n i n violatio n o f 4 9 U.S.C . §41712 ; 4 . W e findtha t

b y facilitatin g unauthorize dcommo n carriag e b y Capita l Airways , LLC , a s describe dabove . Globa l Airlin e Services , Inc. , an dHarol dJ . Pareti , i n hi s persona l capacity , engage di n a n unfai r an ddeceptiv e practic e an da n unfai r metho do f competitio n i n violatio n o f 4 9 U.S.C . § 41712 ; 5 . W e findtha t

Globa l Airlin e Services , Inc. , wa s at al l time s relevan t

here munde r

th e leadership , dkection , an dcontro l o f Harol dJ . Paret i an dtha t Harol dJ . Paret i mad e al l significan t

decision s withrespec t

t o th e conduc t

describe di n orderin g paragraph s 2 , 3 , an d4 , above , an di s therefor e personall y responsibl e for th e violation s foun di

n orderin g paragraph s 2 , 3 , an d4 , above ; 6 . W e orde r

Globa l Airlin e Services , Inc. , an dal l othe r entitie s owne dan dcontrolle d b y o r unde r commo n ownershi p withGloba l Airlin e Service , Inc. , an dit s successor s an d assignee s an dHarol dJ . Pareti , personally , t o ceas e an ddesist fro mfurthe r

violation s o f 4 9 U.S.C . §§4110 1 an d41712 ; 7 . W e asses s jointl y an dseverall y Globa l Airlin e Services , Inc. , an dHarol dJ . Pareti , i n hi s persona l capacity , $120,00 0 i n compromis e of civi l penaltie s tha t

migh t otherwis e b e assesse dfor

th e violation s describe di n orderin g paragraph s 2 , 3 , an d4 , above . O f thi s tota l penalt y amount , $60,00 0 shal l b e du e an dpayabl e i n installment s o f $2,00 0 o n th e 15t hda y o f eac hcalendar

monthfollowin g th e issuanc e o f this order , withth e firs t paymen t du e o n Jul y 15 , 2011 . Th e remainin g $60,00 0 shal l becom e du e an dpayabl e i f eithe r Globa l Airlin e Services , Inc. , o r Harol dJ . Pareti violate s th e ceas e an ddesistprovisio n i n orderin g paragrap h6 , above , o r fail s t o compl y withth e paymen t provision s i n thi s orderin g paragrap hbefore th e las t $2,00 0 penalt y paymen t i s made ; an d 8 . Failur e t o pa y th e penalt y a s prescribe dshal l subjec t Globa l Airlin e Services , Inc. , an dHarol dJ . Pareti , jointl y an dseverally , t o th e assessmen t o f interest , penally , an d collectio n charge s unde r

th e Deb t Collectio n Ac t

an dt o possibl e enforcemen t actio n for failure t o compl y withthis order . Payment s shal l b e mad e b y wir e transfe r throug hth e Federa l Reserv e Communication s System , commonl y know n a s "Fe dWire, " t o th e accoun t o f th e U.S . Treasury . Th e wir e transfer s shal l b e execute di n accordanc e wit

h th e instruction s containe di n th e Attachmen t t o this order . Thi s orde r

wil l becom e afina

l orde r o f th e Departmen t

1 0 day s after

it s servic e dat e unles s atimely petitio n for revie w i s filedo r

th e Departmen t

take s revie w o n it s ow n initiative . BY : ROSALIN D A . KNAP P Deput y Genera l Counse l (SEAL ) A

n electroni c versio n o f

this documen t

i s availabl e a t www , regulations , go v