Order 2013

- 11

- 16

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation On the Twenty

- Second day of November, 201 3

VIH Cougar Helicopters , Inc.

Docket OST 201 3

- 0004

Served November 22 , 201 3

Violatio ns of 14 CFR Part 298

and 49 U.S.C. § 4 1101

CONSENT ORDER

This order concerns unauthorized interstate and foreign air transportation by VIH Cougar Helicopters , Inc., ( VIH Cougar ) which, while under the actual control of a non

- U.S. citizen, engaged in air services as a common carrier between points in the United States and between points in the United States and points abroad . VIH Cougar’s conduct in this regard violated 49 U.S.C. § 41101 and 14 CFR Part 298. This order directs VIH Cougar

to cease and desist from future violations of those provisions and assesses the carrier $ 30 0,000 in civil penalties , subject to footnote 6 below.

Applicable Law

In order to engage directly or indirectly in air transportation, air carriers must hold economic authority from the Department of Transportation (Department) , either in the form of a certificate of public convenience and necessity issued pu rsuant to 49 U.S.C. §§ 41101 and 41102, or in the form of an exemption from the certificate requirement, such as those applicable to direct air carriers operating as air taxis under 14 CFR Part 298 or to indirect air carriers acting as air freight forward ers under 14 CFR Part 296. (This economic authority is in addition to any safety authority necessary under applicable Federal Aviation Administration (FAA) requirements.) Part 298 exempts qualified air2

taxis from section 41101, but only if they comply wi th the requ irements of Part 298, including the requirement that they remain citizens of the United States at all times. 1

Under 49 U.S.C. § 40102(a)(15), as amended by Vision 100

– Century of Aviation Reauthorization Act (P.L. 108

- 176, 117 Stat. 2490, Dec. 12, 2003), a “citizen of the United States” includes a corporation organized in the United States that 1) meets certain specified standards regarding the citizenship of its president, officers and directors, and holders of its voting interests and 2) is u nder the actual control of citizens of the United

States. 2 The Department has customarily looked at the totality of the circumstances to

determine whether a carrier was under the actual control of U.S. citizens. 3

Facts

VIH Cougar wa s a registered air taxi operating under 14 CFR Part 298. 4 It h eld Part 133 and 135 operating authority from the FAA. The air carrier provide d a diverse range of services including seismic monitoring, firefighting, and passenger and cargo operations using a fleet of helicopters. VIH Cougar’s headquarters was located in Bellingh am, Washington, and it maintained bases in Galliano, Louisiana, and Boise, Idaho. The air

carrier’s passenger and cargo operations we re primarily conducted from its Galliano operatin g base, while its seismic monitoring and firefighting ope rations we re primarily conducted from its Boise operating base.

From 2012 to the present , VIH Cougar’s ownership and management structure has undergone numerous changes. On March 12, 2012, when the Department issued an order to show cause why it should not issue an order finding that VIH Cougar did not meet the U.S. citizenship requirements set forth at 49 U.S.C. § 40102(a)(15), ownership was divided between VIH Western, LLC, and VIH USA, which owned 76 and 24 percent of VIH Cougar

, respectively. VIH Western was wholly owned by a U.S. ci tizen, while VIH USA was wholly owned by a Canadian co rporation that was in turn wholly owned by a

Canadian citizen

. T he Department tentatively found that VIH Cougar was not a U.S.

1 14 CFR 298.11. We also note that section 298.21 requires applicants for the exemption authority set forth in section 298.11 to certify that they are U.S. citizens.

2 S ection 40102(a)(15) states that a U.S. citizen corporation is one in which the president and at least two

thirds of the board of directors and other managing officers are citizens of the United States and at least 75 percent of the voting interest is owned or controlled by persons who are citizens of the United States. An

actual control test for citizens hip historically was applied by the Department before Vision 100’s

enactment.

3 See, e.g., In the Matter of the Citizenship of DHL Airways, Inc., n/k/a ASTAR Air Cargo, Inc. , Order

2004

- 5

- 10 at 6 (May 13, 2004) (assessment of actual control based on “tota lity of the circumstances”) , and at 8, quoting Acquisition of Northwest Airlines by Wings Holdings , Order 89

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- 51 at 5 (Sept. 29, 1989) (“control standard is a de facto one”).

4 After a n investigation, o n June 11, 2013, the Department made final its decision that VIH Cougar was not a U.S. citizen corporation and therefore cancelled the air carrier’s air taxi exemption authority. See In the Matter of the Cancellation of the Air Taxi Authority Issued to VIH Cougar Helicopters, Inc. , Order 2013

- 6

- 8 ( June 1 1 , 201 3). On August 7, 2013, VIH Cougar filed a Petition for Review of the Department’s final

decision with the U.S. Court of Appeals for the District of Columbia Circuit

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citizen because it was under the actual control of a Canadian citizen. 5 I n May 2012, in response to the Department ’s tentative findings

, VIH Cougar provided documentation to the Department indicating that it was restructuring its company. In June 2012, VIH Cougar provided a report stating that it had entered into a letter of intent with a U.S. citizen purchaser in an attempt to comply with the citizenship requirement. A majority of the ownership interest in VIH Cougar was subsequently sold to Turner Aviation Holdings, LLC (“Turner Aviation”) , a U.S. citizen

, pursuant to a Share Purchase Agreement dated June 27, 2012.

Nevertheless, a fter reviewing the previous changes to VIH Cougar’s management structure, the D epartment issued Order 2013

- 6

- 8 (June 11, 2013) (“Final Order”) , where

it determined that the changes made in response to the Department’s 2012 show cause

order we re insufficient and that the Canadian citizen still ha d the ability to exert

substantial influence over VIH Cougar ’s operations and its management. The Department found that VIH Cougar wa s under the actual control of VIH Group, a c itizen of Canada, and its Canadian citizen owner; and therefore wa s not a U.S. citizen under the statute or otherwise eligible for exemption authority under Part 298 of the Department’s

rules. 6 VIH Cougar’s operations while under the control of the Canadian citizen were in

vio lation of 49 U.S.C. § 41101 and 14 CFR Part 298.

Mitigation

VIH Cougar notes that t he Department first began its inquiry into VIH Cougar in April

2008

, but did not initiate the Show Cause proceedings until nearly four years later in

March 2012. VIH Cougar maintains that d uring this time, it cooperated fully with the Department’s review, including providing thousands of pages of responsive documents in

response to its numerous requests for information and detailed explanations of VIH Cougar’s corp orate structure, management, and operations. VIH Cougar also met with Department officials to further explain these matters and discuss the agency’s concerns

. VIH Cougar states that t hroughout this process, it explained to the Department that VIH Cougar, in accordance with the applicable statutory requirements, has always been 76

percent owned by U.S. citizens and all of its officers and directors have always been U.S.

citizens. VIH Cougar maintains that there were no voting or other similar agreements

5 See In the Matter of the Canc ellation of the Air Taxi Authority Issued to VIH Cougar Helicopters, Inc.

, Order 2012

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- 7 (Mar. 12, 2012).

6 On July 2, 2013, VIH Cougar surrendered its air carrier certificate. At that time, a majority of shares had been acquired by Turner Aviation, which is owned by Christopher G. Turner who also owns Construction Helicopter s , Inc. (“Construction”), a U.S. commercial helicopter operator based in Howell, Michigan. VIH Cougar is currently majority owned by Turner Aviation. Turner Av iation and Construction (including their present or former officers, directors, employees, shareholders, and affiliates), and any present or former officers, directors, employees, shareholders, and affiliates of VIH Cougar, are not and will not be the subj ect of Department enforcement proceedings in connection with this matter. VIH Cougar has represented to the Department that VIH Cougar has no assets

, and the Department will not take any a ction to pursue payment of the penalties assessed by this order aga inst Turner Aviation or Construction (their present or former officers, directors, employees, shareholders, and affiliates ), or against any present or former officers, directors, employees, shareholders, and affiliates of VIH Cougar

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p roviding any minority foreign shareholders with any rights to control the company, that all of VIH Cougar’s aircraft leases were arm’s length, commercial agreements that complied with the standard industry practices approved by the Federal Aviation

Adminis tration (“FAA”), and that, at all relevant times, VIH Cougar has operated under

the actual control of its U.S. citizen officers and directors. VIH Cougar states that d espite these facts, and in response to the Department’s stated concerns, it voluntarily agreed to

restructure its business operations beginning in 2011 and concluding in 2012. VIH Cougar notes that n otwithstanding its efforts, the Department issued its Final Order on
June 11, 2013 , finding that VIH Cougar is under foreign control.

As asserted in its filings in DOT

- OST

- 2012

- 0022

, VIH Cougar strongly disagrees with the Department’s Final Order

. VIH Cougar states that there is no evidence to support the Department’s determination that the new VIH Cougar has ceded control of nearly all aspects of its operations through the use of perv asive contracts and agreements to VIH Group or a Canadian c itizen. VIH Cougar asserts that it alone controls its management and strategic decision

- making, including all day

- to

- day ope rational decisions . VIH Cougar further asserts that there are no employment or contracting relationships between VIH Cougar , Turner Aviation, or Construction (or any affiliate thereof) and VIH Group or any Canadian citizen. VIH Cougar asserts that there are no ownership or management

interests by , or any other control or decision

- making relationships between

, any Canadian

citizen and Turner Aviation or Construction.

VIH Cougar notes that e ven before the Final Order was issued, it voluntarily began wind down efforts, including voluntarily surrendering its operating licenses. VIH Cougar has

since wound down its business after the Final Order was issued.

Decision

The Enforcement Office has carefully considered the information provid ed by V IH Cougar but continues to believe that enforcement action is warranted. The Office of Aviation Enforcement and Proceedings and V IH Cougar have reached a settlement of this matter in order to avoid litigation. VIH Cougar consents to the issuance of this order to

cease and desist from fut u re violations of 49 U.S.C. § 41101 and 14 CFR Part 298 and to

the assessment of $ 30 0,000 in compromise of potential penalties otherwise due and payable pursuant to 49 U.S.C. § 46301. Within five business days of the execution of this Consent Order, VIH Cougar agrees to withdraw its petition for reconsideration of the Department’s June 11, 2013, Final Order and to dismiss with prejudice its petition for review of that Final Order, VIH Cougar v. DOT, No. 13

- 1234, filed in the U.S. Court of Appeals for the District of Columbia Circuit.

This compromise assessment is appropriate considering the nature and extent of the violations described herein and serves the public interest. It repres ents a strong deterrent to future noncompliance with the statutory citizenship requirement and 14 CFR Part 298

.

This order is issued under the authority contained in 49 CFR Part 1.5

ACCORDINGLY,

1. Based on the above discussion, we approve this settlement a nd the provisions of this order as being in the public interest;

2. We find that VIH Cougar Helicopters, Inc.

, for a significant period of time

, engaged in interstate and foreign air transportation while it was under the actual control of foreign citizens and, therefore, was not a citizen of the United States as defined at 49 U.S.C. § 40102(a)(15) ;

3. We find that by engaging in the conduct described in ordering paragraph 2, above, VIH Cougar Helicopters, Inc.

, violated 49 U.S.C. § 41101 and 14 CFR Part 298 ;

4. We order VIH Cougar Helicopters, Inc.

, and all other entities owned or controlled by, or under common ownership and control with VIH Cougar Helicopters,

Inc.

, and its successors , affiliates, and assignees, to cease and desist from future violations of 49 U.S.C. § 41 101 and 14 CFR Part 298 . Failure to comply with this cease and desist provision shall subject VIH Cougar Helicopters, Inc.

, and its successors, affiliates, and assign ees to further enforcement action;

5. We assess VIH Cougar Helicopters, Inc

. , $ 30 0,000 in lieu of civil penalties that might otherwise be assessed for the violations described in ordering paragraph 3, above

. Subject to footnote 6 , t his amount shall be due and payable 30 days aft er the issue date of this order; and

6. We order VIH Cougar Helicopters, Inc.

, to pay the penalty through Pay.gov to the account of the U.S. Treasury. Payments shall be made in accordance with the

instructions contained in the Attachment to this order. Failure to pay the compromise penalty assessment as ordered shall subject VIH Cougar Helicopters, Inc., to an assessment of interest, penalty, and collection charges under the Debt Collection Act and to possible enforcement action for failure to comply with this order.

This order will become a final order of the Department ten days after its service date unless a timely petition for review is filed or the Department takes review on its own

initiative.

BY:

SAMUEL PODBERESKY

Assistant General Counsel for

Aviation Enforcement and Proceedings

An electronic version of this document is available at www.regulations.gov

.