OFTR^ ^

•"•^TK^"' ^ Orde r 2012-3- 7 Served : Marc h 12 , 201 2 UNITE D STATE S O F AMERIC A DEPARTMEN T O F TRANSPORTATIO N OFFIC E O F TH E SECRETAR Y WASHINGTON , D.C . Issue db y th e Departmen t o f Transportatio n o n th e 12' " da

y o f March , 201 2 I n th e matte r

o f th e cancellatio n o f

th e Ai r Tax i authorit y issue dt o VI H COUGA RHELICOPTERS , INC . pursuan t t o th e provision s o f

1 4 CFR298.2 4 Docke t DOT-OST-2012-002 2

ORDE RT O SHO W CAUS E Summar y B y thi s order , w e tentativel y fin dtha t VI H Cougar

Helicopters , Inc . ("VI H Cougar") , a n operatin g ai r taxi , i s unde r

th e contro l o f

Mr . Kennet

h Norie , aCanadia n citizen . Thi s findin g i s base do n th e totalit y o f th e circumstances , includin g th e operationa l an dmanageria l interrelationship s betwee n VI H Cougar

an dMr . Nori e and/o r

hi s wholly-owne dcompanie s (hereinafte r collectivel y referre dt o a s "VI H Group"). ! Therefore , b y thi s order , w e propos e t o conclud e that VI H Cougar

i s no t aU.S . citize n a s define di n 4 9 U.S.C . § 40102(a)(15 ) an dconsequently , propos e t o cance l it s ai r tax i authority pursuan t

t o 4 9 U.S.C . § 40109(f

) an d1 4 CF RPart

298 . Backgroun d O n Apri l 24 , 2008 , th e Departmen t initiate da

n investigatio n o f

VI H Aviatio n Grou p ("VIHAG") , a Canadia n compan y whic h own s aminority interes t i n VI H Cougar , aU.S . ai r carrier , an dwholly

own s Couga

r Helicopters , Inc . ("Cougar") , aCanadia n ai r carrier . Allegedly , VI H Cougar and/o r Cougar conducte dunlawfu l ai r

servic e operation s withi n th e Unite dStates . T o determin e whethe r an dt o what

exten t an y violation s o f

Federa l aviatio n statute s an dregulation s occurred , th e Departmen t

requeste ddetaile dinformatio n fro mVIHA G regardin g th e ai r service s provide db y Cougar , VI H Cougar , an dan y othe r VI H Grou p company. ^ VI H Cougar

i s aregistere dai r

tax i operatin g unde r

Part 29 8 o f ou r rule s an di t

hold s Part

13 3 an d Part 13 5 operatin g authority fro mth e Federa l Aviatio n Administratio n ("FAA") . Th e ai r carrie r provide s adivers e rang e o f service s includin g seismi c monitoring , firefighting , an dpassenge r an d 1 Mr . Norie' s wholl y owne dcompanie s includ e VI H Aviatio n Group , Ltd . ("VIHAG") ; VI H Helicopter s USA , Inc . ("VI H USA") ; Couga

r Aviation , Ltd . ("Couga

r Aviation") ; Cougar

Helicopters , Inc . ("Cougar") ; VI H Helicopter s Ltd. ; VI H Aerospace , Inc. ; an dKenlo r Investments , Ltd . ("Kenlo r Investments") . 2 Th e Departmen t

requeste dadditiona l informatio n fro mVI H Couga r o n Jul y 10 , 2009 , an dJul y 9 , 2010 . VI H Couga r file dadditiona l informatio n i n respons e t o th e Department' s investigatio n o n Jun e 20 , 200 8 ("Supplemen t 1") ; Novembe r

6 , 200 8 ("Supplemen t

2") ; Augus t

10 , 200 9 ("Supplemen t

3") ; Septembe r

30 , 201 0 ("Supplemen t

4") ; an d Novembe r

17 , 2011 , ("Supplemen t

5") .carg o operation s usin g aflee t of 9 helicopters . VI H Cougar' s headquaiter s i s locate di n Bellingham , Washington , an dit maintain s operatin g base s in Galliano , Louisiana , an dBoise , Idaho . Th e ai r carrier' s passenge r

an dcarg o operation s ar e primaril y conducte dfro mit s Gallian o operatin g bas e an dit s seismi c monitorin g an dfirefightin g operation s ar e primaril y conducte dfro mit s Bois e operatin g base . Ownershi p o f

VI H Cougar

i s currentl y divide dbetwee n VI H Western , LL C ("VI H Western" ) (7 6 percent ) an dVI H US A (2 4 percent) . VI H Wester n i s a n Idah o limite dliabilit y compan y wholl y owne db y Mr . Willia mSteeper , aU.S . citizen ; VI H US A i s a n Idah o corporatio n wholl y owne db y VIHAG , aCanadia n company . VIHA G i s owne db y Kenlo r Investments , whic h is , i n turn , solel y owne db y Mr . Kenneth Norie , aCanadia n citizen . VIHA G an dVI H US A ar e companie s that specializ e i n th e development , implementation , an doversigh t o f system s an dperson s necessar y for th e managemen t

an dadministratio n o f

helicopte r

operation s an drepai r

businesses. ^ VI H Cougar' s ke y managemen t an dtechnica l persoime l consis t of th e followin g individuals-. 4 Nam e Willia mSteepe r Bil l MacDonal d Larry Lippert Larry Kelle y Pete r Bowde n Liona l Munse y Art Lillar d Denni s Mattingl y Jud y Jone s Bil l Majea

u Position(s )

Presiden t an dDirecto r Genera l Manage r Assistan t Directo r

o f Operation s an dBusines s Developmen t

Manage r VFROperation s Manage r Directo r o f Operation s Chie f Pilo t Directo r o f Maintenanc e VFRMarketin g Manage r Hea dOffic e Manage r Safet y Manage r Statutor y Standar d I n orde r t o engag e directl y o r

indirectl y i n ai r

transportation , ai r

carrier s mus t

hol deconomi c authority fro mth e Department , eithe r i n th e for

mof acertificat e of

publi c convenienc e an d necessity issue dpursuan t t o 4 9 U.S.C . § § 4110 1 an d41102 , o r i n th e for

mo f a n exemptio n fro m th e certificat e requirement. ^ Part 29 8 o f ou r regulation s provide s an exemptio n t o qualifie dai r carrier s fro mth e requirement s o f holdin g acertificat e provided , amon g othe r things , th e ai r

carrie r i s acitize n o f

th e Unite dState s a s define di n 4 9 U.S.C . § 40102(a)(15)("th e Statute"). ^ Tha t sectio n define s a"citize n o f

th e Unite dStates " a s follows : (1 ) A n individua l wh o i s acitize n o f th e Unite dStates ;

^ Se e Supplemen t

3 , Exhibi t

8 , Matiagemen t

an dAdministrativ e Support Agreement , a

t 1 . 4 W. , Exhibi t

1,a t 7-8 . 5 5ee49U.S.C.§ § 4110 1 and40109(f) . 6 See H CF RPar t

298.1 1 an d1 4 CF RPar t

298.24 . .(2 ) A partnershi p eac h o f whos e partner s i s a

n individua l wh o i s acitize n o f th e Unite d States ; o r (3 ) A corporatio n o r

associatio n organize dunde r th e law s o f

th e Unite dState s o r

astate , th e Distric t

of Columbia , o r

aterritory o r

possessio n o f

th e Unite dStates , o f

whic h th e presiden t

an da t leas t two-third s o f

th e boar do f

director s an dothe r

managin g officer s are citizen s o f

th e Unite dStates , whic h i s unde r th e actua l contro l o f

citizen s of th e Unite dStates , an di n whic h a t leas t 7 5 percen t

o f th e votin g interes t

i s owne d o r controlle db y person s that ar e citizen s o f

th e Unite dStates . I n makin g th e determinatio n o f actual control , w e loo k a t th e totalit y o f

th e circumstance s surroundin g th e relationshi p betwee n th e ai r carrie r an dth e foreig n entit y o r entitie s involved . I

f a foreig n citize n i s abl e t o exercis e contro l ove r th e ai r carrier , the n i t

i s no t aU.S . citizen. ^ Ai r carrier s that

d o no t compl y with th e prerequisite s for exemptio n authority unde r Par t 298 , includin g th e citizenshi p requirement s discusse dabove , ar e no t eligibl e for

exemptio n authority . Therefor e aviolatio n o f

Part 29 8 i s als o considere daviolatio n o f 4 9 U.S.C . § 41101 . TENTATIV E DECISIO N Ou r revie w o f

th e informatio n provided , a s wel l a s informatio n availabl e publicly , identifie dvariou s relationship s betwee n VI H Cougar an dVI H Grou p tha t

indicat e tha t

actua l contro l o f

VI H Cougar doe s no t res t wit h U.S . citizens . Whil e th e Departmen t informe dVI H Cougar

o f ou r preliminar y findings , th e company ha s no t presente devidenc e that adequatel y addresse s ou r concern s an d alleviate s th e abilit y o f

non-U.S . citizen s t o exert actual contro l ove r

VI H Cougar

an dit s operations. 8 Consequently , th e Departmen t ha s determine di t

necessar y t o initiat e formal proceeding s i n thi s matte r t o giv e intereste dpersons a n opportunity t o sho w caus e wh y w e shoul d no t adop t a s fina l thes e tentativ e finding s an dconclusions . Response s t o thi s orde r shal l b e du e 2 1 day s fro mth e dat e o f

it s issuance ; replie s shal l b e du e 1 4 day s after responses . A . Applicatio n o f

statutor y numerica l test s I n determinin g whethe r

acompan y meet s th e statutory definitio n o f aU.S . citizen , th e Departmen t applie s that

definitio n t o eac h laye r

of a n ai r carrier' s ownershi p s o that eac h successiv e "parent " entity mus t

b e foun dt o b e eithe r

aU.S . citize n o r

not. ^ In case s where , a s here , ther e ar e severa l layer s o f ownershi p b y differen t

entities , informatio n o n th e citizenshi p o f eac h entity mus t

als o b e provide dunti l th e ultimat e individua l owner s ar e reached . Initially , VI H Cougar

wa s organize dunde r

th e law s o f

th e Stat e o f

Idah o o n Januar y 5 , 1995 , a s Wester n Airways , Inc . ("Western Airways") . At th e tim e o f

it s incorporation . Wester n Airway s wa s wholly-owne db y Mr . Ric k L . Wyman , wh o als o serve da s th e company' s sol e directo r an d president . O n Jun e 30 , 2003 , Mr . Wyma n sol d7 6 percen t o f hi s interes t

i n Western Airway s t o VI H Western , a n Idah o limite dliability compan y wholl y owne db y Mr . Steeper , an dth e remainin g 2 4 percen t

o f hi s interes t

i n Wester n Airway s t o Cougar , aCanadia n registere dai r carrie r wholly

owne db y Mr . Norie . O n Januar y 24 , 2004 , Cougar assigne dan dtransferre dit s interes t i n VI H Se e Orde r 2004-5-10 , at

8 ; Orde r 89-9-51 , a

t 5 ; Orde r 93-3-17 , a

t 19 ; Orde r

89-12-41 , at

10 . Se e lette r date dOctobe r

6 , 2011 , addresse dt o VI H Couga r fro mth e Department . Se e Orde r 2006-12-23 , issue dDecembe r 27 , 2006 , a

t 14 .Couga

r t o Cougar

Aviation , aCanadia n compan y owne db y Mr . Norie . I n Augus t 2004 , VI H Wester n acquire dCougar Aviation' s interes t

i n VI H Cougar . Subsequently , i n Augus t 2006 , VI H Couga r transferre d2 4 percen t

of it s share s t o VI H USA , a n Idah o corporatio n ultimatel y owne db y Mr . Norie , aCanadia n citizen . VI H Cougar' s ownershi p ha s remaine dunchange dsinc e 2006 . A s previousl y stated , th e majority o f th e company' s interes t

i s owne d(7 6 percent ) b y VI H Western , whic h i s stil l wholl y owne db y Mr . Steeper . Th e remainin g 2 4 percen t of VI H Couga

r i s hel db y VI H USA , whic h i s ultimatel y owne db y Mr . Norei . In addition , VI H Cougar' s president , it s boardo f directors , an dal l othe r managin g officer s ar e citizen s o f th e Unite dStates , with th e exceptio n o f Mr . Bil l MacDonald , a Canadia n citizen . I n ligh t o f th e above , w e tentativel y conclud e that VI H Cougar

meet s th e numerica l requirement s o f th e statute . Th e questio n of th e relationship s betwee n VI H Cougar' s ke y managemen t an dtechnica l persorme l an dVI H Grou p is , however , relevan t t o th e issu e o f

whethe r VI H Cougar

i s actuall y controlle db y U.S . o r

foreig n citizens . W e discus s thes e relationship s i n th e followin g sectio n o n actual control . B . Actua l contro l I n determinin g actua l control , th e Departmen t review s th e totality o f

th e circumstance s surroundin g th e relationshi p betwee n th e ai r carrie r an dth e foreig n entity o r entitie s involved . N o singl e facto r dictate s afindin g o f

foreig n o r

domesti c control ; rather , al l factor s ar e reviewe di n combinatio n t o determin e aforeig n entity' s ability t o influenc e th e action s o f a n ai r carrier . 10 Employmen t

Relationship s an dAffiliation s Ou r revie w o f

th e recor dindicate s that ther e ar e variou s employmen t relationship s an daffiliation s betwee n Mr . Steepe r

an dothe r

ke y managemen t

persoime l o f

VI H Cougar

o n th e on e hand , an d Mr . Nori e an dVI H Grou p o n th e othe r hand , that

provid e non-U.S . citizens th e ability t o exert overridin g influenc e an dcontro l ove r VI H Cougar

an dit s operations . Accordin g t o publicl y availabl e information , Mr . Steepe r i s a n attorne y license dt o practic e i n Britis h Columbia , wher e hi s principa l office s ar e located . Base do n th e record , Mr . Steepe r ha s serve da s counse l t o VI H Grou p an dMr . Nori e sinc e 1993.1 1 Mr . Steeper , VI H Cougar' s owne r an dpresident , an dMr . Norie , VI H Group' s owner , hav e othe r busines s relationship s that exten d beyon dthei r

conmio n interes t

i n VI H Cougar . Fo r

instance , Mr . Steepe r

represente dMr . Nori e durin g th e purchas e o f

VI H Cougar , an dMr . Steepe r continue s t o represen t

Mr . Nori e i n anumbe r o f relate dcompan y matters , a s indicate di n variou s corporat e filing s directin g tha t correspondenc e for Mr . Nori e b e addresse dt o th e car e o f Mr . Steeper . 1

2 i n fact , Mr . Steepe r

concede s that

h e continue s t o provid e lega l service s t o VI H Group , althoug h h e mamtain s tha t h e i s abl e t o bifurcat e

1 0 Se e Orde r

93-7-26 , issue dJul y 15 , 1993 , a t 7 ; Orde r 91-1-41 , issue dJanuary 23 , 1991 , at 9 ; Ho w t o Becom e a Certificate dAi r

Carrier , availabl e at

http://ostpxweb.dot.gov/aviation/index.html . a t 15 . 1 1 Se e Supplemen t

3 , Exhibi t

1 , a t 15 . ' 2 See , fo

r example . Supplemen t

3 , Exhibi t

4 , an dExhibi t

6(c) .hi s dutie s an dresponsibilitie s betwee n hi s rol e a s counse l t o VI H Grou p an dhi s rol e a s owne r an d presiden t o f VI H Cougar . 1 3 Th e recor dals o show s that , i n additio n t o servin g a s outside counse l t o VI H Grou p sinc e 1993 , Mr . Steepe r

i s employe da s adirector , vic e president , an dsecretary o f VI H USA , an da s secretary o f GA O FB O Service , hic . ("GA O FB O Services") , a n Idah o corporatio n o f

whic h Mr . Nori e i s President.'" ^ Mr . Steepe r wa s als o identifie da s th e secretary o f Cougar i n corporat e filing s with th e Stat e o f Alaska , 1 ^ an dcorporat e filing s wit h th e Stat e o f

Idah o sho w that

Mr . Steepe r

previousl y serve da s presiden t

o f VI H USA.' ^ In addition , stat e record s als o indicat e tha t Mr . Nori e previousl y serve da s presiden t

o f VI H Cougar

an da s vic e presiden t

o f VI H Western . 1

^ Wit h respec t t o VI H Cougar' s ke y managemen t an dtechnica l personnel , Mr . Steepe r maintain s that , with th e exceptio n o f

hi s rol e a s adirector , vic e president , an dsecretary a t VI H USA , an dMr . Bil l MacDonald' s prio r

employmen t

a t Couga r a s it s Genera l Mange r

o f U.S . Operations , non e o f it s ke y persoime l ha s eve r

bee n employe db y VI H Group . 1 ^ Ou r revie w o f

th e informatio n available , however , indicate s otherwise . I n document s file dwit h th e Stat e o f Idah o i n 200 4 followin g th e acquisitio n o f VI H Cougar

b y VI H Wester n an dCougar , th e addres s liste dfor

Mr . Phili p Kemp i s th e sam e addres s a s VIHAG' s hea doffice s i n Canada . 19 At th e time , Mr . Kemp wa s on e o f thre e director s a

t VI H Cougar , a s wel l a s genera l manager , vic e president , an dsecretary o f VI H Cougar . I n addition , corporat e filing s with th e Stat e o f Idah o sho w that , a t thi s time , Mr . Kemp wa s als o servin g a s secretary o f VI H USA , althoug h thi s informatio n i s no t reflecte do n th e resum e VI H Cougar provide dfor

Mr . Kemp.2 0 Similarly , whe n Mr . Ric k Bur t replace dMr . Kemp a s director , vic e president , an dgenera l manage r o f VI H Cougar , hi s addres s wa s liste da s th e sam e addres s a s VIHAG' s hea doffice s i n Canad ai n corporat e filing s with th e Stat e o f Idaho.2 1 Additionally , document s provide dfro mVI H Cougar an dCougar

identif y Mr . Charle s Hodgins , wh o presentl y serve s a s Chie f Financia l Officer

("CFO" ) o f

VIHAG , GA O FB O Services , an dVI H USA , a s agen t

for both VI H US A an dVI H Cougar.2 2 Mr . Hodgin s i s als o identifie da s VI H Cougar' s secretar y an dtreasure r i n filing s with th e Stat e o f Louisiana.2 3 Furthermore , Mr . Larry Lippert , VI H Cougar' s Assistan t Directo r o f Operation s an dManage r o f Busines s Developmen t

an dit s registere dagen t

i n Louisiana , i s als o identifie da s th e registere dagen t o f GA O FB O Service s an dVI H US A i n corporat e filing s with th e Stat e o f Louisiana . Finally , Mr . Bil l MacDonal dha s acte da s VI H Cougar' s genera l manage r sinc e 2007 , whil e at

th e sam e tim e h e wa s 1- ^ Se e Supplemen t

3 , Exhibi t

1 , a t 15-16 . 1 4 Id. , Exhibi t

1 , at 6 an d17 . Se e als o GA O FB O Services ' 201 0 Annual Report filedwit h th e Stat e o f

Idaho , VI H USA' s 201 0 Annual Report filedwit h th e Stat e o f

Idaho , an dVI H USA' s Annua l Report date dApri l 8 , 2011 , filedwit h th e Stat e o f

Louisiana . 1 ^ Se e Cougar' s 201 0 Biennia l Report filedwit h th e Stat e o f

Alaska . 1 6 Se e VI H USA' s 200 4 Annua l Report filedwit h th e Stat e of

Idaho . 1 ' Se e 200 4 Idah o Annua l Report an dVI H Cougar' s registratio n wit h th e Stat e o f

Louisian adate dJanuary 10 , 2008 . 1 ° Se e Supplemen t

3 , Exhibi t

1 , at 7- 8 an d17 . Se e als o Supplemen t 1 , Exhibi t

15 , pg . 811 , para . 4 . 1 9 Se e VI H Helicopter s USA , Inc. , 200 4 Idah o Annua l Report an dVI H Western , LLC , 200 4 Idah o Annua l report . 2 0 Se e VI H Helicopter s USA , Inc. , 200 4 Idah o Annua l Report , an dSupplemen t 3 , Exhibi t

2(a) . 2 1 Se e VI H Couga

r notic e regardin g chang e o f officers , dat e Novembe r

28 , 2008 , file dwit

h th e Stat e o f

Idaho . 2 2 Se e Supplemen t

3 , Exhibi t

5(n) , a t 7-8 . Se e Als o Louisian aStat e registratio n informatio n fo r GA O FB O Service s an dVI H Cougar . 2 3 Se e VI H Cougar' s registratio n wit h th e Stat e o f

Louisian adate dJanuary 10 , 2008 .employe db y VI H Grou p an dwa s servin g a s genera l manage r o f U.S . operation s a

t Cougar , an d unti l hi s recen t

hirin g i n May 2010 , wa s workin g for VI H Cougar

unde r acontrac t

with VI H Group , hi s employer.2 4 Th e Departmen t

ha s lon g maintaine dthat asubstantia l ability t o exercis e contro l b y aforeig n interes t exist s i f ther e ar e "pervasiv e financial an demploymen t relationship s wit

h th e [foreign ] interest,"2 5 o r

wher e th e U.S . citize n stockholders , officers , an ddirector s ar e employee s o f othe r corporation s controlle db y th e foreig n investor.2 6 Give n th e extensiv e pas t an dcurren t

association s betwee n VI H Grou p an dMr . Steepe r an dothe r

member s of

VI H Cougar' s ke y management , w e canno t conside r Mr . Steepe r

o r an y of th e othe r ke y personne l identifie di n th e previou s paragrap h a s independen t

U.S . citizen s for

th e purpos e o f

th e Statute . Therefore , w e tentativel y fin dtha t U.S . citizen s d o no t

maintai n day-to-day contro l of VI H Cougar

an dit s operation s an dtha t VI H Cougar i s no t independen t

fro mVI H Group . Agreements/Provisio n o f Asset s VI H Cougar' s dependenc e o n VI H Grou p provide s anothe r avenu e o f

foreig n control . Accordin g t o th e record , VI H Group' s experienc e an dpersoime l wer e relie dupo n b y VI H Cougar an dsolicite d for th e developmen t

o f VI H Cougar' s IF

Roperations.2 7 Mr . Steepe r state s that

VI H Cougar procure s technica l support an dmaintenance , training , cre w support , an dadministrativ e support service s fro mVI H Grou p pursuan t t o aMaste r

Helicopte r

Technica l Support

Service s Agreemen t an daMaste r

Managemen t

an dAdministratio n Service s Agreemen t (th e "Support

Service s Agreements").2 8 H e maintain s that th e Support

Service s Agreement s wer e negotiate dan dexecute d a t arm' s lengt

h an dthat the y contemplat e afee-for-servic e structur e o n an individua l purchas e orde r basis , ar e non-exclusiv e an dnon-bindin g an dca n b e cancele da t an y time , an dthat

h e manage s an d supervise s th e company' s day-to-da y activities , includin g overseein g al l busines s an dstrategi c initiatives , marketing , huma n resources , an dfinancial an daccountin g matters . Unde r thes e agreements , VI H Cougar dr y lease s al l o f

it s aircraf

t fro mVI H Group , a s wel l a s tools , inventory , an dhange r

space . VI H Grou p als o provide s VI H Cougar managemen t

o f importan t executiv e functions , suc h a s boo k keeping , accountin g an dfinancia l statemen t services , financial managemen t

services , huma n resource s an dbenefit s management , strategi c plannin g services , insuranc e services , an dinformatio n technolog y services . VI H Grou p ha s also , o n occasion , subcontracte dwor

k t o VI H Cougar

an dprovide di t

with affiliate party loan s t o b e use dfor workin g capital , developmen t

cost , an dasse t

purchases.2 9 VI H Cougar als o state s tha t

it ha s contracte d employee s t o Cougar . Althoug h VI H Cougar

contend s that

th e agreement s betwee n th e partie s ar e th e resul t of arm's

lengt h negotiations , ou r

revie w ha s foim

dthat , i n man y cases , formal agreement s betwee n th e 2 4 Mr . MacDonal dbega n hi s contrac t employmen t

wit h VI H Cougar

in February 2007 , followin g th e resignatio n o f Mr . Ric k Burt . Accordin g to VI H Cougar , Mr . MacDonal doperate dunde r Mr . Steeper' s contro l an dsupervisio n whe n servin g unde r

contrac t a s th e company' s General Manager . 2 5 Se e Orde r

1993-7-26 , a

t 7-8 . 2 6 Se e Orde r

2007-12-11 , at

6 . 2 ' Se e Supplemen t

3 , Exhibi t

1 , a t 12 . 2 8 Se e Supplemen t

3 , Exhibi t

1 , at 13 , 2 9 Se e Supplemen t

4 , lette r date dSeptembe r

30 , 2011 , a

t 11 .partie s wer e no t documente dand , fo

r thos e agreement s tha t

wer e documented , purchas e order s for th e provisio n of

variou s service s wer e not . I n fact , VI H Cougar di dno t provid e man y of

th e agreement s it

reference s in it s response s t o th e Department' s request s for information . Moreover , a propose dsal e agreemen t

that wa s provide ddurin g th e cours e o f ou r revie w confirm s th e lac k o f a n arms-length relationshi p betwee n th e VI H Cougar an dCougar

i n that i t require s th e partie s t o firs t documen t th e variou s informal agreement s betwee n th e ai r carrier s for

th e provisio n o f

assets , personnel , an dservice s prio r t o closin g o n th e sal e agreement.3 0 Th e Departmen t

ha s previousl y considere dpartnership s betwee n domesti c an dforeig n ai r carriers , an dha s no t

foun dsuc h relationship s indicativ e o f undu e foreig n controp l provide dthat th e U.S . citize n shareholder s maintai n thei r independenc e an dday-to-da y contro l o f th e ai r carrie r and , i n suc h cases , operation s an dbusines s relationship s ar e maintaine dat arm' s length.3 2 Give n th e lac k o f documentatio n evidencin g aformal relationshi p betwee n th e VI H Cougar an dVI H Group , an d considerin g Mr . Steeper' s rol e a s VI H Group' s outside counsel , i t doe s no t

appear tha t th e contractua l relationship s betwee n VI H Cougar an dVI H Grou p wer e negotiate da t arm' s lengt

h o r tha t th e day-to-da y operation s o f th e tw o companie s ar e conducte da t arm' s length . Moreover , whil e man y o f th e contractua l relationship s betwee n VI H Grou p an dVI H Cougar appea r o n pape r t o b e non-bindin g an dnonexclusive , th e scop e an dscal e t o whic h thes e agreement s ar e employe dar e relevan t

i n ou r determinatio n o f

actua l control . Despit e Mr . Steeper' s assertio n that VI H Cougar' s us e o f

lease s t o acquir e th e asset s necessar y t o conduc t operation s i s astrategi c decisio n whic h position s th e ai r carrie r t o adequatel y respon dt o marke t demand , w e tentativel y fin d tha t VI H Cougar' s extensiv e relianc e an ddependenc y o n VI H Grou p i n thi s regar dprovide s anothe r mean s for non-U.S . citizen s t o exert contro l ove r

VI H Cougar

an dit s operations . Furthermore , whil e i t

i s permissibl e for

aU.S . ai r

carrie r t o contrac t

for th e provisio n o f

flight crew s o r th e provisio n o f

aircraf t t o supplemen t

it s operations , w e hav e previousl y foun dthat th e provisio n o f both aircraf

t an dcrew , eve n if

b y separat e agreement , b y asingl e compan y o r entitie s unde r commo n contro l woul dconstitut e a n engagemen t

i n ai r transportatio n b y th e aircraft/cre w lessor.3 3 Likewise , FA A regulation s generall y prohibi t foreig n ai r

carrier s fro mwe t

leasin g (i.e. , providin g lega l possessio n o f

aspecifi c aircraf

t an dat leas t on e cre w member ) aircraf t t o U.S . ai r

carriers.3 4 T o th e exten t

that VI H Grou p i s unlawfull y engage di n we t lease s i n connectio n wit h th e operatio n o f domesti c U.S . service s b y VI H Cougar , VI H Grou p als o woul db e engagin g i n prohibite d cabotag e operations.3 5 Discrepancie s A s afinal matter , w e not e that durin g th e cours e o f

ou r review , w e discovere danumbe r o f discrepancie s i n th e informatio n VI H Couga r provided . Fo r

example , althoug h i n it s Jun e 20 , 2008 , respons e t o th e Department' s Apri l 24 , 2008 , informatio n request , VI H Cougar assert s that 3 0 Se e Supplemen t

2 , Stoc k Purchas e Agreement , at

12 , sectio n 6.11 . 3 1 Se e Docke t

DOT-OST-2003-15759 , Withdrawa l o f Propose dRulemaking , date dDecembe r 5 , 2006 , at

17-19 . 3 2 Se e Orde r

2006-12-23 , a

t 1 . 3 3 5'e e Orde r 91-2-6 . 3 4 Se e 1 4 CF R135.25(d ) an d119.53(b) . 3 5 5e e 4 9 U.S.C . §41703(c) .Mr . Steepe r i s th e presiden t

o f VI H Cougar , corporat e filing s wit h th e Stat e of

Louisian aidentif

y Mr . Nori e a s presiden t

o f VI H Cougar.3 6 Moreover , i n astatemen t provide db y Mr . Steepe r i n respons e t o th e Department' s Jul y 10 , 2009 , informatio n request , Mr . Steepe r contend s that Mr . Nori e ha s neve r

bee n a n officer o r directo r o f VI H Westem.3 7 However , informatio n file dwith th e Stat e o f

Idah o show s that

Mr . Nori e serve da s vic e presiden t o f VI H Wester n i n 2004.3 8 Also , i n hi s declaration , Mr . Steepe r contend s that

h e i s no t an officer

of Cougar . 39 However , informatio n provide dt o th e Stat e o f

Alask aidentifie dMr . Steepe r a s th e secretary of

that company.4 0 Further , i n VI H Cougar' s mos t

recen t submissio n o f

informatio n t o th e Department , th e compan y states , "Mr . Steepe r

ha s not been , no r

i s now , a

n employe e of

VIHA G o r

any affiliate."4 1 However , corporat e filing s provide dt o th e Stat e o f Idah o sho w that

Mr . Steepe r

previousl y serve da s presiden t o f VI H USA , asubsidiary o f VIHAG.4 2 i n addition , on e documen t submitte dt o th e Stat e o f Alask a identifie dMr . Steepe r

a s secretary o f

Cougar , an dwa s signe db y Mr . Steepe r i n hi s rol e a s notary an dsolicitor.4 3 VI H Cougar

contend s that

eac h o f th e abov e discrepancie s ar e attributabl e t o clerica l filin g errors , an dthat a s aresult , Messrs . Nori e an dSteepe r wer e erroneousl y identifie da s holdin g th e aforementione dpositions . W e tenativel y fin dthat th e frequenc y o f

th e reporte d"clerica l errors " diminishe s th e credibility of Mr . Steepe r

an dVI H Cougar . TENTATIV E CONCLUSIO N I n ligh t o f th e above , w e tentativel y conclud e tha t upo n revie w o f

th e record , publicl y availabl e information , an dth e totality o f th e circumstances , VI H Cougar i s no t aU.S . citize n a s define di n 4 9 U.S.C . §40102(a)(15 ) an dconsequently , propos e t o terminat e it s ai r tax i authority pursuan t

t o Part 298.24(e ) o f

ou r rule s an dsectio n 40109(f) . W e not e that

VI H Cougar

ha s requeste dthat

i t b e afforde dth e opportunity t o reques t confidentia l treatmen t for th e informatio n it

ha s provide di n th e cours e o f th e Department' s revie w prio r t o publi c disclosur e o f

thi s information . T o affor dintereste dpartie s promp t acces s t o th e confidentia l documents , w e wil l gran t immediat e interi macces s t o al l document s provide db y VI H Cougar t o counse l an doutsid e expert s for intereste dpartie s wh o fil e appropriat e affidavit s with th e Departmen t

i n advanc e unti l suc h tim e that w e hav e receive dan drule do n amotio n t o withhol d informatio n fro mpubli c disclosure . ACCORDINGLY , 1 . W e direc t

al l intereste dperson s t o sho w caus e wh y w e shoul dno t issu e a n orde r findin g that VI H Cougar

Helicopters , Inc. , doe s no t mee t th e U.S . citizenshi p requirement s se t fort h i n 3 6 Se e VI H Cougar' s registratio n wit h th e Stat e o f

Louisian adate dJanuar y 10 , 2008 . 3 7 Se e Supplemen t

3 , Exhibi t

1 , a t 5 . 3 8 5e e VI H Western' s 200 4 Idah o Annual report . 3 9 Se e Supplemen t

3 , Exhibi t

1 , a t 17 . 4 0 SeeCouga r

Helicopter' s 201 0 Alask aBiennia l Report . 4 1 Se e Sept . 30 , 2010 , lette r a t 5 . 4 2 Se e VI H Helicopter s USA , Inc. , 200 4 Idah o Annual Report an dVI H Western , LLC , 200 4 Idah o Annua l report . 4 3 Se e Cougar

201 0 Biennia l Repor t

filedwit h th e Stat e o f

Alaska .4 9 U.S.C . § 40102(a)(15 ) an drevokin g it s existin g exemptio n authority a s a n ai r tax i operato r pursuan t t o 4 9 U.S.C . § 40109(f

) an d1 4 CFRPar

t 298.4 4 2 . W e wil l gran t

immediat e interi macces s t o al l document s provide db y VI H Cougar Helicopters , Inc. , t o counse l an doutsid e expert s for intereste dpartie s wh o fil e appropriat e affidavit s wit h th e Departmen t

i n advanc e unti l suc h tim e that w e hav e receive dan drule do n amotio n t o withhol d informatio n fro mpubli c disclosure . Moreover , a t th e Department' s Docket s facility , suc h partie s wil l b e permitte dt o mak e copie s o f th e exhibit s for

us e b y persons wh o hav e file dconfidentiality affidavits . W e als o gran t interi macces s t o an y subsequen t material s tha t

may b e file di n thi s cas e unde r aRul e 1 2 Motio n t o counse l an doutside expert s for intereste dpartie s wh o fil e appropriat e affidavit s with th e Departmen t i n advance . a . W e expec t

al l affidavit s t o state , a

t aminimum , that

(1 ) th e affiant

i s counse l for

a n intereste d party o r an outsid e independen t

expert providin g service s t o suc h aparty ; (2 ) th e affiant wil l us e th e informatio n onl y for

th e purpos e o f

participatin g i n thi s proceeding ; an d(3 ) th e affiant wil l disclos e suc h informatio n onl y t o othe r person s wh o hav e file davali daffidavi t i n Docke t

DOT-OST-2012

- 0022 . Affiant s an dintereste dpartie s mus t understan dan dagre e that an y pleadin g o r

othe r filin g that include s o r

discusse s informatio n containe di n th e covere ddocument s mus t itsel f b e accompanie db y aRul e 1 2 Motio n requestin g confidentia l treatment . Affidavit s mus t b e file di n Docke t DOT-OST-2012-002 2 with th e Departmen t o f Transportatio n Dockets , 120 0 Ne w Jerse y Ave. , SE, Roo mW12-140 , Washington , D.C . 20590 . b . Affiant s havin g file daffidavit s may examin e th e document s a t th e Departmen t

o f Transportatio n a

t th e Docket s location . Affiant s mus t presen t astampe dcop y o f

th e affidavi t

file d with th e Departmen t

o f Transportatio n befor e examinatio n o f th e documents . Immediatel y afte r th e completio n o f

an y judicia l revie w o f

ou r fina l decisio n i n thi s docke t

or , i f ther e i s n o petitio n for judicia l review , th e expiratio n o f th e 60-da y perio dwithi n whic h aperso n ma y petitio n for

judicia l review , al l person s wh o hav e file dconfidentiality affidavit s i n thi s proceedin g ar e hereb y directe dt o fil e afurthe r

affidavi t statin g that

al l copie s o f

th e applicants ' confidentia l material s hav e bee n destroye do r

returne dt o th e applicants . 3 . W e direc t

an y intereste dperson s havin g objection s t o th e issuanc e o f a n orde r makin g fina

l an y o f th e propose dfinding s o r conclusion s se t

fort h her e t o fil e the mwit h Departmen t

o f Transportatio n Dockets , 120 0 Ne w Jerse y Avenue , SE, Roo mW12-140 , Washington , D.C . 20590 , i n Docke t DOT-OST-2012-002 2 an dserv e the mupo n al l persons liste di n Attachmen t A n o late r tha n 2 1 day s afte

r th e servic e dat e o f

thi s order ; answer s t o objection s shal l b e file dn o late r tha n 1 4 day s thereafter . 4 . I f timel y an dproperl y supporte dobjection s ar e filed , w e wil l accor dfull consideratio n t o th e matter s o r issue s raise db y th e objection s befor e w e tak e furthe r action.4 5 5 . I n th e even t

that n o objection s are filed , w e wil l conside r al l further

procedura l step s t o b e waive dan dw e wil l ente r

a n orde r makin g fina

l ou r tentativ e finding s an dconclusions . 4 4 T o allow fo

r a n orderl y shutdow n o f VI H Cougar' s curren

t ai r tax i operations , w

e propos e tha

t an y action revoking the company' s ai r tax i authorit y wil l no t becom e effective unti

l the 91s t da y afte r servic e o f the fina l orde r i n thi s case . 4 5 Sinc e w e hav e provide dfo r th e filin g o f objection s t o this order , w e wil l no t entertai n petitions fo

r reconsideration .1 0

6 . W e wil l serv e acop y o f thi s orde r

o n th e person s liste di n Attachmen t A . 7 . W e wil l publis h asummary o f thi s orde r

i n th e Federa l Register . By :

SUSA N L . KURLAN D Assistan t Secretary for Aviatio n an dInternationa l Affair s A n electroni c versio n o f

thi s documen t

i s availabl e o n th e Worl dWid e We b at : http://'\vw\v . regulations , so vAttachmen t A SERVIC E LIS T FO R VI H COUGA RHELICOPTERS , INC . DAVI D M NADLE R DAVI D Y YAN G COUNSE L T O VI H COUGA R HELICOPTER S IN C DICKSTEI N SHAPIR O LL P 182 5 EY E STREE T NW WASHINGTO N D C 20006-540 3 PETE RLYNC H AGC-30 0 ASS T CHIE F COUNSE L FO RENFORCEMEN T FEDERA L AVIATIO N ADMINISTRATIO N 80 0 INDEPENDENC E AV E S W WASHINGTO N D C 2059 1

WILLIA M J WEBE R CERTIFICATIO N SECTIO N MANAGE R FA A AFS-90 0 4500 5 AVIATIO N DRIV E SUIT E 13 1 DULLE S V A 2016 6 WILLIA M STEEPE R PRESIDEN T VI H COUGA RHELICOPTER S IN C P O BO X 87 2 BELLINGHA M WASHINGTO N 9822 7 RO Y HARDI E AVIATIO N SAFET Y INSPECTO R FEDERAL AVIATIO N ADMINISTRATIO N