Payment processing for on-board shopping could include a biometric two-factor authentication scheme with the new kit coming from Panasonic Avionics and Tascent

Panasonic Avionics admits to bribery, settles with DoJ

After years of investigation the US Department of Justice and Panasonic Avionics (PAC) agreed to a Deferred Prosecution Agreement (DPA), ending the prosecution of the company over bribery allegations. The agreement identifies several former PAC employees who knowingly participated in the schemes, mostly through illegal “consulting” contracts paid through a slush fund known as the “Office of the President Budget.” This fund was managed by then company President Paul Margis without sufficient oversight. Ultimately more than a million dollars were funneled to consultants who did no discernible consulting work, though they did steer business to the company or provide inside information on negotiations. There were also sales agents in Asia who were unwilling or unable to meet required due diligence requirements. These agents were fired and then rehired as subcontractors, avoiding the certification while maintaining the customer relationships.

Read More: Panasonic Unit Admits Accounting Offense (WSJ)

The good news for PAC is that the investigation is now essentially complete. The DOJ requires two years of external monitoring for compliance to ensure no future violations and the company will not be prosecuted criminally so long as it stays clean. The bad news is that the violations will cost PAC north of $280 million in fines paid to the DOJ (~$137mm) and the SEC (~$143mm). That exceeds the profits realized as a result of the bribery instances detailed in the filing; it is less clear what profits came from the illegal sales agents.

There are a couple points in the DPA that are interesting to consider.

  1. The agreement requires PAC to admit guilt. Unlike many such agreements this one leaves zero wiggle room for PAC to claim that it is innocent of the charges. Indeed, any claims of such during the next two years would be a violation of the agreement and could see the prosecution return.
  2. The agreement settles the case related to the company, but not the individuals. Multiple executives, sales agents, and 3rd party companies are implicated in the documents. All of them remain at risk of future prosecution absent separate negotiations.

On the plus side, unlike the United Airlines “Chairman’s Flight” that cost CEO Jeff Smisek his job, at least PAC profited from the deals at the time. For example,

Between April 2007, when negotiations began with Foreign Official concerning an offer of a consultant position at PAC, and March 2013, PAC earned $92,805,432 in profits (on more than $333 million in revenue) from Middle East Airline attributable to twelve programs subsumed under Amendment 2 for which Foreign Official had some involvement or influence, including the IFE retrofit and reconfiguration contracts and contracts for which NRE and STC costs were included.

The domestic incident was less fruitful for PAC, over a slightly shorter period of time.

Between April 2008 and March 2013, PAC earned $22,693,571 in profits attributable to business from Domestic Airline on three different programs for which Domestic Airline Consultant had some involvement or influence, including, for example, by serving as a member of Domestic Airline’s bid review committee.

PAC paid $875,000 and $825,000 in “consulting fees” in the foreign and domestic incidents, respectively, plus the handling fees to the third party company that facilitated the fraudulent contracts. Over five years another $7.2 million was funneled to agents in Asia, “improperly booked as commission payments…, when in fact they were payments to other sales agents who were otherwise ineligible to work with PAC.”

It will be interesting to see if criminal charges follow for the executives involved. Margis moved on to the role of Non-Executive Chairman of the digEcor Board of Directors in November 2017, despite the accusations hanging over him. The current position of others involved in the incidents is less clear.

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I've been covering inflight connectivity, loyalty and the passenger experience for more than a decade with hands-on experience to deliver unbiased analysis. You can connect with me on Twitter, Facebook, LinkedIn and .