FAA $3.3 M civil penalty catalyst for warning

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 FAA Proposes $3.3 Million Civil Penalty Against The Hinman Co.

FAA alleges that real estate company used its aircraft for timeshare

Charges alleged to exceed Part 91 limits

Case catalyst for need to adhere to complex rules

 

WASHINGTON–The U.S. Department of Transportation’s Federal Aviation Administration (FAA) proposes a $3.3 million civil penalty against The Hinman Co. of Portage, Michigan, for conducting hundreds of commercial aircraft operations in violation of the Federal Aviation Regulations, including failing to hold the required operator certificate for the flights being performed.

The FAA alleges that Hinman, through subsidiary Hincojet LLC, operated a Beechcraft Beechjet 400A and a Hawker 900XP aircraft. Hinman entered into multiple aircraft timeshare agreements for use of these aircraft.

Under Part 91 of the Federal Aviation Regulations, Hinman was allowed to charge certain expenses for each flight under the timeshare agreements, including fuel, oil, lubricants, and other additives, and an additional charge equal to 100 percent of the costs for fuel, oil, lubricants, and other additives used for each flight. Hinman, however, charged expenses exceeding these allowances for 850 flights and, as such, was required to conduct the flights in accordance with regulations applicable to commercial operations, the FAA alleges.

Furthermore, the FAA alleges that on multiple occasions, Hinman double-billed timeshare clients for various legs of trips. FAA investigators found that on Sept. 30, 2015, Hinman billed a client for a trip aboard its Hawker aircraft from Connecticut to North Carolina and then to Florida. On the same day, the company billed another client for a trip aboard the same aircraft that included multiple stops on a round-trip from Kalamazoo to Detroit, Indiana, Illinois and back to Kalamazoo. The FAA alleges the iiaircraft was incapable of conducting all of those flights in a single day.

The FAA alleges that because it was charging more than the expenses allowed under Part 91, Hinman should have been operating these flights under Part 135, which applies to commercial operations. As a result, Hinman failed to meet the FAA’s Part 135 requirements for record keeping, including pilot records and load manifests, for each flight. The company also had no Part 135 training program in place, and the pilots operating the flights were not authorized to conduct the flights under Part 135, the FAA alleges.


The Hinman Company was incorporated in 1972. It develops, manages, leases, and currently services over 3 million square feet of properties. The Michigan real estate firm employs over 75 professionals in the various business skills needed to support this venture.

Its portfolio is national in scope; so, it has a subsidiary named Hincojet, LLC. Dun & Bradstreet lists that the subsidiary’s industries is “real estate agents and managers” with 2 employees and $110,000 in annual revenue. Its address is the same as its parent. It has a hangar at the Kalamazoo/Battle Creek International Airport. The FAA records indicate that the subsidiary own a Beechcraft Beechjet 400A and a Hawker 900XP aircraft.

 

 

 

 

 

 

WITH THAT BACKGROUND SET, THERE ARE TWO IMPORTANT LESSONS TO BE LEARNED FROM THIS CASE

 

  • FAR 91 is an arbitrary, economic rule-YES

The FAA alleges that Hinman and its associated companies have, by not adhering to the limited privileges of 14 CFR Part 91, that it neither had Part 135 authority nor met those rules. By violating the FARs, Hinman is liable for $3,300,000 in civil penalties unless it can prove otherwise to the FAA. To say that the requirements as to legal structure, permissible holding out, allowable cost-sharing are collectively complex, intricate, involved,  convoluted, tangled, impenetrable and labyrinthine would be an understatement. If that is not bad enough, there are tax and insurance consequences attached to how a company or individual operates an aircraft.

 

However, “ignorantia juris non excusat[1] or as translated to plain English, there are a more than a few of knowledgeable[2] aviation lawyers who could have guided the company through this maze of requirements. The restrictions may seem to a bit arbitrary, and they are, but they are not capricious.  The lesson here is that operating safely is not enough.

WHY?

Regulation is a form of line-drawing and the early formulators of the CARs decided to draw lines between commercial and not commercial aviation. Higher safety standards (Parts 121 and 135) were assigned to the flights open to the general public; so, the innocent traveler was protected by the federal government’s surveillance. General and business aviation (Part 91) involve, ostensibly, passengers who are aware that the plane which they are (a) about to board and (b) the pilot(s), who will fly the aircraft, are not subject to the same level of scrutiny.

The complex set of rules embedded in Part 91, are arbitrary, economic distinctions between operations, which may solicit the public, and those which may not. In order for a regulation to be effective in reaching its mission, separating the safe from the less safe, they have to be enforceable. Ambiguity or shades of gray is not the realm of regulation. A solid, black line is.

Thus, it is fair to say that the rules at issue here are (i)arbitrary, but not capricious and (ii) economic, but needed to make an important safety delineation.


  • The FAA is no longer enforcing its Rules with Civil Penalties-NO

“I heard my Congressman say that the FAA is no longer enforcing its rules with civil penalties; what’s with this $3,300,000 proposed sanction?”

 

 

 

 

 

First, contrary to the impression, which the Members of Congress are perpetuating, the FAA’s original policy statements about SMS and the compliance philosophy made it clear that there was no “get out of jail card”, that for clear, intentional violations, the FARs would be enforced with civil and criminal sanctions:

New FAA Compliance Policy a Sea Change from Enforcement—10 Forcing Elements

FAA’s new Compliance Policy will take time, but Safety will be better for the wait

Strong evidence that SMS/ASIAS/CAST/compliance is working

FAA Safety Compliance moves from penalties to collaborative fixes of Root Causes; No/Maybe/Yes?

WSJ’s Pasztor exposes the new SMS safety concept to readers

 

More than philosophy, the FAA has taken actions:

FAA bares its Enforcement Teeth in AeroBearings Revocation Order

Repair Stations: is it the Ides of March or is the FAA in the midst of a Part 145 sweep?

HORRIBLE CRIMINAL CASE WARNS CONSEQUENCES FOR BAD PAPERWORK

UNDER THE CBS RADAR? Compliance v. Enforcement

There are serious consequences to violating the FARs

Since September, FAA issued $5,010,255 in civil penalties = revolt against New Compliance Policy or NOT?

What is the significance of FAA’s $417K penalty against FedEx? Compliance?


 

Second, two leading aviation attorneys have delved deeply into the balanced approach between compliance and sanctions:

 

 

 

THE Pilot’s Attorney shares his Wisdom on FAA Compliance Philosophy

 

An Essay by an Aviation Practitioner on Enforcement v. Compliance

 

 

 

 


Third, the precise issue at issue with Hinman has been raised as a serious safety issue: 

NATA Forms Illegal Charter Task Force to Address A Top Industry Concern

PLEASE SHARE YOUR THOUGHTS ON THIS ISSUE in the below comment section.

 

[1] This is not to say that Hinman is wrong. Once it is able to explain its legal defense, it may well prove that it did not violate the FARs.

[2] originally it said “good”, but it was deleted for fear of accusations of using an oxymorons.



 

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1 Comment on "FAA $3.3 M civil penalty catalyst for warning"

  1. Sandy Murdock | July 3, 2018 at 11:51 am | Reply

    NATA repeats its call–https://www.ainonline.com/aviation-news/business-aviation/2018-07-03/nata-sees-more-enforcement-illegal-charter-ahead

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