Guilty Knowledge - The Regulatory Environment
Kilroy Aviation, LLC
STC ODA Parts 23, 25, 27 & 29, Skilled in FAA Type & Production Certification, Continued Operational Safety (COS). Expert witnesses in COS, Type & Production Certification.
This is Part 2 of 2
Guilty Knowledge – No Way Out Part 2
The Big, Big Net for Fraud & Falsification
I present to you some of the numerous ways any of us in civil aviation can get in serious trouble if we behave fraudulently or even hold back on information related to safety or fraud. This is important.? Everything that follows in this Appendix touches airworthiness & safety in some way, and it is not intended to be complete. Rather, the intent is to show that most regulations address fraud in some way, AND there is a separate rule that applies to ALL regulations found in Title 14, Chapter I, “Federal Aviation Administration, Department of Transportation”. Since this document is intended to stand alone as a broad guide to our responsibilities, I’ve selected a handful of fraud-related regulations that I’m most familiar with. If your favorite regulation isn’t presented here, poke around a bit and you’re likely to find something. It goes without saying that the FAA takes fraud and falsification very seriously.
The Code of Federal Regulations[1] (CFR) Title 14 “Aeronautics and Space”, Chapter I, “Federal Aviation Administration, Department of Transportation” presents all regulations, Parts 1-198, that apply to pretty much everything we touch in the regulated world of aviation. As of today, some of those regulations address fraud and falsifications and some don’t. Further, there is no real commonality between any two regulations that happen to have those requirements.
That is about to change.?
What’s Coming
14 CFR Part 3 “General Requirements[1]” applies pretty much across the board to any FAA approved operation or product[2], which includes Chapter I, 14 CFR Parts 1-198. The FAA has decided to wipe out all existing fraud and falsification regulations and replace them with a BLANKET regulation that will apply to all FAA regulations: Parts 1-198. They published a Notice of Proposed Rulemaking (NPRM) in the Federal Register on February 8, 2024; “Falsification, Reproduction, Alteration, Omission, or Incorrect Statements[3]”. The comment period ended April 8, 2024. (Edited 9/20/2024)
The proposal states, in part:
1)????? The proposed rule would affect applicable parts in 14 CFR chapters I and III. Falsification prohibitions are currently found in 14 CFR chapter I, parts 3, 21, 43, 60, 61, 63, 65, 67, 89, 107, 111, 120, 121, 139, 142, and 145. The FAA proposes to remove the existing falsification regulations from parts 21, 43, 60, 61, 63, 65, 67, 89, 107, 111, 120, 121, 139, 142, and 145, and consolidate them in a new subpart in part 3. The proposed rule in part 3 would also apply to those parts of 14 CFR chapter I that do not currently have falsification regulations but for which such regulations are clearly warranted, as explained in the “Discussion of the Proposal Section” in this NPRM. Those parts are 5, 23, 25, 26, 27, 29, 31, 33, 34, 35, 36, 45, 47, 48, 49, 68, 77, 91, 93, 99, 101, 103, 105, 117, 119, 125, 129, 133, 135, 136, 137, 141, 147, and 183. As a result, the proposed rule in part 3 would create standardized falsification proscriptions and apply them to 14 CFR parts 5, 21, 23, 25, 26, 27, 29, 31, 33, 34, 35, 36, 43, 45, 47, 48, 49, 60, 61, 63, 65, 67, 68, 77, 89, 91, 93, 99, 101, 103, 105, 107, 111, 117, 119, 120, 121, 125, 129, 133, 135, 136, 137, 139, 141, 142, 145, 147, and 183. (Emphasis added)
The Part 3 NPRM goes on to propose the addition of Subpart D, ”Falsification, Reproduction, Alteration, Omission, or Incorrect Statements”. consisting of §§3.401, 3.403, and 3.405. The NPRM also goes into detail to describe the changes that will be required in all the current regulations. This change will standardize the language throughout the FAA.
This is a good time to note the use of “Person” in the new Part 3 regulations. Part 1 – Definitions and Abbreviations, defines “Person” as “…an individual, firm, partnership, corporation, company, association, joint-stock association, or governmental entity. It includes a trustee, receiver, assignee, or similar representative of any of them.” It’s an interesting way to simplify the wide variety of entities.
Moving along, the proposed Subpart D follows:
§3.401 Applicability.
This subpart applies to any person subject to the requirements in subchapter A (except parts 1 and 3), subchapter C (except part 39), subchapter D, subchapter E (except parts 71 and 73), subchapter F (except parts 95 and 97), subchapter G (except part 110), subchapter H, and subchapter K (except parts 185, 187, 189 and 193), of this chapter.
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§3.403 Falsification, reproduction, alteration, or omission.
(a) No person may make or cause to be made any fraudulent or intentionally false statement in:
(1) Any document in any format, submitted under any provision referenced in §?3.401, consisting of or related to any acceptance, application, approval, authorization, certificate, rating, declaration, designation, qualification, record, report, request for reconsideration, or similar; or
(2) Any document in any format that is kept, made, or used to show compliance with any requirement under the provisions referenced in §?3.401.
(b) No person may make or cause to be made any production, reproduction, or alteration, for fraudulent purpose, of:
(1) Any document in any format, submitted or granted under any provision referenced in §?3.401, consisting of or related to any acceptance, application, approval, authorization, certificate, rating, declaration, designation, qualification, record, report, request for reconsideration, or similar; or
(2) Any document in any format that is kept, made, or used to show compliance with any requirement under the provisions referenced in §?3.401.
(c) No person may knowingly omit, or cause to be omitted, a material fact in:
(1) Any document in any format, submitted under any provision referenced in §?3.401, consisting of or related to any acceptance, application, approval, authorization, certificate, rating, declaration, designation, qualification, record, report, request for reconsideration, or similar; or
(2) Any document in any format that is kept, made, or used to show compliance with any requirement under the provisions referenced in §?3.401.
(d) The commission by any person of an act prohibited under paragraphs (a) through (c) of this section is a basis for:
(1) Denying, suspending, modifying, revoking, rescinding, removing, or withdrawing any acceptance, application, approval, authorization, certificate, rating, declaration, designation, qualification, request for reconsideration, or similar, issued or granted by the Administrator and held by that person; or
(2) A civil penalty.
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§3.405 Incorrect statement, or omission.
(a) No person may make or cause to be made a material incorrect statement, or omit or cause to be omitted a material fact, in:
(1) Any document in any format, submitted under any provision referenced in §?3.401, consisting of or related to any acceptance, application, approval, authorization, certificate, rating, declaration, designation, qualification, record, report, request for reconsideration, or similar; or
(2) Any document in any format that is kept, made, or used to show compliance with any requirement under the provisions referenced in §?3.401.
(b) A material incorrect statement, or omission of a material fact, in any document described in §?3.405(a)(1) and (2) may serve as a basis for denying, suspending, modifying, revoking, rescinding, removing, or withdrawing any acceptance, application, approval, authorization, certificate, rating, declaration, designation, qualification, request for reconsideration, or similar, issued or granted by the Administrator and held by that person.
NOTE: The proposed §3.405 is specific to “incorrect statements.” The NPRM defines a false statement as follows: “A false statement is distinct from an intentionally false or fraudulent one. A false statement or entry is one that is incorrect. An incorrect statement or entry is made when a person unknowingly provides false ( i.e., incorrect) information upon which the agency relies.” (Emphasis added)
As proposed, §3.405 as proposed will formally draw you into the system if you make a log entry based on a previously falsified document. Many of us are familiar with Suspected Unapproved Parts (SUP[5]). A mechanic may receive a part with perfect paperwork, it looks & feels right, and it gets installed. After a while the FAA comes a’ knocking and (s)he is confronted with a potential violation that could have devastating long-term career implications. The FAA is typically reasonable in these situations and “I didn’t know it was a SUP. Here’s the paperwork.” typically works if corrective action is taken quickly and reported. The NPRM institutionalizes that lenient and reasonable FAA action as follows:
“The intent behind proposed §§?3.405(b) and 402.5(b) would not be punitive, but rather remedial and preventive in an effort to cure unintended defects in documents under proposed §§?3.403, 3.405, 402.3, and 402.5. A material incorrect statement or entry, or omission of a material fact, generally warrants an action against the issuance or grant in response to the document(s) containing an incorrect statement, entry, or omission. For example, generally, the appropriate sanction for an incorrect statement on an application for an airman medical certificate is revocation of that certificate. The individual impacted would then be able to submit a new corrected application. Proposed §§?3.405(b) and 402.5(b) do not require the FAA to take action against a person for an incorrect statement, entry, or omission of material fact. The FAA would use its prosecutorial discretion to determine whether such action was appropriate based on the totality of the circumstances of a particular case.” (Emphasis added)
The intent of the proposed §3 Subpart D seems to be simple and straightforward. It will standardize the fraud and falsification requirements throughout our industry and deal with fraud and falsification in a consistent manner. As for practitioners like you and me, all we have to do is act professionally, do the right thing at the right time, and especially send up a flare the minute we detect a problem.
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The “Dog’s Breakfast” We Have Today
This information is presented as background, but it forms our current environment, and since the time between NPRM and final rule can take quite some time, a quick review might be helpful. The regulations that follow here form the foundation of the regulatory workplace where most of us toil today.?
To set the tone, a very important regulation is §3.5(a)[6] which declares “Airworthy means the aircraft conforms to its type design and is in a condition for safe operation.” Notice the word “and”, not “or”. Now pay attention to the fact that §3 is “General Requirements”, meaning it applies to ALL FAA regulations. Let’s take a look:
·???????? “Airworthy means the aircraft conforms to its type design …”
o?? The concept of conformity is simple, a part or aircraft matches its approved design in all regards. It’s a black & white determination for an experienced person who can review documents, logs and other configuration information.
·???????? “…and is in a condition for safe operation.”
o?? This one is not so easy. It’s a judgement call that is frequently made based on trust and faith in the hardware and documentation that is presented, hopefully by a person whose integrity has been proven over time.
§3.5(b) Prohibition against fraudulent and intentionally false statements. When conveying information related to an advertisement or sales transaction, no person may make or cause to be made:
1)????? Any fraudulent or intentionally false statement in any record about the airworthiness of a type-certificated product, or the acceptability of any product, part, appliance, or material for installation on a type-certificated product.
2)????? Any fraudulent or intentionally false reproduction or alteration of any record about the airworthiness of any type-certificated product, or the acceptability of any product, part, appliance, or material for installation on a type-certificated product.
Note the phrase in the introductory paragraph of §3.5(b) is very specific, it states “…information related to an advertisement or sales transaction…”. That highlights the reasoning behind the proposed standardization of the NPRM. A person might try to take liberty with the current §3.5(b) and falsify a record NOT related to an “advertisement or sales transaction”. That would be a jailhouse lawyer move that I do not recommend.
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14 CFR Part 135 Operating Requirements: Commuter and on Demand Operations and Rules Governing Persons on Board Such Aircraft
?? Part 135 does not currently have a regulation that addresses fraud or falsification, which makes §135 unique, along with a few others. For example, §23, §25 (certification of normal and transport category airplanes), §27 and §29 (certification of normal and transport category rotorcraft) §33 engines and §35 propellers have no such language because §21 (below) is the gateway to all those type certificated products.? But read on:
14 CFR Part 21 Certification Procedures for Products and Articles
§21.2 Falsification of applications, reports, or records[7].
(a) A person may not make or cause to be made—
(1) Any fraudulent, intentionally false, or misleading statement on any application for a certificate or approval under this part;
(2) Any fraudulent, intentionally false, or misleading statement in any record or report that is kept, made, or used to show compliance with any requirement of this part;
(3) Any reproduction for a fraudulent purpose of any certificate or approval issued under this part.
(4) Any alteration of any certificate or approval issued under this part.
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(b) The commission by any person of an act prohibited under paragraph (a) of this section is a basis for—
(1) Denying issuance of any certificate or approval under this part; and
(2) Suspending or revoking any certificate or approval issued under this part and held by that person.
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§43.12 Maintenance records: Falsification, reproduction, or alteration[8]
(a) No person may make or cause to be made:
(1) Any fraudulent or intentionally false entry in any record or report that is required to be made, kept, or used to show compliance with any requirement under this part;
(2) Any reproduction, for fraudulent purpose, of any record or report under this part; or
(3) Any alteration, for fraudulent purpose, of any record or report under this part.
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(b) The commission by any person of an act prohibited under paragraph (a) of this section is a basis for suspending or revoking the applicable airman, operator, or production certificate, Technical Standard Order Authorization, FAA-Parts Manufacturer Approval, or Product and Process Specification issued by the Administrator and held by that person.
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14 CFR Part 91 General Operating and Flight Rules
§91.7 Civil aircraft airworthiness[9].
(a) No person may operate a civil aircraft unless it is in an airworthy condition.
(b) The pilot in command of a civil aircraft is responsible for determining whether that aircraft is in condition for safe flight. The pilot in command shall discontinue the flight when unairworthy mechanical, electrical, or structural conditions occur.
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§121.9 Fraud and falsification[10]
(a) No person may make, or cause to be made, any of the following:
(1) A fraudulent or intentionally false statement in any application or any amendment thereto, or in any other record or test result required by this part.
(2) A fraudulent or intentionally false statement in, or a known omission from, any record or report that is kept, made, or used to show compliance with this part, or to exercise any privileges under this chapter.
(b) The commission by any person of any act prohibited under paragraph (a) of this section is a basis for any one or any combination of the following:
(1) A civil penalty.
(2) Suspension or revocation of any certificate held by that person that was issued under this chapter.
(3) The denial of an application for any approval under this part.
(4) The removal of any approval under this part.
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14 CFR Part 145 Repair Stations
§145.12 Repair station records: Falsification, reproduction, alteration, or omission.
(a) No person may make or cause to be made:
(1) Any fraudulent or intentionally false entry in:
(i) Any application for a repair station certificate or rating (including in any document used in support of that application); or
(ii) Any record or report that is made, kept, or used to show compliance with any requirement under this part;
(2) Any reproduction, for fraudulent purpose, of any application (including any document used in support of that application), record, or report under this part; or
(3) Any alteration, for fraudulent purpose, of any application (including any document used in support of that application), record, or report under this part.
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But WAIT, There’s MORE
As if violating FAA regulations isn’t enough, any person or organization who is convicted of fraud with one government entity may be barred from conducting business with all other government entities. With that in mind, the Department of Transportation addresses fraudulent behavior as follows:
Suspension and Debarment[11]
Purpose
The debarment* and suspension procedures are intended to prevent waste, fraud and abuse in Federal procurement and non-procurement actions. ?Debarment or suspension of an organization or individual excludes that company or individual from doing business with the Federal Government.? These exclusions are intended to ensure that only responsible companies or individuals participate in contracts and financial assistance awards with the Federal government.? The Nonprocurement Suspension and Debarment Regulation (Nonprocurement Regulation), at 2 CFR Part 180, provides rules for a Department wide system of debarment and suspension under nonprocurement transactions.? The Federal Acquisition Regulation (FAR), at 48 C.F.R. subpart 9.4, Debarment, Suspension, and Ineligibility, provides rules for procurement actions. ?Both the Nonprocurement Regulation and the FAR provide for reciprocity between procurement and nonprocurement actions, meaning that any action under one regulation will allow the exclusion by suspension or debarment to extend to government wide transactions covered by the other regulation. The General Services Administration (GSA) maintains the list of companies and individuals that are debarred, suspended, or otherwise excluded from doing business with the government in a publicly available website at?www.SAM.gov.? Examples of conduct resulting in a suspension or debarment by the United States Department of Transportation can include fraud under the Disadvantaged Business Enterprise program, falsification of documents relating to contract payments, falsification of credentials, or any other failure to follow the regulations and contract or financial assistance requirements. (Emphasis added)
·???????? Debarment (from Wiki[12]) is the state of being excluded from enjoying certain possessions, rights, privileges, or practices and the act of prevention by legal means. For example, companies can be debarred from contracts due to allegations of fraud, mismanagement, and similar improprieties. Firms, individuals, and non-governmental organizations can be debarred.
In Conclusion
The upshot of this entire exercise is simple: Know what you’re doing, do it well, and be aware that we all work and live in an imperfect world. There are people with no moral compass but eventually (aka hopefully) they are found out before they can do much damage. That’s where we come in. We’re not cops, but as aircrew, mechanics, inspectors and engineers we are in positions to know when something is not right. The FAA proposal to amend Part 3 with a single, universal regulation that will apply to all of Subchapter C, Aircraft, is a move that should help all of us. Hopefully the majority of us will never have to deal with fraud, misleading statements and abuse.
When we DO see something that is not right, when our Spidey sense tingles, it’s time to stop, observe (if it’s not an emergency), think and decide if we’re looking at fraud, falsification, an unsafe condition or some other situation that violates the regulations or simply flies in the face of common sense. The next decision may be the toughest. Do we act? Are we witnessing an intentional act? Do we blow the whistle or step in and point to the problem, act the hero and cry “Cease and Desist!”
There’s no easy answer to any of those questions. Good judgement matures and sharpens with experience. If you got it, use it. If you ain’t got it, find someone who does.
Mike Borfitz, CEO
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