Floyd Stilwell Gets $250,000 Fine for Upgrading Airplane Engines for Venezuelan Air Force; Former Exec With Mesa's Marsh Aviation Keeps Money Made in Deal

Upgrading airplane engines for Venezuela's air force in violation of an arms embargo has resulted in a $250,000 fine and five years' probation for Phoenix resident Floyd Stilwell.

The 87-year-old former owner of Marsh Aviation in Mesa knew he shouldn't have been doing such work for Venezuela after the 2006 ban, but did it anyway -- and pocketed $1.8 million personally.

He was able to keep the money -- minus the fine -- because the deal was "completely legitimate" and legal when Marsh Aviation and Venezuela entered into it, says Stilwell's Tucson lawyer, Walter Nash. Only specific actions that occurred after the ban resulted in two criminal charges for conspiracy to violate the Arms Export Control Act, he says.

Through a contract that kept other company execs in the dark, Stilwell had his company upgrade six old T-76 engines intended to power OV-10 Bronco light attack turboprop aircraft for the Venezuelan military.

After the Venezuelan arms embargo went into effect in June of 2006, Stilwell changed the contract to indicate -- falsely -- that the engines were a civilian variety of the T-76, the plea agreement states. With the help of two liaisons Stilwell hired to help him deal with the Venezuelans, four of the upgraded engines were disassembled and shipped in boxes mislabeled as non-military gear to Florida, and then on to Stilwell's military contacts in Valencia, Venezuela. Stilwell offered his chief mechanic the chance to travel to Venezuela to help assemble the engines, but apparently he never went.

In 2008, one of the liaisons -- who weren't charged -- told Stilwell that the Venezuelan Air Force was "happy" with the engines and would do business with him again.

A joint investigation by the bureau of U.S. Immigration and Customs Enforcement and the FBI somehow uncovered the conspiracy. Matt Allen, special agent in charge of ICE investigations and former Arizona U.S. Attorney Dennis Burke made public statements after Stilwell's 2010 indictment about the need for companies to abide by export laws in order to maintain national security.

As part of Stilwell's deal with the government, says his Tucson lawyer, Walter Nash, Stilwell was forced to divest himself of interest and ownership in Marsh Aviation, which he bought in the 1960s. The company, based at Falcon Field Airport in Mesa, refurbishes and modifies engines and equipment for a large variety of aircraft. Stilwell's daughter runs Marsh Aviation now, and Stilwell is allowed to work as a consultant, Nash says.

The government dropped charges against the company after Stilwell pleaded guilty earlier this year.

Reached by phone at his Phoenix home, Stilwell declined comment.

Stilwell wasn't sentenced to jail because he has a "spotless record" -- but also because he's pushing 90 and has health issues, Nash says.

Considering the money he made on the deal, Stilwell will have plenty left over after he pays the fine.

Other would-be arms-embargo violators should take note: Get the money up front.

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Ray Stern has worked as a newspaper reporter in Arizona for more than two decades. He's won numerous awards for his reporting, including the Arizona Press Club's Don Bolles Award for Investigative Journalism.