Defense contractor Raytheon agrees to pay more than $950 million to resolve bribery, fraud claims
NEW YORK (AP) — RTX Corporation, the defense contractor formerly known as Raytheon, agreed Wednesday to pay more than $950 million to resolve allegations that it defrauded the government and paid bribes to secure business with Qatar.
The company entered into deferred prosecution agreements in separate cases in federal court in Brooklyn and Boston, agreed to hire independent monitors to oversee compliance with anti-corruption and anti-fraud laws and must show good conduct for three years.
The money the company owes includes penalties in the criminal cases, as well as civil fines, restitution and the return of profits it derived from inflated Defense Department billing and business derived from alleged bribes paid to a high-ranking Qatari military official from 2012 to 2016.
The biggest chunk is a $428 million civil settlement for allegedly lying to the government about its labor and material costs to justify costlier no-bid contracts and drive the company’s profits higher, and for double-billing the government on a weapons maintenance contract.
The total also includes nearly $400 million in criminal penalties in the Brooklyn case, involving the alleged bribes, and in the Boston case, in which the company was accused of inflating its costs by $111 million for missile systems from 2011 to 2013 and the operation of a radar surveillance system in 2017.
RTX also agreed to pay a $52.5 million civil penalty to resolve a parallel Securities and Exchange Commission investigation into the bribery allegations and must forfeit at least $66 million to satisfy both probes.
At a brief hearing in federal court in Brooklyn, lawyers for RTX waived their right to an indictment and pleaded not guilty to charges that the company violated the anti-bribery provision of the Foreign Corruption Practices Act and the Arms Export Control Act. They did not object to any of the allegations in court documents filed in conjunction with the agreement.
RTX said in a statement that it is “taking responsibility for the misconduct that occurred” and is “committed to maintaining a world-class compliance program, following global laws, regulations and internal policies, while upholding integrity and serving our customers in an ethical matter.”
The various legal resolutions came to light over the span of several hours. First, at the Brooklyn hearing, prosecutors revealed that RTX was to pay a $252 million penalty to resolve criminal charges in the bribery case. Then, court documents hit the docket in Boston showing another criminal penalty of nearly $147 million to resolve the missile and radar case.
Finally, hours later, the Justice Department issued a press release tying them together and putting the total north of $950 million.
Assistant Attorney General Matthew G. Olsen, of the Justice Department’s National Security Division, said in a statement that the resolution of the cases “should serve as a stark warning to companies that violate the law when selling sensitive military technology overseas.”
A message seeking comment was left for the Qatari embassy in Washington.
RTX said in a July regulatory filing that it set aside $1.24 billion to resolve pending legal and regulatory matters. The company’s president and CEO, Christopher Calio, told investors that the investigations largely involved issues that predated the Raytheon-United Technologies merger that formed the current company in 2020.
“These matters primarily arose out of legacy Raytheon Company and Rockwell Collins prior to the merger and acquisition of these companies,” Calio said. “We’ve already taken robust corrective actions to address the legacy gaps that led to these issues.”
According to court documents, Raytheon employees and agents offered and paid bribes to a high-ranking Qatari military official to gain an advantage in obtaining lucrative business deals with the Qatar Emiri Air Force and Qatar Armed Forces.
The company then succeeded in securing four additions to an existing contract with the Gulf Cooperation Council — a regional union of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates — and a $510 million sole-sourced contract to build a joint-operations center for the Qatari military, the court documents said.
Raytheon made about $36.7 million in profit from the Gulf Cooperation Council contract additions and anticipated making more than $72 million on the joint operations center, but the Qatari government ultimately did not go forward with the deal, prosecutors said.
In the price inflation case, Raytheon allegedly lied to the government about the costs it would incur in building three Patriot missile firing units — also known as missile batteries — leading the U.S. Army to agree to a $619 million contract.
In a 2013 email cited in court papers, a Raytheon employee told a Pentagon official that the company’s expected costs had increased when, according to prosecutors, they had actually gone down. Prosecutors said the government overpaid for the weapons by about $100 million.
Raytheon was also accused of misleading the U.S. Air Force in 2017 about the costs associated with operating and maintaining a radar surveillance system, including by arguing that it needed to give employees lucrative compensation packages to maintain adequate staffing.
In reality, prosecutors wrote in court papers, the company “was secretly preparing to reduce the pay” of site employees “in order to improve the company’s profitability.”
The contract was fraudulently inflated by $11 million, prosecutors said.
Wednesday’s penalties are just the latest legal fallout from RTX’s business dealings.
In August, the company agreed to pay $200 million to the State Department after voluntarily disclosing more than two dozen alleged violations of the Arms Export Control Act and International Traffic in Arms Regulations.
Among the allegations were that the company provided classified military aircraft data to China and that employees took company-issued laptops containing information about missiles and aircraft into Iran, Lebanon and Russia.