The Raytheon subsidiary of defense contractor RTX agreed to pay more than $950m to settle US Department of Justice (DOJ) investigations. The Arlington, Virginia-based company also settled civil claims by the DOJ arising out of a whistleblower lawsuit by a former employee, and it agreed to resolve a related foreign bribery case by the SEC for $124m.

More than $22m of the SEC’s settlement will be offset by Raytheon’s settlement with the DOJ.

As part of the overall DOJ settlement, Raytheon agreed to enter into deferred prosecution agreements involving that conduct in federal district courts in New York and Massachusetts.

Under the accords, prosecutors have agreed to dismiss criminal charges against the company after three years if it complies with the terms of the deferred prosecution agreements, which call for hiring an independent monitor for three years and enhancements to its internal compliance program.

RTX, which was named Raytheon Technologies Corp until 2023, was formed after the 2020 merger of Raytheon Company and United Technologies Corp (collectively, “Raytheon” here).

Bribery charges

Specifically, Raytheon was charged in New York federal court with a scheme to bribe a high-level government official in Qatar to obtain lucrative business there, and with failing to disclose the bribes in export licensing applications with the State Department as legally required. The SEC contended that Raytheon violated the antibribery, internal accounting controls, and books and records provisions of the Foreign Corrupt Practices Act (FCPA).

“Such corrupt and fraudulent conduct, especially by a publicly traded US defense contractor, erodes public trust and harms the DOD, businesses that play by the rules, and American taxpayers.”

Kevin Driscoll, Deputy Assistant Attorney General, DOJ Criminal Division

The company admitted to engaging in two separate schemes, admitting that, from 2012 to 2018, it defrauded the Department of Defense (DOD) into paying over $111m more than it should have in two contracts to purchase Patriot missile systems and operate a radar system.

DOJ charged the firm for its alleged government contract fraud scheme, violations of the FCPA and the Arms Export Control Act.

The SEC zeroed in on the foreign bribery aspect, charging Raytheon with violating the FCPA in connection with paying bribes of more than $32m to a relative of the emir of Qatar and to military and government officials in that country in exchange for obtaining defense contracts there.

“The penalty in this case reflects the significant misconduct by Raytheon and the need for global companies to implement meaningful internal accounting controls that ensure that payments to intermediaries are not used to circumvent the restrictions of the FCPA,” said Charles Cain, Chief of the SEC Enforcement Division’s FCPA Unit. 

Referring to the DOJ’s case and the misconduct the agency unveiled in its investigation, Deputy Assistant Attorney General Kevin Driscoll of the DOJ’s Criminal Division said: “Such corrupt and fraudulent conduct, especially by a publicly traded US defense contractor, erodes public trust and harms the DOD, businesses that play by the rules, and American taxpayers.”

The SEC charged Raytheon with violations of Section 13(b)(2)(B) of the Exchange Act, the provision of the Securities Exchange Act that mandates books and records by registered businesses that are in conformity with generally accepted accounting principles.

Cooperation credit

The SEC said that, after a period of uncooperativeness and following the merger, Raytheon provided significant cooperation under new management, who also hired new outside counsel. New management undertook an internal investigation and reexamined prior work done related to a key supplier.

From this point, the SEC said that the company timely produced key documents, provided facts developed in its internal investigation, translated key documents, and made numerous employees.