RTX (ex-Raytheon) busted for ‘extraordinary’ corruption | Responsible Statecraft
RTX (ex-Raytheon) busted for ‘extraordinary’ corruption | Responsible Statecraft
Summary
1. Defrauding the Department of Defense:
- - RTX engaged in two schemes to defraud the DOD in connection with contracts for Patriot missile systems and a radar system.
- - This resulted in the DOD overpaying by over $111 million.
- - RTX will pay a criminal monetary penalty of $146,787,972 and $111,203,009 in victim compensation.
2. Bribery in Qatar:
- - RTX bribed a high-level Qatari military official to secure defense contracts between 2012 and 2016.
- - For this, RTX will pay a criminal monetary penalty of $230.4 million and forfeit $36,696,068.
3. Export Control Violations:
- - RTX violated the Arms Export Control Act by failing to disclose bribes paid in connection with Qatar-related contracts.
- - This resulted in a financial penalty of $21,904,850.
4. False Claims Act Violations:
- - RTX provided untruthful certified cost or pricing data when negotiating prices with the DOD for numerous government contracts between 2009 and 2020.
- - RTX will pay $428 million to settle these allegations.
5. SEC Resolution:
- - As part of resolving the SEC's parallel investigation, RTX will pay approximately $49.1 million in disgorgement and prejudgment interest, plus a civil penalty of $75 million.
Total: The combined criminal and civil recoveries total nearly $1 billion.
Additionally, RTX has agreed to retain an independent compliance monitor for three years and implement various remedial measures to prevent future misconduct.RTX (ex-Raytheon) busted for ‘extraordinary’ corruption | Responsible Statecraft
Indictments of arms contractors for corruption and malfeasance are not uncommon, but recently revealed cases of illegal conduct by RTX (formerly Raytheon) are extraordinary even by the relatively lax standards of the defense industry.
The company has agreed to pay nearly $1 billion in fines, which is one of the highest figures ever for corruption in the arms sector. To incur these fines, RTX participated in price gouging on Pentagon contracts, bribing officials in Qatar, and sharing sensitive information with China.
Engaging in illegal conduct on this scale suggests that, far from being an aberration, this behavior may be business as usual for the company. Given the scale of RTX’s malfeasance, the Justice Department should take a close look at the practices of other arms contractors to determine whether these infractions are industry standard.
The company’s approach is reminiscent of the way arms companies did business in the 1960s, when, for example, massive cost overruns on Lockheed Martin’s C-5 transport plane drew fire from internal critics like Ernest Fitzgerald and congressional gadflies, like the-Democratic Sen. William Proxmire of Wisconsin.
Resorting to bribery has been less prevalent since Sen. Proxmire pushed through the Foreign Corrupt Practices Act of 1977, which was a response to a massive scandal involving the bribery of officials in Japan, Germany, the Netherlands, Indonesia, and Saudi Arabia. The exposure brought about by the scandal – which covered events going back to the 1950s that were not known to the general public until a set of 1975 Senate hearings on the activities of multinational corporations showed the world how bribery was used to sway the decisions of foreign policy makers. This resulted in major consequences, including the conviction of former Japanese Premier Kakuei Tanaka, along with 10 other business people and government officials.
These days, with the exception of egregious cases like the recent conviction of Sen. Robert Menendez (D-N.J.) for taking bribes from the Egyptian government, most arms companies are more subtle in their efforts to influence foreign government officials, as far as can be determined. Bribery as blatant as passing along bags of cash, as happened in a number of cases in the 1960s and 1970s, is no longer prevalent. Now bribes are hidden amongst business deals. For example, a precondition of most major U.S. arms sales is the creation of an “offset” or kickback agreement. Basically, if a country spends billions of dollars on a U.S.-supplied weapon system, the company making the sale is expected to give something back to the purchasing country.
These offsets can include things like letting the host country build components of the system they are buying, to subsidizing military-related activities like the UAE’s cybersecurity industry, or even investing in unrelated items like hotels and entertainment venues. These deals are complex, and the U.S. government generally gives the companies involved free range to make whatever deals they need to make to secure an arms sale.
This regularity allows for a perfect avenue for currying favor with the potential recipient country. For example, it’s easy enough to throw part of an offset agreement to a relative of a member of the ruling elite with little chance of being detected or held accountable.
The story of RTX is about more than just money. For example, its weapons have been used to kill civilians in Yemen, Gaza, and other war zones. In addition to not showing remorse or regret for its part in these atrocities, RTX is also lobbying to reduce government vetting of weapons exports, a move that could make it easier to arm reckless and repressive regimes.
In the case of the Saudi war on Yemen, RTX lobbied aggressively to block any effort to cut off weapons supplies to the Saudi regime through visits to Congress and coordination with top Trump administration economic officials like Peter Navarro.
And it could get worse. As the Pentagon budget soars towards $1 trillion a year, and the wars in Ukraine and Gaza put a premium on pushing weapons out the door more quickly, opportunities for corrupt behavior will multiply. One potential way to head off a new wave of corruption in the weapons industry would be to adopt the kinds of reforms championed by Sen. Elizabeth Warren (D-Mass.). She has endorsed policy changes which could prevent price gouging and work to reduce the power and influence of ex-military and congressional officials who work as board members or lobbyists for weapons contractors after leaving government.
Better regulations and more vigorous prosecution of bribery and price gouging could well reduce corruption in the arms industry. But the ultimate solution would be to scale back America’s “cover the globe” military strategy and resist the tendency to arm allies regardless of their behavior. We see this happening now with the Biden administration’s continuation of arms sales and military aid to Israel, even though the International Court of Justice has said that it is “plausible” that Israel is engaged in a campaign of genocide in Gaza. When waging war and selling weapons are viewed as the royal road to global security, companies can take advantage of urgency, as Sen. Harry Truman found out when he chaired a Senate committee on war profiteering in World War II, and as did John Sopko when he served as the Special Inspector General for Afghan Reconstruction.
Netanyahu’s war is bad for almost everyone — not just the direct victims of the violence. Future U.S. administrations will find that current, uncritical support for Israel will make their jobs extremely difficult when they attempt to present the idea that the United States is a reliable partner that believes in promoting adherence to the “rules-based international order.” Furthermore, the people of Israel will find that their nation is treated as a pariah by many countries, including ones which had recently been open to developing a positive relationship with Jerusalem. As for the goal of eliminating Hamas altogether, it is a long shot. And even if the organization is completely eradicated, a new organization could pop up composed of people who lost family members and had their lives turned upside down by Israel’s brutal campaign in Gaza.
The war is not bad for companies like RTX. Although they did not lobby for increased aid to Israel, they benefit from the chaos that comes from war and conflict, even if they aren’t the primary cause of this frightening condition. But if we could build a world where cooperation and diplomacy supplant the use of force as the first resort in U.S. foreign policy, companies like RTX could see their revenues reduced dramatically. Demilitarizing our society will require us to reduce the power and economic clout of companies like RTX, but it will also have to involve a change in the current U.S. foreign policy, which elevates force and the provision of arms above common-sense diplomacy.
RTX will pay almost $1B for defrauding DOD, allegedly bribing Qatari official
That’s on top of the $200 million levied in August for illegal exports to China and elsewhere.
Defense giant Raytheon will pay the U.S government more than $950 million for defrauding the Pentagon and allegedly bribing a Qatari official, the Justice Department announced today.
RTX admitted to “two separate schemes” to defraud the Defense Department in connection with the Patriot missile systems and a radar system, and other defense services, according to a DOJ release.
“These schemes to defraud caused the DOD to pay Raytheon over $111 million more than Raytheon should have been paid on the contracts,” the release said.
RTX will pay the government more than $124 million for bribing a high-level Qatari military official to win defense contracts, and then concealed those payments by falsifying documents, according to an SEC filing.
“Raytheon engaged in criminal schemes to defraud the U.S. government in connection with contracts for critical military systems and to win business through bribery in Qatar,” said Deputy Assistant Attorney General Kevin Driscoll of the Justice Department’s Criminal Division. “Such corrupt and fraudulent conduct, especially by a publicly traded U.S. defense contractor, erodes public trust and harms the DOD, businesses that play by the rules, and American taxpayers. Today’s resolutions, with criminal and civil recoveries totaling nearly $1 billion, reflect the Criminal Division’s ability to tackle the most significant and complex white-collar cases across multiple subject matters.”
In a statement, RTX said the misconduct occurred “largely prior to 2020” and the financial impact of these matters is consistent with the reserve announced in the company’s July 2024 quarterly earnings report.
“RTX is taking responsibility for the misconduct that occurred. We have worked diligently during the investigations to remediate that misconduct and continue to do so. We are committed to working closely with the incoming independent monitor to improve and further enhance our ethics and compliance program,” the company said.
The defense contractor also recently was fined $200 million for the unauthorized export of defense technology to China, Russia, Iran, and elsewhere. In July, the company told investors during an earnings call that it set aside more than $1 billion to settle a number of government investigations.
"While this is one of the biggest penalties in recent memory, it is not an isolated incident with defense contractors. For example, earlier this year Lockheed settled a suit for $70 million to resolve overcharging the Navy for parts. Meanwhile, Boeing on the commercial aerospace end of the spectrum paid some $487 million related to 737 MAX certification," said Rich Pettibone of Forecast International, a sister brand of Defense One. “With RTX taking responsibility for the misconduct and paying the penalty, I don't anticipate any curtailment of their work with the Pentagon.”
Bradley Peniston contributed to this article.Defense contractor RTX 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 Massachusetts, 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 Massachusetts 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 hearing in Brooklyn federal court, RTX lawyers 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 allegations in court documents filed 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.
Raytheon Company to Pay Over $950M in Connection with Defective Pricing, Foreign Bribery, and Export Control Schemes
Raytheon Company (Raytheon) — a subsidiary of Arlington, Virginia-based defense contractor RTX (formerly known as Raytheon Technologies Corporation) — will pay over $950 million to resolve the Justice Department’s investigations into: (i) a major government fraud scheme involving defective pricing on certain government contracts and (ii) violations of the Foreign Corrupt Practices Act (FCPA) and the Arms Export Control Act (AECA) and its implementing regulations, the International Traffic in Arms Regulations (ITAR).
Raytheon will enter into a three-year deferred prosecution agreement (DPA) in connection with a criminal information filed today in the District of Massachusetts charging Raytheon with two counts of major fraud against the United States. As part of that resolution, Raytheon admitted to engaging in two separate schemes to defraud the Department of Defense (DOD) in connection with the provision of defense articles and services, including PATRIOT missile systems and a radar system.
Separately, Raytheon entered into a three-year DPA in connection with a criminal information unsealed today in the Eastern District of New York charging Raytheon with two counts: conspiracy to violate the anti-bribery provision of the FCPA for a scheme to bribe a government official in Qatar and conspiracy to violate the AECA for willfully failing to disclose the bribes in export licensing applications with the Department of State as required by part 130 of ITAR.
Both agreements require that Raytheon retain an independent compliance monitor for three years, enhance its internal compliance program, report evidence of additional misconduct to the Justice Department, and cooperate in any ongoing or future criminal investigations.
Raytheon also reached a separate False Claims Act settlement with the department relating to the defective pricing schemes. The Justice Department’s FCPA and ITAR resolution is coordinated with the Securities and Exchange Commission (SEC).
In addition, the Justice Department’s resolutions ensure that the appropriate federal agencies can proceed with determining whether Raytheon or any other individuals or entities associated with the company should be suspended or debarred as federal contractors. Pursuant to the Federal Acquisition Regulations (FAR), when more than one agency has an interest in an entity’s potential suspension or debarment, the FAR requires that the Interagency Suspension and Debarment Committee (ISDC) identify the lead agency for conducting governmentwide suspension or debarment proceedings. In connection with this resolution, the Justice Department has referred Raytheon’s factual admissions to the appropriate officials within the DOD to initiate the process with the ISDC to identify which federal agency will take the lead in such administrative proceedings, which occur independently of the Justice Department’s criminal and civil resolutions.
“Raytheon engaged in criminal schemes to defraud the U.S. government in connection with contracts for critical military systems and to win business through bribery in Qatar,” said Deputy Assistant Attorney General Kevin Driscoll of the Justice Department’s Criminal Division. “Such corrupt and fraudulent conduct, especially by a publicly traded U.S. defense contractor, erodes public trust and harms the DOD, businesses that play by the rules, and American taxpayers. Today’s resolutions, with criminal and civil recoveries totaling nearly $1 billion, reflect the Criminal Division’s ability to tackle the most significant and complex white-collar cases across multiple subject matters.”
“Government contractors have an obligation to be fully transparent about their cost and pricing data when they seek an award of a sole source contract,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The department is committed to holding accountable those contractors that knowingly misrepresent their cost and pricing data or otherwise violate their legal obligations when negotiating or performing contracts with the United States.”
“International corruption in military and defense sales is a violation of our national security laws as well as an anti-bribery offense,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division. “Raytheon willfully failed to disclose bribes made in connection with contracts that required export licenses. Today’s resolution should serve as a stark warning to companies that violate the law when selling sensitive military technology overseas.”
“Over the course of several years, Raytheon employees bribed a high-level Qatari military official to obtain lucrative defense contracts and concealed the bribe payments by falsifying documents to the government, in violation of laws including those designed to protect our national security,” said U.S. Attorney Breon Peace for the Eastern District of New York. “We will continue to pursue justice against corruption, and as this agreement establishes, enforce meaningful consequences, reforms and monitorship to ensure this misconduct is not repeated.”
“Through deliberate and deceptive actions, Raytheon not only defrauded the U.S. government — it compromised the integrity of our defense procurement process,” said Acting U.S. Attorney Joshua S. Levy for the District of Massachusetts. “Our office is committed to holding accountable those who prioritize profits over national security and clear legal obligations. This case underscores our unwavering commitment to pursuing justice, particularly when taxpayer dollars and DOD operations are at stake. We will continue to work tirelessly with our law enforcement partners to ensure that this type of misconduct is fully exposed and addressed with serious consequences.”
“Investigating procurement fraud impacting DOD contracts is a top priority for the Defense Criminal Investigative Service (DCIS), the law enforcement arm of the DOD Office of Inspector General,” said Inspector General Robert Storch of DOD. “When DOD contractors fail to provide truthful pricing data and overcharge the government, they undermine the integrity of the DOD procurement process and harm critical DOD programs. The DCIS will continue to work with its law enforcement partners and the Justice Department to ensure DOD contractors that engage in defective pricing schemes are held accountable for their actions. The Defense Contract Audit Agency’s (DCAA’s) Operations Investigative Support Division provided valuable expertise during this investigation.”
“The Raytheon Company set out to intentionally defraud the U.S. government,” said Assistant Director Chad Yarbrough of the FBI Criminal Investigative Division (CID). “This agreement highlights the importance of integrity when it comes to government contracting. The FBI, with its law enforcement partners, will continue to investigate these types of crimes that waste taxpayer dollars and prosecute all those who are intent on cooking up these major fraud schemes.”
“Raytheon Corporation engaged in a systematic and deliberate conspiracy that knowingly and willfully violated U.S. fraud and export laws,” said Special Agent in Charge William S. Walker of Homeland Security Investigations (HSI) New York. “Raytheon’s bribery of government officials, specifically those involved in the procurement of U.S. military technology, posed a national security threat to both the United States and its allies. As this investigation reflects, national security continues to be a top priority for HSI New York. The global threats facing the United States have never been greater, and HSI New York is committed to working with our federal and international partners to ensure that sensitive U.S. technologies are not unlawfully and fraudulently acquired.”
The Defective Pricing Case
The Criminal Resolution
According to admissions and court documents filed in the District of Massachusetts, from 2012 through 2013 and again from 2017 through 2018, Raytheon employees provided false and fraudulent information to the DOD during contract negotiations concerning two contracts with the United States for the benefit of a foreign partner — one to purchase PATRIOT missile systems and the other to operate and maintain a radar system. In both instances, Raytheon employees provided false and fraudulent information to DOD in order to mislead DOD into awarding the two contracts at inflated prices. These schemes to defraud caused the DOD to pay Raytheon over $111 million more than Raytheon should have been paid on the contracts.
Under the terms of the DPA, Raytheon will pay a criminal monetary penalty of $146,787,972, pay $111,203,009 in victim compensation, and retain an independent compliance monitor for three years. The Justice Department has agreed to credit the victim compensation amount against restitution Raytheon pays to the Civil Division in its related, parallel False Claims Act proceeding.
Pursuant to the DPA, in addition to the independent compliance monitor, Raytheon and RTX have agreed to continue to implement a compliance and ethics program at Raytheon designed to prevent and detect fraudulent conduct throughout its operations. Raytheon and RTX have also agreed to continue to cooperate with the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the District of Massachusetts in any ongoing or future criminal investigations.
The Justice Department reached this resolution with Raytheon based on a number of factors, including, among others, the nature and seriousness of the offense conduct, which involved two separate schemes to defraud the U.S. government. Raytheon received credit for its affirmative acceptance of responsibility and cooperation with the department’s investigation, which included (i) facilitating interviews with current and former employees; (ii) providing information obtained through its internal investigation, which allowed the department to preserve and obtain evidence as part of its own independent investigation; (iii) making detailed presentations to the department; (iv) proactively identifying key documents in the voluminous materials collected and produced; (v) engaging experts to conduct financial analyses; and (vi) demonstrating its willingness to disclose all relevant facts by analyzing whether the crime-fraud exception applied to certain potentially privileged documents and releasing the documents that it deemed fell within the exception. However, in the initial phases of the investigation prior to March 2022, Raytheon’s cooperation was limited by unreasonably slow document productions.
Raytheon also engaged in timely remedial measures, including (i) terminating certain employees who were responsible for the misconduct; (ii) establishing a broad defective pricing awareness campaign; (iii) developing and implementing policies, procedures, and controls relating to defective pricing compliance; and (iv) engaging additional resources with appropriate expertise to evaluate and test the new policies, procedures, and controls relating to defective pricing compliance.
In light of these considerations, as well as Raytheon’s prior history, the criminal penalty calculated under the U.S. Sentencing Guidelines reflects a 25% reduction off the 10th percentile above the low end of the otherwise applicable guidelines fine range.
The False Claims Act Settlement
Raytheon also entered into a civil False Claims Act settlement to resolve allegations that it provided untruthful certified cost or pricing data when negotiating prices with the DOD for numerous government contracts and double billed on a weapons maintenance contract.
Under the False Claims Act settlement, which is the second largest government procurement fraud recovery under the Act, Raytheon will pay $428 million for knowingly failing to provide truthful certified cost and pricing data during negotiations on numerous government contracts between 2009 and 2020, in violation of the Truth in Negotiations Act (TINA). Congress enacted TINA in 1962 to help level the playing field in sole source contracts — where there is no price competition — by making sure that government negotiators have access to the cost or pricing data that the offeror used when developing its proposal. As part of the settlement, Raytheon admitted that it failed to disclose cost or pricing data, as required by TINA, regarding its labor and material costs to supply weapon systems to DOD.
Raytheon also admitted that by misrepresenting its costs during contract negotiations it overcharged the United States on these contracts and received profits in excess of the negotiated profit rates. Further, Raytheon admitted that it failed to disclose truthful cost or pricing data on a contract to staff a radar station. Raytheon also admitted that it billed the same costs twice on a DOD contract.
As part of the civil resolution, Raytheon received credit under the Justice Department’s guidelines for taking disclosure, cooperation, and remediation into account in False Claims Act cases for cooperation provided by RTX. That cooperation included conducting and disclosing the results of an internal investigation, disclosing relevant facts and material not known to the government but relevant to its investigation, providing the department with inculpatory evidence, conducting a damages analysis, identifying and separating individuals responsible for or involved in the misconduct, admitting liability and accepting responsibility for the misconduct, and improving its compliance programs.
“The Defense Department greatly appreciates the Justice Department’s outstanding efforts culminating in this significant recovery,” said Principal Director of Defense Pricing, Contracting, and Acquisition Policy John Tenaglia of DOD. “The price we pay for equipment and services absolutely matters. The more we pay, the less combat capability we can deliver for our nation’s warfighters. This Justice Department recovery both restores funding that will be used to acquire more capability while also serving as a strong deterrent to all companies that might seek to deny DOD contracting officers the factual information they require to negotiate contracts at fair and reasonable prices.”
The civil settlement includes the resolution of a lawsuit filed under the qui tam or whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery. The qui tam lawsuit was filed by Karen Atesoglu, a former Raytheon employee, and is captioned United States ex rel. Atesoglu v. Raytheon Technologies Corporation, 21-CV-10690-PBS (DMA). Ms. Atesoglu will receive $4.2 million as her share of the settlement.
The FCPA Case
According to admissions and court documents filed in the Eastern District of New York, between approximately 2012 and 2016, Raytheon, through certain of its employees and agents, engaged in a scheme to bribe a high-level official at the Qatar Emiri Air Force (QEAF), a branch of Qatar’s Armed Forces (QAF) that was primarily responsible for the conduct of air warfare, in order to assist Raytheon in obtaining and retaining business from the QEAF and QAF. Raytheon entered into and made payments on sham subcontracts for air defense operations-related studies in order to corruptly obtain the QEAF official’s assistance in securing certain air defense contracts. Raytheon also entered into a teaming agreement with a Qatari entity in order to corruptly obtain the QEAF official’s assistance in directly awarding a potential contract to Raytheon to build a joint operations center that would interface with Qatar’s several military branches.
Under the terms of the DPA, Raytheon will pay a criminal monetary penalty of $230.4 million, pay forfeiture of $36,696,068, and retain an independent compliance monitor for three years. In addition, as part of the resolution of the SEC’s parallel investigation, Raytheon will pay approximately $49.1 million in disgorgement and prejudgment interest and a civil penalty of $75 million ($22.5 million of which will be credited against the criminal monetary penalty). The Justice Department has agreed to credit approximately $7.4 million of the disgorgement Raytheon pays to the SEC against the criminal forfeiture.
As part of the DPA, Raytheon and RTX have agreed to continue to cooperate with the Criminal Division’s Fraud Section, the National Security Division’s Counterintelligence and Export Control Section, and the U.S. Attorney’s Office for the Eastern District of New York in any ongoing or future criminal investigations. In addition to the independent compliance monitor, Raytheon and RTX have agreed to continue to enhance Raytheon’s compliance program.
The Justice Department reached this resolution with Raytheon based on a number of factors, including, among others, the nature and seriousness of the offense. Raytheon received credit for its affirmative acceptance of responsibility and cooperation with the department’s investigation, which included (i) providing information obtained through its internal investigation, which allowed the government to preserve and obtain evidence as part of its own independent investigation; (ii) facilitating interviews with current and former employees; (iii) making detailed factual presentations to the government; (iv) proactively disclosing certain evidence of which the government was previously unaware and identifying key documents in materials it produced; and (v) engaging experts to conduct financial analyses. However, in the initial phases of the investigation, prior to in or around 2022, Raytheon was at times slow to respond to the government’s requests and failed to provide relevant information in its possession.
Raytheon also engaged in timely remedial measures, including (i) recalibrating third party review and approval processes to lower company risk tolerance; (ii) implementing enhanced controls over sales intermediary payments; (iii) hiring empowered subject matter experts to oversee its anti-corruption compliance program and third party management; (iv) implementing data analytics to improve third party monitoring; and (v) developing a multipronged communications strategy to enhance ethics and compliance training and communications.
In light of these considerations, as well as Raytheon’s prior history, the criminal penalty calculated under the U.S. Sentencing Guidelines reflects a 20% reduction off the 20th percentile above the low end of the otherwise applicable guidelines fine range.
The ITAR Case
According to admissions and court documents filed in the Eastern District of New York, between approximately 2012 and 2016, Raytheon, through certain of its employees and agents, engaged in a scheme to willfully violate the AECA and ITAR Part 130 by failing to disclose to the State Department, Directorate of Defense Trade Controls, fees and commissions paid in connection with two Qatar-related contracts — specifically, the bribes Raytheon paid to the high-level QEAF official through sham subcontracts.
The Justice Department reached this resolution with Raytheon based on a number of factors, including, among others, the nature and seriousness of the offense. Raytheon received credit for its cooperation with the department’s investigation, which included (i) gathering evidence of interest to the government and proactively identifying key documents related to willful ITAR-related misconduct; (ii) making factual presentations concerning the ITAR-related misconduct; and (iii) facilitating witness interviews and expediting the government’s ability to meet with witnesses. Raytheon did not receive full credit for its cooperation because in the initial phase of the investigation, before the National Security Division joined the investigation, it failed to provide information relevant to the ITAR violations beyond what was requested in the FCPA investigation.
Raytheon also received credit for remediation, which included, in addition to the remediation described above in connection with the FCPA case, (i) hiring additional empowered subject matter experts in legal and compliance; (ii) developing a multipronged communications strategy to enhance ethics and compliance training and communications; and (iii) making enhancements to its ITAR-related compliance program.
In light of these considerations, the ITAR-related financial penalty of $21,904,850 includes a cooperation and remediation credit of 20% off the otherwise applicable penalty.
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DCIS, Army Criminal Investigation Division, FBI, and Air Force Office of Special Investigations are investigating the criminal defective pricing case. Senior Auditor Glen Hughes from DCAA’s Office of Investigative Support Division assisted in the civil investigation of the False Claims Act Matter. HSI and the FBI’s International Corruption Unit are investigating the FCPA and ITAR case. The Justice Department’s Office of International Affairs assisted in the investigation for the FCPA and ITAR case.
Assistant Chief Kyle Hankey, Acting Assistant Chief Laura Connelly, and Trial Attorney Tamara Livshiz of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Brian LaMacchia and Benjamin Saltzman for the District of Massachusetts are prosecuting the criminal defective pricing case.
Attorneys Art J. Coulter, Patrick Klein, and Jared S. Wiesner of the Civil Division’s Commercial Litigation Branch, Fraud Section, and Assistant U.S. Attorney Brian LaMacchia for the District of Massachusetts are prosecuting the False Claims Act matter.
Acting Assistant Chief Katherine Raut and Trial Attorney Elina A. Rubin-Smith of the Criminal Division’s Fraud Section, Trial Attorneys Christine Bonomo and Leslie Esbrook of the National Security Division’s Counterintelligence and Export Control Section, and Assistant U.S. Attorneys David Pitluck, Hiral Mehta, and Jessica Weigel for the Eastern District of New York are prosecuting the FCPA and ITAR case.
The Justice Department also expresses its appreciation for the assistance provided by the State Department and the legal offices of the Army, Air Force, Defense Logistics Agency, Defense Contract Management Agency, and Department of Navy.
The Criminal Division’s Fraud Section is responsible for investigating and prosecuting FCPA and Foreign Extortion Prevention Act matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal-fraud/foreign-corrupt-practices-act.
View the Executed Civil False Claims Act Settlement Agreement here.
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