Defense contractor Raytheon to pay almost $1B for defrauding DOD

Raytheon Co., part of parent defense contractor RTX, will pay more than $950 million to resolve Justice Department allegations that it defrauded the Defense Department (DOD) and paid bribes to a government official in Qatar to get business in the country.

The company is accused of “a major government fraud scheme involving defective pricing on certain government contracts and violations of the Foreign Corrupt Practices Act and the Arms Export Control Act,” according to a statement from the Department of Justice (DOJ).

The DOJ also said the company had violations in “its implementing regulations” and in “the International Traffic in Arms Regulations.”

Raytheon will enter into three-year deferred prosecution agreements in separate cases filed Wednesday in federal court in Massachusetts and New York. The company also agreed to hire independent compliance monitors to make sure it is following anti-corruption and anti-fraud laws. 

At the center of the allegations in the Massachusetts case are missile systems Raytheon sold to the Department of Defense from 2011 to 2013 and the operation of a radar surveillance system in 2017. The company was accused of inflating its costs by $111 million in those deals.

Raytheon allegedly lied to the Pentagon about the costs to build three Patriot missile batteries, with the Army agreeing to a $619 million contract.

DOJ investigators unearthed a 2013 email in which Raytheon told the Pentagon the company’s expected costs had increased when they had gone down, causing the government to overpay by about $100 million, according to court papers.

And in 2017, Raytheon allegedly misled the Air Force about the costs that came with operating and maintaining a radar surveillance system to inflate the contract by $11 million, prosecutors said.

In the New York case, Raytheon was accused of gaining business from bribes paid to a high-ranking official at the Qatar Emiri Air Force from 2012 to 2016.

“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,” U.S. Attorney Breon Peace for the Eastern District of New York said in the DOJ statement.

Raytheon now owes money for penalties in the criminal cases, civil fines, restitution and returned profits it gleaned from inflating the military contracts and business it got after making the bribes.

“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,” Deputy Assistant Attorney General Kevin Driscoll of the Justice Department’s Criminal Division said in the statement. “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.”

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,” according to The Associated Press.

Assistant Attorney General Matthew Olsen, of the Justice Department’s National Security Division, said that the resolution of the cases “should serve as a stark warning to companies that violate the law when selling sensitive military technology overseas.”