Defense Contractor to Pay $950M to Resolve Bribery and Fraud Allegations
Defense contractor RTX Corporation, formerly Raytheon, agreed on Wednesday to a $950 million settlement with U.S. authorities to resolve allegations of bribery and fraud related to its defense contracts with Qatar.
The defense giant, which rebranded from Raytheon after merging with United Technologies in 2020, has entered deferred prosecution agreements in separate federal cases in Massachusetts and the New York City borough of Brooklyn. The company must hire independent monitors and adhere to anti-corruption measures over the next three years to remain compliant.
The $950 million payment includes criminal fines, civil penalties, restitution and the return of profits made from what prosecutors charged were inflated defense contracts and bribes paid to a high-ranking Qatari military official from 2012 to 2016.
The amount includes a $428 million settlement over allegations the contractor lied to the government about its labor and material costs to justify costlier no-bid contracts and drive the company's profits higher. The company was also accused of double-billing the government on a weapons maintenance contract.
The settlement also includes nearly $400 million in criminal penalties in the Brooklyn case, involving the bribery allegations, 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.
The Securities and Exchange Commission also investigated RTX's conduct, leading to an additional $52.5 million civil penalty. The company must pay at least $66 million in forfeitures to resolve both probes.
During a federal court hearing in Brooklyn, RTX attorneys entered a not guilty plea to charges that the company violated the anti-bribery provision of the Foreign Corruption Practices Act and the Arms Export Control Act, but did not contest the allegations in court documents filed in conjunction with the agreement.
RTX stated it is "taking responsibility for the misconduct that occurred" and emphasized its commitment to "upholding integrity and serving our customers ethically."
RTX CEO Christopher Calio said that the investigations largely involved issues that predated the merger with United Technologies. In a regulatory filing in July, the company disclosed that it had set aside $1.24 billion to cover legal and regulatory costs, emphasizing that robust measures have since been implemented to address these gaps.
"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 also succeeded in securing four additions to a 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 settlement is the latest in a series of legal and regulatory challenges for RTX. In August, the company agreed to pay $200 million to the U.S. State Department after self-disclosing violations of the Arms Export Control Act, including sharing classified aircraft data with China and transporting sensitive equipment to Iran, Lebanon and Russia.
This includes reporting from the Associated Press.
