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Defense contractor Raytheon agrees to pay $950 million to resolve corruption and fraud allegations

NEW YORK — RTX Corp., the defense contractor formerly known as Raytheon, agreed Wednesday to pay $950 million to resolve allegations that it defrauded the government and paid bribes to settle business with Qatar.

The company entered into deferred prosecution agreements in separate cases in federal courts in Brooklyn and Massachusetts, agreed to hire independent monitors to oversee compliance with anti-corruption and anti-fraud laws and must demonstrate good driving for three years.

The money the company owes includes penalties in criminal cases, as well as civil fines, restitution and the return of profits from Defense Department inflated billing and cases from alleged kickbacks paid to a senior Qatari military official from 2012 to 2016.

The amount includes a $428 million settlement for lying to the government about labor and material costs to justify more expensive no-bid contracts and increase the company’s profits. The company was also accused of billing the government twice for a weapons maintenance contract.

It also includes nearly $400 million in criminal penalties in the Brooklyn case, involving alleged kickbacks, and the Massachusetts case, in which the company was accused of inflating its costs of $111 million for missile systems from 2011 to 2013 and the operation of a radar surveillance system in 2017.

He also agreed to pay a $52.5 million civil penalty to resolve a parallel Securities and Exchange Commission investigation and must forfeit at least $66 million to satisfy both probes.

At a brief hearing in Brooklyn federal court, RTX’s lawyers waived their right to an indictment and pleaded not guilty to charges that the company violated the anti-corruption provisions of the Trade Practices Act. foreign corruption and the arms export control law. They did not object to any of the allegations contained in court documents filed in conjunction with the agreement.

RTX said in a statement that it “takes responsibility for the misconduct that occurred” and that it is “committed to maintaining a world-class compliance program, following global laws, regulations and internal policies, while respecting integrity and serving our customers ethically.”

A message seeking comment was left at the Qatari embassy in Washington.

RTX said in a July regulatory filing that it had set aside $1.24 billion to resolve outstanding legal and regulatory matters. The company’s president and CEO, Christopher Calio, told investors that the investigations largely concern issues that predate the Raytheon-United Technologies merger that formed the current company in 2020.

“These questions arise primarily from the legacy of Raytheon Co. and Rockwell Collins prior to the merger and acquisition of those companies,” Calio said. “We have already taken robust corrective actions to address the existing deficiencies that led to these issues. »

According to court documents, Raytheon employees and agents offered and paid bribes to a senior Qatari military official to gain an advantage in securing lucrative business deals with the Qatari military. Qatar UAE Air Force and Qatar Armed Forces.

The company then managed to secure four additions to an existing contract with the Gulf Cooperation Council – a regional union comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates – and a contract to sole source of $510 million to build a joint complex. – an operations center for the Qatari army, according to court documents.

Raytheon made about $36.7 million in profit from additions to the Gulf Cooperation Council contract and expected to earn more than $72 million on the joint operations center, but the Qatari government ultimately did not followed through on the deal, prosecutors said.

In the price inflation case, Raytheon allegedly lied to the government about the costs it would incur for building three Patriot missile firing units – also known as missile batteries – leading to the US Army to accept a $619 million contract.

In a 2013 email cited in court documents, a Raytheon employee told a Pentagon official that the company’s expected costs had increased when, prosecutors said, they had actually decreased. Prosecutors said the government overpaid about $100 million for the weapons.

Raytheon was also accused of misleading the US Air Force in 2017 about the costs associated with operating and maintaining a radar surveillance system, including by arguing that it had to offer employees compensation lucrative to maintain an adequate workforce.

In reality, prosecutors wrote in court documents, the company was “secretly preparing to reduce salaries” of employees at the site “in order to improve the company’s profitability.”

The contract was fraudulently inflated by $11 million, prosecutors said.

The sanctions imposed on Wednesday are just the latest legal consequences of 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 Arms Trafficking Regulations .

Among the allegations were that the company provided classified data on military aircraft to China and that employees took company-issued laptops containing information on missiles and aircraft to Iran, Lebanon and Russia.