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RTX to pay more than $950 million to resolve Qatar corruption and fraud allegations

Editor’s note: This story was updated on Wednesday, Oct. 16, 2024, to include updates from the Associated Press.

NEW YORK — 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 conclude 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 largest amount is a $428 million civil settlement for allegedly lying to the government about its labor and material costs to justify more expensive no-bid contracts and increase company profits , 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 alleged bribes, 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.

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

At a 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 allegations contained in the court documents filed 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.”

The various legal resolutions were brought to light in the space of several hours.

First, during the Brooklyn hearing, prosecutors revealed that RTX must pay a $252 million fine to resolve criminal charges in the bribery case. Then court documents were filed in Boston showing another criminal fine of nearly $147 million to resolve the missile and radar case.

Finally, a few hours later, the Justice Department issued a press release putting the total amount at $950 million.

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

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. Its chairman and CEO, Christopher Calio, told investors that the investigations largely relate to issues that predate the Raytheon-United Technologies merger that formed the current company in 2020.

“These issues primarily arose from the former Raytheon and Rockwell Collins companies 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. »

Before Wednesday, documents relating to Raytheon’s criminal cases were kept under seal and not available to the public. For that reason, the company’s name was excluded from Brooklyn’s court calendar, leaving the nature of the case a mystery — and reporters scrambling to figure out what it was — until the hearing began.

Raytheon employees and agents offered and paid bribes to a senior Qatari military official to gain an advantage in securing lucrative contracts with the UAE Air Force, according to court documents of Qatar and the Qatari 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 for $510 million to build a joint operations center. for the Qatari military, according to court documents.

Raytheon made about $36.7 million in profit from additions to the Gulf Cooperation Council contract, which involved air defense system upgrades, and expected to earn more than $72 million on the center of joint operations, but the Qatari government ultimately did not follow through on the agreement. » prosecutors said.

The Qatari military official represented his country in the Gulf Cooperation Council agreement, served as an advisor on the joint operations center project and managed procurement for the UAE’s Qatari Air Force , prosecutors said. Raytheon bribed him by signing at least $2 million in fictitious contracts with a company he owned, prosecutors said.

In the price inflation case, Raytheon allegedly lied to the government about the costs it would incur to build three Patriot missile firing units – known as missile batteries – leading the military American to accept a contract of 619 million dollars.

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.

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 revealing 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 sensitive missile and aircraft information to Iran, Lebanon and in Russia.