Defense contractor RTX has agreed to pay more than $950 million to resolve bribery, fraud claims

NEW YORK (AP) — RTX Corp., a defense contractor Formerly known as RaytheonIt agreed Wednesday to pay more than $950 million to resolve allegations that it defrauded the government and paid bribes to secure business. 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 show good behavior for three years.

The money owed to the company includes fines in criminal cases, as well as civil fines, restitution and return of profits derived from inflated Defense Department billings and business from bribes paid to high-ranking Qatari military officials from 2012 to 2016. .

The largest was a $428 million civil settlement for lying to the government about its labor and material costs to justify no-bid contracts and inflate the company's profits and double-billing the government on an arms maintenance contract.

The total also includes nearly $400 million in criminal fines in the Brooklyn case, which included alleged bribes, and in the Massachusetts case, where the company was accused of overstating the cost of the missile system by $111 million from 2011 to 2013. 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 bribery allegations and must forfeit at least $66 million to satisfy both investigations.

At a hearing in Brooklyn federal court, RTX lawyers waived their right to sue and pleaded not guilty to charges that the company violated anti-bribery provisions of the Foreign Corrupt Practices Act and the Arms Export Control Act. They did not contest any of the allegations in court documents filed with the agreement.

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

Several legal resolutions came out in the space of a few hours.

First, at a hearing in Brooklyn, prosecutors revealed that RTX must pay $252 million in fines to settle criminal charges in the bribery case. Then, court documents hit Boston's docket showing another criminal fine of about $147 million to settle the missile and radar case.

Finally, a few hours later, the Justice Department issued a press release answering the total to $950 million.

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

A message seeking comment was sent to the Qatari embassy in Washington.

RTX said in a July regulatory filing that it has set aside $1.24 billion to resolve pending legal and regulatory matters. Its president and CEO, Christopher Caleo, told investors that the investigations largely involved issues that The Raytheon-United Technologies merger which formed the present company in 2020.

“These issues primarily arose from the legacy Raytheon Company and Rockwell Collins prior to the merger and acquisition of these companies,” Callio said. “We have already taken strong corrective action to address the legacy gaps that led to these issues.”

Prior to Wednesday, documents from Raytheon's criminal case were sealed and not publicly available. Because of that, the company's name was left off the Brooklyn court calendar, leaving the nature of the case a mystery — and reporters scrambling to find out what it was until the hearing began.

According to court documents, Raytheon employees and agents offered and paid bribes to a high-ranking Qatari military official to obtain lucrative contracts with the Qatar Emiri Air Force and the Qatari Armed Forces.

The company then succeeded in securing four additions to existing contracts with the Gulf Cooperation Council – a regional union of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates – and a $510 million contract to build a joint-operations center. As for the Qatari military, court documents said.

Raytheon profited about $36.7 million from the Gulf Cooperation Council contract addition, which involved air-defense system upgrades, and was expected to make more than $72 million in profits on the joint-operations center, but the Qatari government ultimately did not move forward with the deal, prosecutors said.

The Qatari military official represented his country in Gulf Cooperation Council agreements, served as an adviser on joint-operations center projects and managed procurement for the Qatar Emiri Air Force, prosecutors said. Raytheon bribed him by signing fake contracts worth at least $2 million with a company he owned, prosecutors said.

In a case of price inflation, Raytheon lied to the government about what it would cost to build three Patriot missile firing units — known as missile batteries — leading the U.S. Army to agree to a $619 million contract.

In a 2013 email cited in court papers, a Raytheon employee told a Pentagon official that the company's expected costs had increased when, according to prosecutors, they had actually decreased. Prosecutors said the government overpaid by nearly $100 million.

Raytheon was also accused in 2017 of misleading the US Air Force about the costs associated with operating and maintaining radar surveillance systems, arguing that maintaining adequate staffing required a lucrative compensation package.

In reality, prosecutors wrote in court papers, the company was preparing to “secretly cut pay” to site workers “to improve the company's profitability.”

Prosecutors said the contract was fraudulently inflated by $11 million.

Wednesday's fine is the latest legal fallout from RTX's business dealings.

In August, the company agreed to pay $200 million to the State Department after disclosing more than two dozen alleged violations of the Arms Export Control Act and the International Traffic in Arms Act.

The allegations included that the company provided classified military aircraft data to China and that employees took company-issued laptops containing sensitive missile and aircraft information to Iran, Lebanon and Russia.