Raytheon Agrees to Pay Over $950 Million in Connection with Defective Pricing, Foreign Bribery and Export Control Schemes
Wednesday, October 16, 2024
As part of today’s announcement, Raytheon will pay over
$574 million to resolve criminal civil liability for overcharging government
contracts in connection with filings unsealed in the District of Massachusetts
BOSTON – Raytheon Company (Raytheon), a subsidiary of RTX
(formerly Raytheon Technologies Corporation) in Arlington, Va., has agreed to
pay over $950 million to resolve the government’s investigations into a major
government fraud scheme involving defective pricing on certain government
contracts and violations of the Foreign Corrupt Practices Act (FCPA) and the
Arms Export Control Act (AECA) and its implementing regulations, the
International Traffic in Arms Regulations (ITAR).
The U.S. Attorney’s Office in Massachusetts announced today
that Raytheon will pay over $574 million to resolve criminal civil liability
for overcharging government contracts. Raytheon has entered into a three-year deferred
prosecution agreement (DPA) in connection with a criminal Information
filed today in the District of Massachusetts charging Raytheon with
two counts of major fraud against the United States. Raytheon has agreed to pay
$147 million to resolve the criminal allegations. Today’s settlement with the
District of Massachusetts also resolves civil allegations that Raytheon
provided untruthful certified cost or pricing data when negotiating prices with
the DOD for numerous government contracts and double billed DOD on a weapons
maintenance contract. Raytheon
has agreed to pay $428 million, the second largest government procurement fraud
recovery under the False Claims Act, to resolve the civil allegations.
Under both resolutions, Raytheon will pay a total of $574.7 million. Under the
terms of the DPA, Raytheon will pay $146.7 million in a criminal monetary
penalty, $111.2 million in victim compensation and retain an independent
compliance monitor for three years.
Separately, Raytheon entered into a three-year DPA in
connection with a criminal information unsealed today in the Eastern District
of New York charging Raytheon with two counts: conspiracy to violate the
anti-bribery provision of the FCPA for a scheme to bribe a government official
in Qatar and conspiracy to violate the AECA for willfully failing to disclose
the bribes in export licensing applications with the Department of State as
required by Part 130 of ITAR.
The agreements in Boston the District of Massachusetts and
the Eastern District of New York require that Raytheon retain an independent
compliance monitor for three years, enhance its internal compliance program,
report evidence of additional misconduct to the Justice Department, and
cooperate in any ongoing or future criminal investigations.
Raytheon also reached a separate False Claims Act settlement
with the department relating to the defective pricing schemes. The Justice
Department’s FCPA and ITAR resolution is coordinated with the Securities and
Exchange Commission (SEC).
In addition, the Justice Department’s resolutions ensure
that the appropriate federal agencies can proceed with determining whether
Raytheon or any other individuals or entities associated with the company
should be suspended or debarred as federal contractors. Pursuant to the Federal
Acquisition Regulations (FAR), when more than one agency has an interest in an
entity’s potential suspension or debarment, the FAR requires that the
Interagency Suspension and Debarment Committee (ISDC) identify the lead agency
for conducting governmentwide suspension or debarment proceedings. In
connection with this resolution, the Justice Department has referred Raytheon’s
factual admissions to the appropriate officials within the DOD to initiate the
process with the ISDC to identify which federal agency will take the lead in
such administrative proceedings, which occur independently of the Justice
Department’s criminal and civil resolutions.
“Through deliberate and deceptive actions, Raytheon not
only defrauded the U.S. government – it compromised the integrity of our
defense procurement process,” said Acting United States Attorney Joshua S.
Levy. “Our office is committed to holding accountable those who prioritize
profits over national security and clear legal obligations. This case
underscores our unwavering commitment to pursuing justice, particularly when
taxpayer dollars and DOD operations are at stake. We will continue to work
tirelessly with our law enforcement partners to ensure that this type of
misconduct is fully exposed and addressed with serious consequences.”
“Raytheon engaged in criminal schemes to defraud the U.S.
government in connection with contracts for critical military systems and to
win business through bribery in Qatar,” said Deputy Assistant Attorney General
Kevin Driscoll of the Justice Department’s Criminal Division. “Such corrupt and
fraudulent conduct, especially by a publicly traded U.S. defense contractor,
erodes public trust and harms the Department of Defense, businesses that play
by the rules, and American taxpayers. Today’s resolutions, with criminal and
civil penalties totaling nearly $1 billion, reflect the Criminal Division’s
ability to tackle the most significant and complex white-collar cases across
multiple subject matters.”
“Government contractors have an obligation to be fully
transparent about their cost and pricing data when they seek an award of a sole
source contract,” said Principal Deputy Assistant Attorney General Brian M.
Boynton, head of the Justice Department’s Civil Division. “The Department will
use all available tools to hold accountable contractors that knowingly provide
inflated pricing information or otherwise violate their legal obligations when
negotiating or performing contracts with the United States.”
“Investigating procurement fraud impacting DOD contracts is
a top priority for the Defense Criminal Investigative Service (DCIS), the law
enforcement arm of the DOD Office of Inspector General,” said Inspector General
Robert Storch for the Department of Defense. “When DOD contractors fail to
provide truthful pricing data and overcharge the government, they undermine the
integrity of the DOD procurement process and harm critical DOD programs. The
DCIS will continue to work with its law enforcement partners and the Department
of Justice to ensure DOD contractors that engage in defective pricing schemes
are held accountable for their actions. The Defense Contract Audit Agency's
Operations Investigative Support Division provided valuable expertise during
this investigation.”
“We rely on private contractors to help build our
unparalleled defense technology, not to pull the wool over our eyes by
convincing the government to shell out tens of millions more than what their
technology is actually worth,” said Jodi Cohen, Special Agent in Charge of the
Federal Bureau of Investigation (FBI) Boston Division. “Today’s settlement
holds Raytheon both criminally and financially responsible for doing just that,
using fraud and deceit to gouge American taxpayers to boost its company’s bottom
line. The FBI and our partners will not hesitate to investigate any entity that
sets out to undermine the principles of fair and free competition to defraud
the federal government and waste precious tax dollars.”
“This recovery exemplifies the commitment of the Department
of the Army Criminal Investigation Division to ensure that contracts supporting
our warfighters are executed effectively and fairly, guaranteeing our armed
forces remain unmatched in capability and lethality,” said Special
Agent-in-Charge Keith K. Kelly, Department of the Army Criminal Investigation
Division’s (CID) Fraud Field Office. “Army CID applauds the efforts of our
partners in this investigation and recovery. We will continue to work tirelessly
to defend our defense procurement enterprise against any party which would seek
financial advantage to the detriment of our men and women in uniform.”
“Any attempt to defraud the government also degrades our
military’s ability to invest in the capabilities needed to protect our nation,”
said Special Agent Jason Hein of the Air Force Office of Special Investigations
(AFOSI) Director of Procurement Fraud. “The AFOSI procurement fraud team is
committed to working with our partners to protect the procurement process and
the government funds entrusted to the Department of the Air Force.”
According to admissions and court documents filed in the
District of Massachusetts, Raytheon employees provided false and misleading
information to the DOD during contract negotiations concerning two contracts
with the United States for the benefit of a foreign partner, one to purchase
PATRIOT missile systems and the other to operate and maintain a radar station.
In both instances, Raytheon employees provided false and deceptive information
to DOD in order to mislead DOD into awarding the two contracts at inflated
prices. These schemes to defraud caused the DOD to pay Raytheon $111.2 million
more than Raytheon should have been paid on the contracts.
Raytheon cooperated with the investigation and engaged in
remedial measures, including, terminating employees who remained at the company
that were responsible for the misconduct; establishing a broad defective
pricing awareness campaign; developing and implementing policies, procedures
and controls relating to defective pricing compliance; and engaging additional
resources with appropriate expertise to evaluate and test the new policies,
procedures and controls relating to defective pricing compliance.
Pursuant to the DPA, Raytheon has also agreed to retain an
independent compliance monitor for a period of three years, and Raytheon and
RTX have agreed to continue to implement a compliance and ethics program at
Raytheon designed to prevent and detect fraudulent conduct throughout its
operations. Raytheon and RTX also agreed to continue to cooperate with the
Department of Justice in any ongoing or future criminal investigations by the
Criminal Division’s Fraud Section or the U.S. Attorney’s Office for the District
of Massachusetts.
Under the False Claims Act settlement Raytheon will pay $428 million for
knowingly failing to provide truthful certified cost and pricing data during
negotiations on numerous government contracts between 2009 and 2020, in
violation of the Truth in Negotiations Act (TINA). Congress enacted TINA in
1962 to help level the playing field in sole source contracts, where there is
no price competition, by making sure that government negotiators have access to
the cost or pricing data that the offeror used when developing its proposal. As
part of the settlement, Raytheon admitted that it failed to disclose cost or
pricing data, as required by TINA, regarding its labor and material costs to
supply weapons systems to DOD, and that it failed to disclose cost or pricing
data, as required by TINA, regarding its labor costs to staff a radar station.
As a result, Raytheon overcharged the United States and received profits in
excess of the negotiated profit rates. Raytheon also admitted it billed the
same costs twice on a maintenance contract for the DOD.
The DOD’s Principal Director of Defense Pricing,
Contracting, and Acquisition Policy, Mr. John Tenaglia said, “The Defense
Department greatly appreciates DOJ’s outstanding efforts culminating in this
significant recovery. The price we pay for equipment and services absolutely
matters. The more we pay, the less combat capability we can deliver for our
nation’s warfighters. This DOJ recovery both restores funding that will be used
to acquire more capability while also serving as a strong deterrent to all companies
that might seek to deny DOD contracting officers with factual information they
require to negotiate contracts at fair and reasonable prices.”
“During the course of a Truth in Negotiations audit, DCAA’s
auditors found indicators of suspected irregular conduct and elevated these
concerns to the Department of Defense Inspector General and the Department of
Justice. DCAA’s Investigative Support team assisted on the case and provided
valuable insight into the calculations of the damages to the Government.
Preventing fraud and ensuring a fair and reasonable price for products is
everyone’s job and DCAA is a valuable member of the team required to investigate
and prosecute those who seek to defraud the government,” said Terri L. Dilly,
Director, Defense Contract Audit Agency (DCAA).
The civil settlement includes a resolution of a lawsuit
filed under the qui tam or whistleblower provision of the
False Claims Act, which permits private parties to file suit on behalf of the
United States for false claims and share in a portion of the Government’s
recovery. The qui tam lawsuit was filed by a former
Raytheon employee, and is captioned United States ex rel. Atesoglu v.
v. Raytheon Technologies Corporation, 21-CV-10690-PBS (D. Mass.). The
whistleblower will receive $4.2 million as her share of the settlement.
The criminal case is being prosecuted by Assistant U.S.
Attorneys Brian LaMacchia and Benjamin Saltzman of the District of
Massachusetts and Assistant Chief Kyle Hankey, Acting Assistant Chief Laura
Connelly and Trial Attorney Tamara Livshiz of the Criminal Division’s Fraud
Section. The case was investigated by DCIS, Army-CID, FBI and Air Force OSI.
The civil investigation was handled by Assistant U.S.
Attorney Brian LaMacchia of the District of Massachusetts, along with Trial
Attorneys Art J. Coulter, Patrick Klein and Jared S. Wiesner of the Civil
Division’s Commercial Litigation Branch, Fraud Section.
