RTX Fined Nearly $1B for Alleged Violations Linked to Qatari Sales, Including Export Breaches

The company will pay both civil and criminal penalties to resolve the charges, must hire independent compliance monitors to oversee its compliance programs for three years, and agreed to take several steps to improve its compliance procedures, including putting in place improved sales controls. The company also must hire “empowered subject matter experts” to oversee its anti-corruption program, introduce data analytics tools to improve its third party monitoring, and develop a “multipronged communications strategy” to improve its ethics and compliance training.

The company’s $950 million DOJ penalty and the $124 million SEC fine were announced about one month after the U.S. fined RTX $200 million to settle alleged violations of U.S. defense export controls, the largest stand-alone export penalty ever issued by the State Department (see 2408300023). In a July earnings release, RTX said it was awaiting the resolution of “several outstanding legal matters,” including a case before DOJ and the SEC involving “improper payments” associated with contracts in the Middle East.

"RTX is taking responsibility for the misconduct that occurred. We have worked diligently during the investigations to remediate that misconduct and continue to do so," an RTX spokesperson said in an Oct. 16 email. 'We are committed to working closely with the incoming independent monitor to improve and further enhance our ethics and compliance program."

The person added that RTX is "committed to maintaining a world-class compliance program, following global laws, regulations and internal policies, while upholding integrity and serving our customers in an ethical matter." It also noted that the issues "relate to conduct that occurred at Raytheon Company largely prior to 2020."

The alleged violations outlined by DOJ involve efforts by RTX, also known as Raytheon, to win Qatar-related business through bribery, said Kevin Driscoll, deputy assistant attorney general of DOJ’s Criminal Division. “Such corrupt and fraudulent conduct, especially by a publicly traded U.S. defense contractor, erodes public trust and harms the DOD, businesses that play by the rules, and American taxpayers,” he said.

One set of allegations accuses RTX of violating Part 130 of the International Traffic in Arms Regulations, which requires companies to disclose fees, political contributions or commissions associated with controlled exports. DOJ said RTX didn’t disclose fees and commissions in connection with two Qatar-related contracts between 2012 and 2016 as part of a scheme to bribe a senior official at the Qatar Emiri Air Force, a branch of Qatar’s Armed Forces.

RTX made those bribes to obtain and retain business from the country’s air force and armed forces, DOJ said, which violated the FCPA. The aerospace firm entered into “sham subcontracts” for air defense operations studies “in order to corruptly obtain the QEAF official’s assistance in securing certain air defense contracts,” DOJ said, and also entered into a “teaming agreement” with a Qatari entity in order to “corruptly obtain” a potential contract to build a Qatari military operations center.

For the ITAR charges, DOJ said RTX received credit for cooperating with the agency, including by gathering evidence “of interest to the government and proactively identifying key documents related to willful ITAR-related misconduct.” The company also made “factual presentations concerning the ITAR-related misconduct” and helped DOJ interview witnesses.

But the agency said Raytheon didn’t receive “full” cooperation credit because it initially “failed to provide information relevant to the ITAR violations beyond what was requested in the FCPA investigation.” The company agreed to pay about $21.9 million to settle the ITAR charges, which included a 20% remediation credit.

As part of the FCPA case, RTX will pay a $230.4 criminal penalty million and a forfeiture of about $36.7 million. It also will pay the SEC about $49.1 million in disgorgement and prejudgment interest in addition to a $75 million civil penalty, and DOJ said it will credit about $22.5 million of that penalty toward its criminal fine.

RTX also will pay a $146.7 million fine, along with about $111.2 million in victim compensation, after DOJ said the company's employees gave false information to the Pentagon during contract negotiations for a foreign country to buy defense items, including Patriot missile systems. RTX employees tried to “mislead DOD into awarding the two contracts at inflated prices,” DOJ said, causing the agency to pay the company over $111 million more than it should have been paid.

Under another settlement, RTX 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. The company admitted to the charges as part of the settlement, saying that it "failed to disclose" required cost or pricing data to the Pentagon about the cost of labor and materials to supply the weapon systems. It also "admitted that by misrepresenting its costs during contract negotiations it overcharged the United States on these contracts and received profits in excess of the negotiated profit rates."

DOJ said the penalty is the second-largest "government procurement fraud recovery" under the False Claims Act.

Matthew Olsen, chief of DOJ’s National Security Division, said the settlements “should serve as a stark warning to companies that violate the law when selling sensitive military technology overseas.”

DOJ said the government will soon begin "administrative proceedings" to discuss whether RTX or other people or entities associated with the company should be suspended or debarred as federal contractors. Because multiple federal agencies have an interest in the case, the Pentagon is currently determining which agency will take the lead in those proceedings.