Raytheon’s $950M Penalty Highlights Multiple Corruption and Compliance Due Diligence Failures

Raytheon to Pay Over $950 Million for Defective Pricing, Foreign Bribery, and Export Control Violations

Raytheon Company (Raytheon), a subsidiary of RTX, reached a resolution with the Department of Justice (DOJ), Securities and Exchange Commission (SEC), and the State Department, agreeing to pay more than $950 million to settle criminal and civil allegations of defective pricing on government contracts, foreign bribery schemes, and violations of U.S. export controls. The case highlights the critical need for robust due diligence, improved internal controls, and a strong ethics and compliance culture in global enterprises, even when a compliance program is in place.

In the SEC’s press release, Charles E. Cain, Chief of the SEC Enforcement Division’s FCPA Unit stated, "The penalty in this case reflects the significant misconduct by Raytheon and the need for global companies to implement meaningful internal accounting controls that ensure that payments to intermediaries are not used to circumvent the restrictions of the FCPA.” 

Investigations began after a 2019 California lawsuit alleged that defense contractor Raytheon channeled around $1.9 million through a consulting firm partially owned by the emir of Qatar’s brother. While the lawsuit was dismissed on jurisdictional grounds, it garnered the attention of the U.S. State Department.  

Raytheon’s settlement stems from allegations of systemic misconduct involving three primary violations:

1. Defective Pricing Practices: The company failed to disclose accurate pricing information for government contracts, from 2012 through 2013 and again from 2017 through 2018, resulting in $111 million in overcharges to the U.S. government and taxpayers. 
2. Foreign Bribery Schemes: Raytheon allegedly funneled bribes to a high-level official at the Qatar Emiri Air Force (QEAF), a branch of Qatar’s Armed Forces (QAF) to retain and secure lucrative defense contracts in violation of the anti-bribery provision of the Foreign Corrupt Practices Act (FCPA).
3. Export Control Violations: Raytheon was accused of exporting controlled technologies without proper authorization, raising national security concerns. 

These corrupt practices reportedly generated substantial profits for the company while exposing significant risks for both Raytheon and its stakeholders.

In October 2024, Raytheon entered into two deferred prosecution agreements (DPA’s) to resolve criminal charges filed by the DOJ in federal courts in Boston and Brooklyn. They also settled civil claims with the department stemming from for a qui tam whistleblower lawsuit by a former employee, agreeing to resolve the related bribery case with the SEC.

Raytheon was charged on 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 Arms Export Controls Act (AECA) for willfully failing to disclose the bribes in export licensing applications with the Department of State as required by part 130 of International Traffic in Arms Regulations (ITAR).”

Raytheon admitted, as part of the resolution, “to engaging in two separate schemes to defraud the Department of Defense (DOD) in connection with the provision of defense articles and services, including PATRIOT missile systems and a radar system.”

Additionally, Raytheon entered into a civil False Claims Act settlement to resolve allegations of providing untruthful certified cost or pricing data when negotiating prices with the DOD for government contracts and double billing on a weapons maintenance contracts in violation of the Truth in Negotiations Act (TINA).

Regulatory Action:

The settlements include:

• $49 million in the SEC’s order in disgorgement and prejudgment interest of approximately $49 million and a civil penalty of $75 million, $22.5 million of which will be offset by a criminal fine in a parallel criminal action.
• $267 million ($230.4 million criminal penalties and $36,696,068 forfeiture) to resolve FCPA violations. (Approximately $7.4 million in disgorgement paid to the SEC will be credited against the forfeiture.) 
• $258 million to resolve defective pricing allegations brought by the DOJ.
• $21.9 million ITAR-related financial penalty that includes a cooperation and remediation credit of 20% off the otherwise applicable penalty.
• $428 million in penalties pursuant to a False Claims Act settlement for failing to provide truthful certified cost and pricing in multiple government contract negotiations.

Along with monetary penalties, both agreements 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. 

The enforcement actions were coordinated across agencies and reflect the U.S. government’s increasingly aggressive stance on corporate misconduct. 

The DOJ emphasized Raytheon’s failure to self-report their violations, noting that the company only cooperated after the investigation had begun.

The penalties, resulting from investigations by the DOJ and SEC, underscore significant compliance failures in multiple facets of Raytheon’s operations.

Compliance Lapses and Red Flags:

Raytheon’s enforcement action revealed several systemic failures:

• Inadequate Third-Party Oversight: Subcontractors and agents engaged in bribery with little oversight or accountability.
• Deficient Export Controls: Internal compliance teams failed to ensure adherence to export control regulations, leading to unauthorized transfers of sensitive technologies.
• Faulty Pricing Disclosures: Procurement teams misrepresented pricing data on government contracts, resulting in significant overcharges.

These failures occurred despite Raytheon’s established compliance framework, signaling gaps in execution and enforcement.

Key Takeaways in Risk Management and Compliance

The Raytheon case serves as a powerful reminder that even major corporations with significant resources are not immune to regulatory scrutiny. 

Key takeaways for businesses include:

1. Strengthen Third-Party Oversight: Ninety percent of FCPA violations involve third parties. Companies must perform rigorous due diligence investigations on agents, subcontractors, and international partners. 
2. Enhanced Due Diligence: Proactive deeper vetting of company executives, third-party agents, and contractors is essential to mitigate bribery risks. We recommend partnering with an expert intendent global risk management firm for robust due diligence investigations.
3. Export Controls Risk Management: Establish comprehensive internal controls, including automated systems for monitoring compliance across pricing, bribery, and export controls practices. Multinational companies need to develop rigorous processes to ensure adherence to international trade laws and national security regulations.
4. Create a Culture of Integrity: Foster a culture of accountability, ensuring employees at all levels understand the importance of ethical business conduct.

Raytheon’s is a not only a case of unmitigated corruption, but one of compromising national security and defrauding the American people’s tax dollars. Raytheon’s $950 million penalty underscores the immense financial and reputational costs of non-compliance. To avoid similar pitfalls, companies must invest in comprehensive due diligence investigations, robust internal controls, and a culture of accountability. As federal enforcement actions grow increasingly focused, organizations must prioritize proactive compliance measures to safeguard their operations and reputations. In today’s regulatory climate, the stakes have never been higher.

Partner with Infortal Worldwide for expert guidance in mitigating compliance risks. Our tailored due diligence investigation solutions can help your organization strengthen its defenses against regulatory violations and safeguard your global operations to prevent bribery and corruption.