/>i24 October 2024. Concluding the government’s investigations into a “major government fraud scheme,” Raytheon has agreed to pay over $950 million to resolve allegations of defective pricing, foreign bribery, and export control violations. This settlement marks one of the largest recoveries under the False Claims Act, signaling to government contractors the severe consequences of fraudulent practices. A former employee filed a qui tam whistleblower lawsuit regarding the contractor’s contract negotiation and billing practices.
Key Details of Fraud Scheme
Raytheon, a subsidiary of RTX, has been at the center of a major government fraud investigation involving several serious allegations:
Defective Pricing: Raytheon was found to have provided untruthful certified cost or pricing data during negotiations with the Department of Defense (DoD), resulting in overcharges. The company agreed to pay $428 million to settle these civil allegations, marking the second-largest government procurement fraud recovery under the False Claims Act.
Foreign Bribery: The company faced charges under the Foreign Corrupt Practices Act (FCPA) for conspiring to bribe a government official in Qatar. Raytheon entered into a Deferred Prosecution Agreement (DPA) and agreed to a $147 million payment to resolve these criminal allegations.
Export Control Violations: Violations of the Arms Export Control Act (AECA) and its implementing regulations, the International Traffic in Arms Regulations (ITAR), were also part of the settlement, leading to further scrutiny and penalties.
In total, Raytheon will pay over $950 million, comprising a $574.7 million payout for criminal civil liability and additional penalties related to the FCPA and AECA violations.
Qui Tam Whistleblower Lawsuit
A former Raytheon employee reported the government contractor’s alleged violations of the Truth in Negotiations Act (TINA) via a False Claims Act qui tam lawsuit. Under the False Claims Act settlement, Raytheon has agreed to pay $428 million for knowingly violating TINA by failing to provide truthful cost and pricing data during negotiations on various government contracts from 2009 to 2020. Enacted in 1962, TINA aims to ensure fair pricing in sole source contracts by granting government negotiators access to the cost or pricing data used by offerors (in this case, government contractors). In the settlement, Raytheon conceded that it failed to provide necessary labor and material cost data to the DoD concerning weapons systems, as well as omitting labor cost data needed for staffing a radar station. The government ended up overpaying for services, from which Raytheon profited, above the agreed-upon profit rates. Furthermore, Raytheon admitted to double billing for identical costs on a DoD maintenance contract.
Importance of Whistleblowing Mechanisms
The settlement also highlights the role of whistleblowers under the False Claims Act. The qui tam lawsuit initiated by a former Raytheon employee resulted in a $4.2 million reward for the whistleblower.
The Role of Regulatory Bodies
The settlement was achieved through coordinated efforts between various federal agencies, including the Department of Justice, the Securities and Exchange Commission, and the Defense Contract Audit Agency (DCAA). These bodies play a critical role in enforcing compliance and ensuring government contractors adhere to procurement standards. Raytheon faces potential suspension or debarment as a government contractor, pending potential administrative proceedings with the Interagency Suspension and Debarment Committee.
The Raytheon case serves as a reminder of the high stakes involved in government contracting and the power of whistleblowers to make sure contracted funds are used appropriately. For contractors, it is imperative to maintain transparency, adhere to ethical standards, and implement comprehensive compliance programs. Government contractor employees who see something can say something, as the False Claims Act provides an avenue for private citizens to report fraud perpetrated against the federal government.
