Talk about a royal screw-up: CCI columnist Mary Shirley digs into the recent settlement between the U.S. government and RTX Corp., better known as Raytheon, in a case involving a connection with the ruling family of Qatar, fake progress reports and $30 million in improper payments.
The case of RTX Corp. features a bonanza of compliance risk areas — FCPA, ITAR and defective pricing schemes — culminating in a $950 million settlement, deferred prosecution agreements and two monitorships.
What lessons can compliance professionals take away from the various failures of RTX, commonly referred to as Raytheon, its name before a 2020 merger with United Technologies?
FCPA investigation
The FCPA case against RTX revolves around improper third-party intermediary payments of more than $30 million to Qatari government officials through classic bribery schemes, such as sham defense consulting agreements.
In one of the more striking details of the case, an agent acting for Raytheon lacked a background in the defense space where the company operates, a textbook red flag. While the agent lacked the expected professional background, they did have something else important: a familial relationship with the head of state of Qatar and a seat at the table as a member of the ruling family’s council.
It seems that Raytheon did have some compliance controls in place, as agents are expected to provide progress reports on their work for the organization. So, an obvious snag occurred since an agent without relevant subject matter expertise wasn’t well-positioned to provide a legitimate report about their accomplishments and achievements.
To address this glitch, a Raytheon employee loaned their own services to the agent that they were paying and wrote progress reports on the agent’s behalf.
Compliance Lessons From Boston Consulting Group’s FCPA Declination
Self-disclosure, voluntary program improvements cited as factors in DOJ decision
Read moreDOJ settlement
As to the RTX settlement with the DOJ, many of the usual expected cooperation and remediation efforts were present, such as making available current and former employees for interview and leveling up the third-party intermediary risk areas of the compliance program. However, according to DOJ’s news release on the matter, the following factors counted against the company:
- Tardiness responding to DOJ’s requests
- Not being forthcoming with key information
- Giving presentations that did not accurately paint the picture concerning the company’s relationship with a third-party representative
This appears to indicate that while the existence of the compliance program may have value, how you react to government agency scrutiny and addressing issues counts for a whole heck of a lot.
Recent FCPA history
If I were to summarize the themes from recent FCPA cases, they would be that:
- You always want to be perceived as acting in good faith and doing your darndest to get to the bottom of what went wrong; in other words, you display gold star-worthy cooperation with the government agencies and conducting your investigative inquiries with root cause analysis.
- Investing in solutions and/or making “sacrifices” to your business model, such as doing away completely with certain third-party intermediary relationships that are too risky, could prevent you from getting in trouble again.
- Monitorships, like pecuniary clawbacks, hit ’em where it hurts: Companies must pay for the monitor’s team and divert attention from regular business to focus on compliance initiatives. But unlike simple financial penalties, monitorships have an added benefit: They force companies to strengthen their compliance programs. This powerful enforcement tool has recently made a comeback in FCPA cases after being used less frequently in recent years.
