RTX Corporation, a leader in aircraft engines and engine parts manufacturing, has reached settlements with the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) to resolve criminal and civil investigations into its subsidiary, Raytheon Company (NYSE:RTN). These settlements relate to allegations of bribery and fraud on contracts in the Middle East and involve payments totaling $959 million.
On Monday, Raytheon entered into two deferred prosecution agreements (DPAs) and a False Claims Act (FCA) settlement with the DOJ, alongside an administrative order from the SEC. The agreements concern payments made by Raytheon and its joint venture, Thales-Raytheon Systems, since 2012, and pricing claims on legacy contracts from 2011, 2013, and 2017.
Under the first DPA, the DOJ will defer criminal prosecution for three years regarding Raytheon's involvement in a conspiracy to violate anti-bribery laws and arms export control regulations. This DPA includes a $282 million penalty and forfeiture to the DOJ. Concurrently, the SEC's order found Raytheon in violation of the FCPA, resulting in a $102 million payment for disgorgement, interest, and civil penalties.
The second DPA addresses two counts of major fraud against the United States involving two legacy contracts. If Raytheon fulfills its obligations under this agreement, the DOJ will seek dismissal of the charges. This DPA mandates a $147 million criminal penalty. Additionally, the FCA settlement requires Raytheon to pay $428 million, including restitution and interest.
Both Raytheon and RTX Corporation must comply with compliance monitoring and self-reporting for three years as part of the settlements. An independent compliance monitor will oversee their adherence to the agreements.
These settlement payments were anticipated and accrued as of June 30, 2024, as disclosed in RTX's second-quarter Form 10-Q report. The details of the DPAs and the FCA settlement are included in the exhibits filed with the SEC and are part of this current report.
The settlements conclude significant legal challenges for RTX Corporation and underscore the company's commitment to resolving past compliance issues. The information is based on a press release statement.
In other recent news, Raytheon, a subsidiary of RTX, has settled criminal charges related to a foreign bribery investigation by entering a three-year deferred prosecution agreement with the U.S. Department of Justice. The agreement allows Raytheon to avoid immediate prosecution, provided it complies with certain undisclosed conditions over the next three years.
Moreover, RTX Corp has been the subject of positive analyst attention, with TD Cowen maintaining a Buy rating on the company. This follows the Javelin Joint Venture (JJV), a collaboration between RTX and Lockheed Martin (NYSE:LMT), securing two contracts worth $267 million from the U.S. Army for the production of Lightweight Command Launch Units.
In addition, Raytheon's counter-drone systems, including the Ku-band Radio Frequency Sensor and Coyote Block 2 and Block 3 effectors, have successfully passed the U.S. Army's tests. The company also secured a $736 million contract from the U.S. Navy for the production of the AIM-9X SIDEWINDER missile's Block II variant. These developments mark significant progress in RTX's recent operations.
InvestingPro Insights
As RTX Corporation navigates through the settlement of these legal challenges, InvestingPro data offers additional context to the company's financial position. Despite the substantial settlement payments, RTX maintains a robust market capitalization of $167.44 billion, reflecting its significant presence in the Aerospace & Defense industry.
InvestingPro Tips highlight that RTX has maintained dividend payments for an impressive 54 consecutive years, demonstrating long-term financial stability. This consistency is particularly noteworthy given the recent legal settlements. Additionally, the company's net income is expected to grow this year, suggesting resilience in its core business operations.
The company's revenue for the last twelve months stands at $72.42 billion, with a revenue growth of 2.61% over the same period. This growth, albeit modest, indicates that RTX continues to expand its business even while addressing past compliance issues.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips that could provide valuable insights into RTX's financial health and market position.
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