3 Controversies and Litigation

3.1 Illegal obtention of classified information in a bidding process

In March 1990, Raytheon pleaded guilty to one felony count of illegally obtaining classified Air Force budget and planning documents. [1] U.S. District Judge Albert V. Bryan,Jr. imposed a $10,000 criminal fine for one felony count of "conveyance without authority" and $900,000 in civil penalties and damages. The documents allegedly gave Raytheon an unfair advantage against its competitors in bidding for weapons contracts. Although the plea only involved 1983 Air Force documents, United States Attorney Henry Hudson said Raytheon also illegally obtained a wide range of secret Pentagon documents.

3.2 Disputed claims about the Patriot missile

During the 1991 Gulf War, Raytheon received widespread publicity in the United States in connection with its manufacture of the Patriot Missile ( MIM-104 Patriot). The Patriot Missile is an anti-ballistic missile which had allegedly intercepted Scud Missiles launched by Iraq in its defense against the U.S. led invasion. When President George H. W. Bush traveled to Raytheon's Patriot manufacturing plant in Andover, Massachusetts during the Gulf War, he declared, the ""Patriot is 41 for 42: 42 Scuds engaged, 41 intercepted!" [2] After the Gulf War had concluded, the staff of the House Government Operations Subcommittee on Legislation and National Security reported, "The Patriot missile system was not the spectacular success in the Persian Gulf War that the American public was led to believe. There is little evidence to prove that the Patriot hit more than a few Scud missiles launched by Iraq during the Gulf War, and there are some doubts about even these engagements. The public and the Congress were misled by definitive statements of success issued by administration and Raytheon representatives during and after the war." [3]

3.3 AGES Lawsuit

In 1996 a corporation called AGES Group filed suit against Raytheon in federal court in Alabama over a $450 million contract to service C-12 and U-21 military aircraft. [4], [5] The Boston Herald reported that AGES alleged that the security firm Wackenhut Corporation, hired by Raytheon, used video and audio surveillance to spy on a consulting firm hired by AGES to help it prepare its bid. AGES also alleged that stolen confidential pricing documents were turned over to Raytheon. Both Raytheon and AGES had been vying for the contract, which Raytheon had held for decades but which AGES won in 1996. On May 12, 1999, Reuters reported that Raytheon would pay $3 million to AGES Group and purchase $13 million worth of AGES aircraft parts to settle to settle AGES lawsuit. The settlement was exceptional in that the parties agreed that judgment would be entered against Raytheon, legally establishing the validity of AGES' allegations.

3.4 Contract Disputes

Raytheon frequently has been involved in contract disputes with the United States Government. In October of 1994, Raytheon paid $4 million to settle a U.S. government claim that it inflated a defense contract for antimissile radar. The PAVE PAWS system was designed to detect incoming submarine-launched ballistic missiles. PAVE PAWS stands for Precision Acquisition Vehicle Entry Phased Array Warning System. The government claimed in a federal lawsuit that Raytheon inflated a contract to upgrade two of four PAVE PAWS sites by proposing to hire higher-skilled employees than were necessary for the job. Just one year earlier, on October 14, 1993, Raytheon paid $3.7 million to settle allegations that it misled the U.S. Defense Department by overstating the labor costs involved in manufacturing Patriot missiles. "The recovery of this money is yet another warning to contractors that the Truth in Negotiations Act's information disclosure requirements will be strictly and sternly enforced," Frank Hunger, assistant attorney general, said in a statement.

3.5 Brazilian (SIVAM) Controversy

Allegations of bribery were made against Raytheon in 1995 in connection with its efforts to win a 1.4 billion dollar radar contract from Brazil for the SIVAM project. [6] SIVAM, the acronym for "System for Vigilance over the Amazon," is a complex radar surveillance system for use monitoring the Amazon rainforest, allegedly to curb the trafficking of narcotics and to curb illegal logging or burning of the forest. Brazilian police wiretapped a telephone conversation between a special advisor to the Brazilian President Fernando Enrique Cardoso , and Raytheon's operative in Brazil, Jose Afonso Assumpcão. According to transcripts published in the Brazilian Weekly Isto E, when Assumpcão told Gomes dos Santos that Brazilian Senator Gilberto Miranda might block the Raytheon contract, Gomes dos Santos responded, "Damn, did you already pay this guy?" Gomes dos Santos and Brazil's aviation minister resigned because of allegations that this conversation suggested that bribes were paid. Nonetheless, Raytheon ultimately was awarded the contract after lobbying by the administration of U.S. President Bill Clinton.

3.6 Securities Litigation

In October of 1999, Raytheon was the subject of a number of securities class action lawsuits alleging it had issued a series of materially false and misleading statements including overstating the Company's 1997 and 1998 revenues, concealing cost overruns and inflating its financial results. The suits were brought in response to a massive drop in value of Raytheon's common stock as traded on the New York Stock Exchange. On Tuesday, October 12, 1999, Raytheon shares were trading at about 45% below the level at which they had been traded on October 11, 1999. The plunge in stock prices was triggered by a Wall Street Journal report that Raytheon was over cost or behind schedule on more than a dozen fixed-price defense contracts. This crash represented a loss of about $8 billion in market value in a single day. On May 13, 2004 Raytheon reported that it had reached a preliminary agreement to pay $410 million in cash and securities to settle a class-action lawsuit alleging it misled investors by not disclosing difficulties on various Pentagon and construction projects five years before.

4 See also

• Aerospace manufacturer

5 External links

• Raytheon Company website
  • Raytheon Business Ethics and Compliance Home Page
• CorpWatch Raytheon profile

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