Case File
Raytheon’s Dirty Business in Qatar (Sham Contracts)
Contents
Introduction
Introduction
contentsOver the past decade, Qatar has dramatically increased its military capabilities. Qatar’s military expenditure rose by 434%, a process of hyper-militarization which intensified after the 2017 blockade on Qatar led by Saudi Arabia and the United Arab Emirates. The promise of lucrative contracts attracted foreign arms companies, particularly US manufacturers - major weapons imports from the US grew by at least 208% between 2016-2020 relative to the previous four years.
As a result of Raytheon’s pursuit of defense projects in the United Arab Emirates, US authorities have alleged multiple bribery schemes and high-bribery-risk activities involving the company.
On October 16, 2024, Raytheon admitted as part of a Deferred Prosecution Agreement (DPA) in the United States that it had paid bribes intended for a high-ranking Qatari military official to secure contracts in the 2010s. Raytheon agreed to pay a criminal penalty of USD 230.4 million, forfeit USD 36.7 million, and pay an additional USD 21.9 million in criminal penalties. This DPA was part of a settlement connected to proceedings initiated by the Securities and Exchange Commission, which issued a cease-and-desist order against RTX (Raytheon’s parent company) on the same day.
Also on October 16, as part of a second DPA, Raytheon admitted to two additional schemes to defraud the U.S. Department of Defense in connection with the provision of defense products and services, including PATRIOT missile systems and radar systems intended for an undisclosed foreign customer. Altogether, Raytheon will pay over USD 950 million as a result of the two DPAs.
The cease-and-desist order also highlighted another scheme with corruption concerns, detailed in 'Raytheon’s Dirty Business in Qatar (The Qatari Agent)'.
A note on this case:
The version of events presented in this case study relies primarily on the version presented in the “Order Instituting Cease-And-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, And Imposing a Cease-And-Desist Order” (“the cease-and-desist order”) against RTX Corporation of 16 October 2024 with additions, as far as possible, from the Deferred Prosecution Agreement between the United States and Raytheon for Raytheon’s violations of the Foreign Corrupt Practices Act and the Arms Export Control Act of 16 October 2024 (“the DPA”), as well as the allegations made in the private lawsuit Tarek A. Fouad vs. The State of Qatar. The SEC cease-and-desist order provides the most comprehensive account of all actors involved, though it includes fewer details about the events themselves. The actors are anonymized in the two proceedings against Raytheon in different ways and are named in Tarek A. Fouad v. The State of Qatar. Considerable effort has been made in the present report to align the actors across the three proceedings; however, we cannot guarantee the accuracy of these efforts. If you have any information on this please contact us at [email protected]
The previous version of this case as it appeared on the Corruption Tracker by Sahar Vardi has been updated fundamentally as a result of the publication of the DPA and cease-and-desist order.
Case Details
Case details
contentsSeller country
United States
Seller company
Raytheon (now RTX)
Buyer country
Qatar
Goods category
Fake Contracts, Missile Systems
Equipment sold
Air Defense products and a C4I Joint Operations Control System (sale not completed)
Deal value
Raytheon profits totalled approximately $36.7 million, with expected additional earnings of $72 million that ultimately did not materialize; the deal's total value was likely several billion USD.
Sum involved in corruption
USD 1.9 million
Start year
2012
End year
2017
Outcome status
Deferred Prosecution Agreement(s)
Actors
Actors
contentsRaytheon: An American arms company. We use the term Raytheon as a collective term for the companies today under RTX Corporation, which was formed after a merger and name change involving Raytheon Company and Raytheon Technologies Corp.
Joint Venture (JV): Was a joint venture between Raytheon Company and a French company, each owning 50% of the joint venture. The joint venture was based in California and was controlled by and reported into Raytheon. The joint-venture subcontracted with the Qatari supplier (below) to perform sham studies to funnel illicit payments to foreign officials in order to win contracts with the Qatari Emiri Air Force (QEAF). In 2016 the joint venture became a wholly owned Raytheon subsidiary. The joint-venture is reportedly Thales-Raytheon Systems Company LLC.
Supplier A: A Qatar-based company established in May 2012. According to the 2024 cease-and-desist order, between 2012 and 2017, Raytheon employees and Supplier A devised a scheme to funnel bribe payments to Qatari military officials by entering into fake contracts for defense studies. A Qatari royal family member (below) and two QEAF military officials had an interest in Supplier A, and the military officials and a director of Supplier A (below) managed the company. Supplier A has two wholly-owned subsidiaries. Supplier A most likely corresponds to Qatari Entities/Qatari Companies in the 2024 DPA. We may also infer that Supplier A corresponds to Digital Soula Systems LLC (DDS) or one of its parent companies in Tarek A. Fouad v. The State of Qatar.
Al Sedriah Holding Company: 60% owner of DSS, beneficially owned 83% by a member of Qatar’s royal family, reportedly Sheikh Joaan bin Hamad bin Khalifa Al Thani, and 17% Lt. Col. Mohamed Al-Mannai.
Qatari Royal Family Member: The majority owner of Supplier A (above) and an immediate family member of the current Emir of Qatar. This individual may correspond to Sheikh Joaan bin Hamad bin Khalifa Al Thani, a full brother of the Emir and one of the beneficial owners of the majority shareholder company of DSS, Al Sedriah Holding Company, in Tarek A. Fouad vs. The State of Qatar.
Qatari Military Official A: former high-level general with the QEAF, close associate of Qatari Royal Family Member, and the Qatar GGC HAT program (below) chairman and program director of procurement. During the relevant period, he held dual roles as both a principal board member of Supplier A and a member of the Qatari military. Qatari Military Official A most likely corresponds to Foreign Official 1 in the 2024 DPA.
Qatari Military Official B: was a shareholder and board member of Supplier A, and an officer in the QEAF for GCC HAT. Qatari Military Official B served as the Qatari Royal Family Member’s representative in both government and commercial matters.
Lt. Col. Mohamed Abdullah Al-Mannai: Identified in the lawsuit Tarek Fouad v. The State of Qatar. Al-Mannai is identified as the 17% owner of and executive chairman Al Sedriah Holding Company and board member of Digital Soula Systems. He was also an active-duty lieutenant colonel for the Qatar Air Force. Allegedly one of the facilitators of the bribes. Lt. Col. Al-Mannai is likely one of the people referred to as either Qatari Military Official A or Qatari Military Official B in the 2024 cease-and-desist order. He is the only military official identified by Tarek Fouad as a shareholder in the company where the cease-and-desist order identifies two. He is also identified as a Lt. Col. not a Brigadier General. The Corruption Tracker does not currently have access to all court documents in the lawsuit, so it is possible that more information is contained therein.
Tarek Fouad: Former director and 20% shareholder of Digital Soula Systems. He brought the lawsuit against the State of Qatar for unpaid invoices in 2019 in which he also alleged corruption against his co-directors and Sheisk Joaan bin Hamad (above).
AbdulSalam Abu-Issa: A director and board member of DSS (above). Also the representative of 20% shareholder in DSS, Salam International Investment Ltd. Allegedly one of the facilitators of the bribes.
Individual 1: Identified in Raytheon’s 2024 Deferred Prosecution Agreement as a citizen of the United States and other countries, a former officer and shareholder of the companies referred to as the “Qatari Entities”.
Local Company: Raytheon’s 2024 Deferred Prosecution Agreement identified, but did not name, a construction company based in Qatar that built villas and was associated with Foreign Official 1. Tarek A. Fouad v. The State of Qatar names a local Qatari construction company by the name of Osoul, which the second sham contract was allegedly laundered through.
Qatar Emiri Air Force (QEAF/ “Air Force”): Air Force of Qatar, customers/clients of both Raytheon and DSS.
Gulf Cooperation Council (GCC): an intergovernmental union of six Gulf-country member states: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. In 1998, the GCC contracted with a company later acquired by Raytheon for an air defense system called Hizam Al-Taawun (HAT). There were several later additions to the HAT contracts, two of which pertained to Qatar exclusively. Foreign Official 1/ Military Official A was the country leader for Qatar on the GCC contract, and Qatar’s signatory on all four additions.
Allegations
Summary of Corruption Allegations
contentsAccording to U.S. court documents, between 2012 and 2017, Raytheon entered into fake contracts with Qatari companies to funnel bribes to a military official and, allegedly, a member of the Qatari royal family. Defense-related studies were commissioned from a company in which Raytheon knew both the military official and the Qatari royal had a financial interest. In reality, Raytheon employees prepared these studies, which were then passed off as the company's work. Raytheon paid over USD 1.9 billion for these fake studies.
The allegation first became public in 2019 when Tarek Fouad, a former director of the Qatari company Digital Soula Systems (DSS), filed a lawsuit against the Qatari government for unpaid bills. Several bank statements presented in the case showed payments from Raytheon to DSS. Officially, these payments were for defense studies and reports on Qatar’s defense systems that Raytheon had commissioned from DSS. However, forensic analysis of the studies (commissioned by Fouad as part of his lawsuit) suggests they were actually completed by Raytheon. As quoted in a Wall Street Journal article, Fouad stated, “This form of bribe is often referred to as a no-work contract.”
At the time, DSS was the primary consultant to the Qatari government on “Project Falcon,” the C4I system for which Raytheon was a competitor. Although the project was eventually scrapped, Qatar was then considering a bid from a Raytheon-led consortium. According to the DPA and cease-and-desist order, however, the sham study arrangements were unrelated to Project Falcon and instead served as bribes for other Qatari defense contracts.
In 2018, two of the three directors of DSS, Mohammed Al Mannai and Abdul Salam Abu-Issa, reached an agreement with the Qatari government, receiving $2.4 million of the $6.8 million owed to the company. In his lawsuit, Fouad alleged that this settlement was reached after the Qatari Ministry of Defence suspected the pair of involvement in bribing a member of the royal family and that they accepted the reduced payment to avoid an investigation.
Timeline
Timeline
contentsThe Qatar Additions
2011
- Raytheon employees, including two senior managers in the U.S., allegedly agreed to funnel payments to supplier companies owned by Qatari Military Officials A and B, as well as a member of the Qatari royal family, to help Raytheon secure three contracts related to the HAT contract. Raytheon was aware that Qatari Military Official A had significant influence over the awarding of HAT contracts and controlled certain payments.
2012
- From 2012 to 2017, Raytheon entered into two fake supplier agreements with Supplier A to funnel nearly USD 2 million in bribes to a Qatari royal family member and two QEAF officials, helping Raytheon secure four contracts valued at least USD 90 million. Raytheon was unsuccessful in obtaining an additional contract, as the program was canceled and one of the bribed Qatari military officials retired.
- AprAccording to the DPA, a contract was created specifying that a Local Company would prepare three studies for Raytheon's customer, the Qatari Air Force. Raytheon knew that the company referred to as "Local Company" in the DPA was affiliated with Foreign Official 1. The corresponding account in the cease-and-desist order states that Raytheon employees recognized the sham supplier was so obviously unqualified for the studies that it wouldn't pass initial due diligence. As a result, Supplier A was formed to serve as the supplier. Raytheon employees were aware that both Qatari Military Officials A and B were principals and board members of Supplier A, and that a Qatari Royal Family Member was the majority owner.
- MayAccording to the DPA, once the companies, referred to as Qatari Company (Supplier A) and Qatari Sub 1, were formed in May and July 2012, Foreign Official 1 introduced the entities to Raytheon. Consequently, Raython pursued a commercial relationship with these companies rather than Local Company.
2013
- Through 2013, Raytheon employees assisted the Qatari company and its subsidiary in passing Raytheon's due diligence process and helped them secure the subcontracts for the studies. Using personal email accounts, they aided the Qatari companies in drafting the proposal and conducting pricing negotiations with Raytheon.
- As Foreign Official 1 gained more responsibilities within the QEAF, he began using an alias when communicating on behalf of the Qatari entities. His email account included the Qatari company's domain name and an alias belonging to a relative who shared Foreign Official 1's last name but was not known to be affiliated with the QEAF. Several Raytheon employees were aware of Foreign Official 1's use of the alias. These employees communicated with the company via private email addresses.
- AprRaytheon was paid USD 15.4 million by the GCC in relation to the additions, with one Raytheon employee informing another that Foreign Official 1 was the main figure behind the payment release.
2014
- One of the Raytheon employees created the studies and provided them to the person identified as “Individual 1” so that the Qatari Company could falsely claim they performed the study. Despite paying nearly $975,000 for the studies for the first contract, Raytheon did not retain a copy of the studies. In fact, Raytheon employees did not review the studies because they were written in Arabic, and only the employee who drafted the studies was fluent.
2015
- 4 NovA similar process was repeated to obtain the second addition to the HAT contracts with new fake studies contracts. Foreign Official 1, using his alias, sent an email to Raytheon with his Qatari subsidiary company’s proposal for the studies, in reality, it was drafted by Raytheon, and signed with the title “member, Board of Directors”.
2016
- 30 AugForeign official 1, using his alias email account, sent invoices to Raytheon on behalf of his company. He had by then retired from the QAF.
- According to allegations made in Tarek A. Fouad v. The State of Qatar, DSS started to receive payments totalling USD 950,000 that the company accountant did not know what to book against since they were not aware of any projects the company had with Raytheon. Fouad alleges that, in an attempt to launder the money, Lt. Col. Al-Mannai and Abu-Issa created another sham construct with a small local Qatari construction company called Osoul. Under this contract, Osoul issued sham invoices back dated to 2014, two years before the sham contract was created in 2016.
2017
- Between January and November 2017, Raytheon made three payments totalling approximately USD 950,000 to the second Qatari subsidiary company for the second set of sham studies.
- MarRaytheon receives a 1.1 billion USD contract for building an A/N FPS-132 Block 5 Early Warning Radar system in Qatar.
The Falcon Project
2013
- Raytheon’s 2024 DPA further describes how Raytheon offered an additional bribe to Foreign Official 1 in connection with the company’s attempt to win a potential sole source contract to build a joint-operations centre. In 2013, the QAF established a committee to oversee the potential project. According to the cease-and-desist order, Raytheon employees knew that Qatari Military Official A was an advisor to this project. Rather than relying on the same sham defense studies, they attempted to enter into a partnership agreement with Supplier A’s subsidiary. The project is referred to as the Falcon Project in the cease-and-desist order and Tarek A. Fouad v. The State of Qatar and as the “JOC” contract in the DPA.
- Foreign Official 1 became responsible for procurement and logistics at the QEAF, allowing them more influence over the award of defense contracts, including the JOC contract.
- Also in 2013, a Raytheon employee met with Foreign Official 1 both in their official capacity on behalf of the QAF and in a commercial capacity as a representative of the Qatari companies. In an email about the meeting, the Raytheon employee said that, in their role as a decision-maker at the QEAF, Foreign Official 1 submitted a report in favor of proceeding with another contract that was worth billions of dollars.
2014
- FebAccording to the lawsuit Tarek Fouad v. State of Qatar, in February 2014, a commercial Consultancy Services Agreement for the acquisition of a C41 system for Joint Operations command referred to as the Falcon Project was awarded to DSS.
- JunIn June 2014, the QAF selected one of the Qatari subsidiaries as a consultant to the committee in charge of the JOC Contract.
2015
- MayForeign Official 1 and a Raytheon employee convinced the Qatari government committee overseeing the JOC project to visit Raytheaon’s offices in California, together with representatives of one of the Qatari subsidiaries. Raytheon was also pursuing a teaming-agreement with the other Qatari subsidiary.
2016
- FebRaytheon entered into an agreement with one of the subsidiaries of the Qatari company in order to corruptly obtain Foreign Official 1’s assistance with the JOC contract.
2017
- The Qatari government did not go forward with the JOC contract. In this capacity, the company would help draft requests for proposals and advise the Qatari government on which company should be awarded the contract.
Outcomes
Investigation Outcomes
contentsTarek Fouad v. The State of Qatar
2019
- 25 SepTarek Fouad files a lawsuit in California against the State of Qatar for unpaid invoices to DSS. According to the allegations against Fouad’s fellow directors of DSS, Lt. Col. Al-Mannai and AbdulSalam Abu-Issa, Raytheon directed a series of payments worth over USD 1.9 million into bank accounts associated with DSS that were meant as bribes for a Qatari royal, later identified in the Wall Street Journal as Sheikh Joaan bin Hamad Al Thani. The payments were disguised as compensation for defense studies that DSS would produce for Raytheon, which were really produced by Raytheon itself. Raytheon was aware as early as 2013 of DSS’ ownership structure. Between November 2015 and March 2018, DSS invoiced for agreed consulting services provided to Qatar. According to allegations in a 2019 lawsuit brought by DSS board member Tarek Fouad, some invoices worth over USD 4.4 million were never paid by Qatar to DSS. According to Fouad’s 2019 lawsuit, in September 2018 the Ministry of Defense of Qatar became aware of the alleged role of DSS in facilitating bribes. The two DSS directors allegedly accepted lower invoice payments in exchange for non-prosecution.
2020
- 14 AprThe case is dismissed, a decision upheld on appeal in February 2021.
SEC Investigation into Raytheon
2019
- In 2019, the Securities and Exchange Commission (SEC) handed Raytheon a subpoena seeking documents for an investigation regarding improper payments in dealings of Thales-Raytheon Systems in a “middle eastern country”.
2020
- OctIn October 2020, following these allegations, the U.S. Department of Justice started its own investigation and served Raytheon with two criminal subpoenas (in 2020 and 2021).
2021
- MarThe second criminal subpoena is filed, seeking information on a contract signed in 2017. Also in 2021, Raytheon puts aside 290 million USD for legal defense and liabilities relating to criminal investigations.
- 7 SepThe Wall Street Journal reports the U.S. Securities and Exchange Commission had opened an investigation into whether Raytheon used payments to DSS were bribes intended for Joaan bin Hamad Al Thani following Fouad’s lawsuit.
2024
- 16 OctRaytheon Company, as a subsidiary of RTX, enters into two deferred prosecution agreements with the U.S. government and agrees to pay a total of USD 950 million and retain an independent compliance monitor for three years. One of the DPA’s concerned the specific allegations of breaches in the Foreign Corrupt Practices Act and the Arms Export Control Act. Raytheon entered into this DPA as part of it’s settlement of the institution of cease-and-desist proceedings by the Securities and Exchange Commission. The second DPA concerned two schemes to defraud the U.S. Department of Defense in connection with the pricing of defense articles and services, including PATRIOT missile systems and a radar system destined for a foreign customer.
References
References
contentsUnited States District Court District of Massachusetts. 16.10.2024. “United States of America v. Raytheon Company”. https://storage.courtlistener.com/recap/gov.uscourts.mad.276407/gov.uscourts.mad.276407.2.0_1.pdf
United States District Court For the Eastern District of New York. 16.10.2024. “United States of America v. Raytheon Company - Deferred Prosecution Agreement”. https://fcpa.stanford.edu/fcpac/documents/6000/004747.pdf
U.S. Department of Justice. 16.10.2024. “Raytheon Company to Pay Over USD 950M in Connection wtih Defective Pricing, Foreign Bribery, and Export Control Schemes.” https://fcpa.stanford.edu/fcpac/documents/6000/004746.pdf
U.S. Securities and Exchange Commission. 16.10.2024. “Order Instituting Cease-And-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, And Imposing a Cease-And-Desist Order”. . https://fcpa.stanford.edu/fcpac/documents/6000/004742.pdf
U.S. Securities and Exchange Commission. 16.10.2024. “SEC Charges Virginia-Based RTX Corp. with Violating Foreign Corrupt Practices Act in Connection with Efforts to Obtain Contracts with the Qatari Military.” https://fcpa.stanford.edu/fcpac/documents/6000/004743.pdf
Tarek A. Fouad v. The State of Qatar: Complaint. 25.09.2019. https://www.courtlistener.com/docket/16249039/tarek-a-fouad-v-the-state-of-qatar/
Tarek A. Fouad v. The State of Qatar: Declaration of Tarek Fouad in Opposition to Motions to Dismiss and in Support of Motion to Stay Action and compel Arbitration. 2020.02.14. https://ecf.cacd.uscourts.gov/doc1/031132428240
Tokar, Dylan. 07.10.2021. “WSJ News Exclusive | U.S. Probes Examine Raytheon’s Dealings with Qatari Defense Contractor.” WSJ. https://www.wsj.com/articles/u-s-probes-examine-raytheons-dealings-with-qatari-defense-contractor-11631007001.