DDTC Charges Raytheon with 125 ITAR, AECA Violations; Company Agrees to $8 Million in Penalties
Raytheon Company agreed to pay $8 million in civil penalties to settle more than 120 alleged violations of the International Traffic in Arms regulations and the Arms Export Control Act, the State Department’s Directorate of Defense Trade Controls said April 30. The Massachusetts company also agreed to an extensive compliance program, which includes hiring an outside Special Compliance Officer to monitor Raytheon’s ITAR and AECA procedures.
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The company agreed to the penalties and compliance program without “admitting or denying the allegations,” according to the April 30 consent agreement, which remains in effect for four years (read the agreement here). Half of the $8 million will be used for DDTC-approved consent agreement remedial compliance measures. The penalties stem from “longstanding and repeated” violations of Raytheon’s administration of its Part 124 agreements and Part 123 temporary import and export authorizations, DDTC said in the proposed charging letter sent to Raytheon on March 21, 2013 (here).
“Based on the repetitive nature of the violations, the Department has determined that there is a corporate-wide weakness in administering [Parts 124 and 123] and in investigating and correcting errors that requires immediate, comprehensive, effective remedial action across [Raytheon’s] many operating units and subsidiaries,” the charging letter said.
Some of the violations include Raytheon exceeding the dollar amounts authorized under DDTC-approved agreements, which required -- but did not receive -- Congressional approval, the letter said. Sparked by multiple disclosures of violations at the company’s Space and Airborne Systems business unit, DDTC audited Raytheon in 2006, the letter said. DDTC officials continued meeting with the company in ensuing years, and Raytheon continued to disclose a variety of violations and identify corrective actions.
Despite these efforts, Raytheon’s violations continued over the years, while corrective measures “repeatedly proved insufficient or failed,” the letter said. In 2008, for example, the company disclosed its failure to file sales reports for 2004 and 2005; two years later, Raytheon reported the same violation for 2006 and 2007. Disclosed violations of ITAR export and import authorizations were generally administrative, such as inaccurate tracking, valuation and documentation, the letter said. Reported violations at Raytheon's network Centric Systems business unit also included failures to obtain proper license endorsements, properly decrement licenses, file shipments in the Automated Export System and return expired licenses, the letter said.
Raytheon’s corrective actions have been hampered by “inadequate investigations of root causes,” the letter said. The company has also not complied with ITAR Section 127.12(c), which details how voluntary disclosures should be handled. DDTC repeatedly told Raytheon the importance of complying with this section since September 2010, but Raytheon “has not satisfactorily done so.”
DDTC charged Raytheon with 110 counts of failing to comply with the terms and administrative requirements of Part 124 agreements and 15 counts of failing to comply with the terms and administrative requirements of Part 123, temporary import and export authorizations.
The consent agreement requires Raytheon to complete an internal review of AECA and ITAR compliance resources within 120 days. In six months, and thereafter semi-annually, Raytheon has to submit a status report to DDTC on its compliance programs. The agreement also requires Raytheon, in consultation with DDTC, to hire an outside Special Compliance Official. The official will monitor, oversee and promote AECA and ITAR compliance, as required by the consent agreement. The agreement details specific qualifications for the official -- they must not have any history of working for Raytheon or its subsidiaries -- and requires them to serve for two years. After the two years are up, Raytheon can appoint an Internal Special Compliance Official to serve for the remaining two years of the consent agreement. That official will have the same authorities and responsibilities of the Special Compliance Official.
The State Department determined an administrative debarment of Raytheon is “not appropriate at this time,” according to a Department statement (here). The company voluntarily disclosed nearly all the ITAR violations in the settlement, cooperated with DDTC reviews and implemented or planned “extensive remedial measures,” State said.