When the Bad Guys Spill the Beans (and You’re the One Who Trips)

Sometimes, there is just no honor amongst thieves.
While it is always risky to give or authorize bribes, that risk may sometimes manifest from unexpected sources.
For RTX (formerly Raytheon Technologies), which entered into agreements with the DOJ and SEC last week to resolve charges related to the FCPA and government procurement laws, it was someone they appear to have been working closely with.
RTX used a consulting firm to funnel about $1.9 million to payoffs to relatives of the country’s emir. Curiously, it was an owner of that very firm who brought the case to light – he filed a commercial lawsuit in 2019 for unpaid fees on a related matter, and made the corruption allegations in the process.
This may have caused the SEC to investigate. Indeed, many of the findings in the DOJ and SEC orders, including the conclusion that the consultant reports were actually written by Raytheon, reflect the allegations and documents attached to that lawsuit.
The owner is not the only middleman in the aerospace and defense industry who has tried to enforce dubious arrangements and, in the process, exposed more than he may have intended.
The French firm Thales, for instance, was sued by Sanjay Bhandari, a self-described “well-known commercial intermediary” who facilitated a meeting between the fighter jet maker and a senior Indian defense official. He was paid €9 million, but claimed to be owed €11 million more – and reportedly triggered an investigation by French authorities as a result. The case is still ongoing.
(For Thales, this may be starting to feel like Groundhog Day. They were a joint-venture partner with Raytheon in the Qatar deals.)
Similarly, around 2017, a middleman in Indonesia reportedly sued to enforce the sale of a helicopter to the Indonesian air force for €44 million. The helicopter was ostensibly for search and rescue operations, but was fitted with luxury appointments and lacked a side door that would facilitate the entry and exit of stretchers. The middleman was eventually sentenced to a 10-year prison term.
And in 2007, a third party threatened to sue German industrial service provider Ferrostaal for unpaid commissions in connection with submarine sales to Greece, even though that could expose both entities to corruption-related prosecution. Ferrostaal decided to pay the company EUR 11 million, leading its lawyers in a later compliance review to conclude that “the net effect was to ‘whitewash’ a highly irregular set of facts with clear compliance red flags.” The company was eventually caught anyway, and fined about $183 million by a Munich court near the end of 2011.
Perhaps it is not surprising that individuals connected to bribery and corruption would continue to make questionable decisions. The lesson for businesses should be clear – a leopard can’t change its spots.
Author’s note: The RTX case includes very unusual circumstances, such the involvement of some of the most prominent officials in Qatar, and resulted in more than $950 million in penalties and disgorgement, as well as a deferred prosecution agreement and the imposition of an independent monitor. While those circumstances are also noteworthy, the point above was highlighted for its relevance to most compliance programs. RTX refers to both the holding company and its subsidiary.
FCPA Compliance Consultant