RTX (ex-Raytheon) busted for ‘extraordinary’ corruption

Indictments of arms contractors for corruption and malfeasance are not uncommon, but recently revealed cases of illegal conduct by RTX (formerly Raytheon) are extraordinary even by the relatively lax standards of the defense industry.

The company has agreed to pay nearly $1 billion in fines, which is one of the highest figures ever for corruption in the arms sector. To incur these fines, RTX participated in price gouging on Pentagon contracts, bribing officials in Qatar, and sharing sensitive information with China.

Engaging in illegal conduct on this scale suggests that, far from being an aberration, this behavior may be business as usual for the company. Given the scale of RTX’s malfeasance, the Justice Department should take a close look at the practices of other arms contractors to determine whether these infractions are industry standard.

The company’s approach is reminiscent of the way arms companies did business in the 1960s, when, for example, massive cost overruns on Lockheed Martin’s C-5 transport plane drew fire from internal critics like Ernest Fitzgerald and congressional gadflies, like the-Democratic Sen. William Proxmire of Wisconsin.

Resorting to bribery has been less prevalent since Sen. Proxmire pushed through the Foreign Corrupt Practices Act of 1977, which was a response to a massive scandal involving the bribery of officials in Japan, Germany, the Netherlands, Indonesia, and Saudi Arabia. The exposure brought about by the scandal – which covered events going back to the 1950s that were not known to the general public until a set of 1975 Senate hearings on the activities of multinational corporations showed the world how bribery was used to sway the decisions of foreign policy makers. This resulted in major consequences, including the conviction of former Japanese Premier Kakuei Tanaka, along with 10 other business people and government officials.

These days, with the exception of egregious cases like the recent conviction of Sen. Robert Menendez (D-N.J.) for taking bribes from the Egyptian government, most arms companies are more subtle in their efforts to influence foreign government officials, as far as can be determined. Bribery as blatant as passing along bags of cash, as happened in a number of cases in the 1960s and 1970s, is no longer prevalent. Now bribes are hidden amongst business deals. For example, a precondition of most major U.S. arms sales is the creation of an “offset” or kickback agreement. Basically, if a country spends billions of dollars on a U.S.-supplied weapon system, the company making the sale is expected to give something back to the purchasing country.

These offsets can include things like letting the host country build components of the system they are buying, to subsidizing military-related activities like the UAE’s cybersecurity industry, or even investing in unrelated items like hotels and entertainment venues. These deals are complex, and the U.S. government generally gives the companies involved free range to make whatever deals they need to make to secure an arms sale.

This regularity allows for a perfect avenue for currying favor with the potential recipient country. For example, it’s easy enough to throw part of an offset agreement to a relative of a member of the ruling elite with little chance of being detected or held accountable.

The story of RTX is about more than just money. For example, its weapons have been used to kill civilians in Yemen, Gaza, and other war zones. In addition to not showing remorse or regret for its part in these atrocities, RTX is also lobbying to reduce government vetting of weapons exports, a move that could make it easier to arm reckless and repressive regimes.

In the case of the Saudi war on Yemen, RTX lobbied aggressively to block any effort to cut off weapons supplies to the Saudi regime through visits to Congress and coordination with top Trump administration economic officials like Peter Navarro.

And it could get worse. As the Pentagon budget soars towards $1 trillion a year, and the wars in Ukraine and Gaza put a premium on pushing weapons out the door more quickly, opportunities for corrupt behavior will multiply. One potential way to head off a new wave of corruption in the weapons industry would be to adopt the kinds of reforms championed by Sen. Elizabeth Warren (D-Mass.). She has endorsed policy changes which could prevent price gouging and work to reduce the power and influence of ex-military and congressional officials who work as board members or lobbyists for weapons contractors after leaving government.

Better regulations and more vigorous prosecution of bribery and price gouging could well reduce corruption in the arms industry. But the ultimate solution would be to scale back America’s “cover the globe” military strategy and resist the tendency to arm allies regardless of their behavior. We see this happening now with the Biden administration’s continuation of arms sales and military aid to Israel, even though the International Court of Justice has said that it is “plausible” that Israel is engaged in a campaign of genocide in Gaza. When waging war and selling weapons are viewed as the royal road to global security, companies can take advantage of urgency, as Sen. Harry Truman found out when he chaired a Senate committee on war profiteering in World War II, and as did John Sopko when he served as the Special Inspector General for Afghan Reconstruction.

Netanyahu’s war is bad for almost everyone — not just the direct victims of the violence. Future U.S. administrations will find that current, uncritical support for Israel will make their jobs extremely difficult when they attempt to present the idea that the United States is a reliable partner that believes in promoting adherence to the “rules-based international order.” Furthermore, the people of Israel will find that their nation is treated as a pariah by many countries, including ones which had recently been open to developing a positive relationship with Jerusalem. As for the goal of eliminating Hamas altogether, it is a long shot. And even if the organization is completely eradicated, a new organization could pop up composed of people who lost family members and had their lives turned upside down by Israel’s brutal campaign in Gaza.

The war is not bad for companies like RTX. Although they did not lobby for increased aid to Israel, they benefit from the chaos that comes from war and conflict, even if they aren’t the primary cause of this frightening condition. But if we could build a world where cooperation and diplomacy supplant the use of force as the first resort in U.S. foreign policy, companies like RTX could see their revenues reduced dramatically. Demilitarizing our society will require us to reduce the power and economic clout of companies like RTX, but it will also have to involve a change in the current U.S. foreign policy, which elevates force and the provision of arms above common-sense diplomacy.