Tucson-based Raytheon unit target of federal probe into contract pricing

Defense contractor Raytheon Technologies Corp. has set aside $290 million to cover potential expenses of a federal criminal investigation into cost irregularities on past Pentagon contracts.

The Department of Justice investigation involves Raytheon’s former Integrated Defense Systems business, which, at the time, was based in Tewksbury, Massachusetts. That business is now part of the Tucson-based Raytheon Missiles & Defense unit under the 2020 merger with United Technologies.

The probe involves multiyear contracts and includes potential civil “defective pricing” claims for three contracts entered into between 2011 and 2013, according to Raytheon filings with the U.S. Securities and Exchange Commission.

Under federal law, defective pricing occurs when a contractor fails to disclose more current, complete or accurate cost and pricing data to the government, resulting in a significant increase to the contract price.

As part of the same investigation, the company disclosed that it had received a second criminal subpoena from the DOJ in March 2021, relating to a different contract entered into in 2017.

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Raytheon is cooperating fully with the DOJ and believes it has defenses to potential claims, but it has reserved $290 million to cover the risk of liability for damages, interest and possible penalties, the company said in its 10-K annual report issued Friday.

Raytheon spokesman Chris Johnson said the company would not comment on the investigation.

The company also is facing several shareholder lawsuits, citing the pending federal investigation and alleging executives failed to disclose material information about its internal accounting controls.

Meanwhile, Bloomberg News reported last week that three unnamed senior executives had left Raytheon Missiles & Defense amid the federal probe, citing an internal Raytheon email.