US authorities are investigating whether payments from Raytheon Technologies Corp. to a consultant to the Qatari armed forces could have been bribes intended for a member of the country’s ruling royal family, according to people familiar with the matter.
A lawsuit in California, dismissed last year on jurisdictional grounds, included allegations that Raytheon funneled about 7 million Qatari riyals, the equivalent of $ 1.9 million, into earnings through Digital Soula Systems, a Doha, Qatar-based defense and security consultancy that was partly owned by a brother of the country’s emir.
The lawsuit, filed in 2019 by a former director of Digital Soula Systems who claimed the QAF did not pay for the work the consulting firm did on a defense procurement contract, has led to inquiries of the United States Securities and Exchange Commission and the United States Department of Justice, people familiar with the matter said.
The SEC began investigating allegations of corruption in the lawsuit in the months following its filing, according to one of those familiar with the matter. The DOJ quickly followed suit, the person added. Agencies share power to enforce the Foreign Corrupt Practices Act, which prohibits companies from paying bribes to foreign public officials to gain a business advantage, and requires companies to maintain controls to prevent such payments .
Law firm Wilmer Cutler Pickering Hale and Dorr LLP has been asked by Raytheon to investigate the allegations in the lawsuit and has interviewed people with knowledge of Digital Soula Systems and its dealings with Raytheon, according to several people who said they were contacted. . by the law firm.
Raytheon publicly disclosed parallel FCPA investigations into securities filings last year, claiming only that authorities were investigating whether improper payments were made by Raytheon or its joint venture with France’s Thales. HER
in the Middle East since 2014. The company did not provide further details on the probes.
A spokesperson for Raytheon said the company maintains a “rigorous” anti-corruption compliance program and cooperates with government investigations. The spokesperson declined to comment on the subject of the investigations, citing the ongoing investigations.
A spokeswoman for Thales said the investigations disclosed by Raytheon concerned Raytheon or a joint venture under full control of Raytheon, and that the French company had not received any requests from US or French authorities on the matter.
A spokesperson for the Department of Justice declined to comment. The SEC did not respond to requests for comment.
Founded in 2013, Digital Soula Systems was hired to help Qatar modernize the way it acquires defense products, according to former employees who interviewed the Wall Street Journal. The country has a large defense budget for its size, but lacks the expertise and scale to effectively manage procurement processes and even some of the cutting-edge equipment it purchases, the former employees said.
Qatar, which has a population of less than 3 million, spent around $ 6.5 billion on defense in 2020, according to the International Institute for Strategic Studies. Raytheon has won contracts in Qatar worth more than $ 7 billion since 2014, including for the construction and maintenance of its Patriot missile system and other air defense infrastructure, according to a count in public records from Journal.
Digital Soula Systems contracted with QAF in March 2015 to provide advice on acquiring an advanced command and control system, dubbed the Falcon Project, according to a copy of the agreement seen by the Journal. Company staff, mostly retired military personnel from the UK, Germany and elsewhere, began arriving in Doha shortly thereafter to begin work on the technical specifications for the project, said former employees.
A formal document requesting bids for the Falcon project was completed in 2016, but the project at this point was suffering from significant delays due to malfunctions and internal struggles within the QAF, the former employees said. Digital Soula Systems continued to operate until mid-2017, expecting him to be hired to review bids for Project Falcon, but the Qataris quickly ditched the proposed command and control system, said they declared.
After the project collapsed, Tarek Fouad, a dual US and UK citizen and one of the three directors of Digital Soula Systems, sued the QAF for $ 4.4 million in fees he said was owed for the work of the consulting firm. In the lawsuit, Fouad also alleged that his two former co-directors negotiated an illegitimate settlement with the QAF in order to avoid prosecution in Qatar for facilitating the alleged corruption of Raytheon.
The alleged bribes were intended for Sheikh Joaan bin Hamad bin Khalifa Al Thani, the Emir of Qatar’s brother, Fouad said, in what his complaint called an “apparent effort” to influence the government. acquisition by Qatar of defense systems.
A spokesperson for the Government of Qatar’s Communications Office said it was unable to provide anyone who could speak to the corruption allegations in Mr. Fouad’s trial or related allegations regarding the expenses. Qatari military more generally. The two former co-directors of Mr. Fouad, of Qatari nationality, could not be reached for comment.
Mr. Fouad alleged that Raytheon between 2014 and 2016 directed a series of payments to bank accounts associated with Digital Soula Systems. Bank statements included in his lawsuit show several of those payments from Raytheon in 2014, according to the former manager.
The payments were supposed to be compensation for the defense studies Digital Soula Systems would produce for Raytheon, Fouad claimed in the lawsuit. But metadata extracted from the digital files of the studies appears to show that Raytheon himself created them, according to a forensic report commissioned by Fouad and included in his trial. The forensic report was carried out by Secure Network Technologies Inc., an information security consultancy firm based in Syracuse, NY
Mr. Fouad, in a written statement filed in his lawsuit, argued that the work orders for the studies were a sham, since none of the deliverables requested in the contracts were created by Digital Soula Systems directly or indirectly for Raytheon. . “This form of bribe is often referred to as a contract without work,” he said in the statement.
Payments such as those alleged in Mr. Fouad’s trial would have posed a serious FCPA risk for Raytheon, according to attorneys who reviewed the corruption allegations and Mr. Fouad’s trial documents.
One of the directors of Digital Soula Systems was an active-duty lieutenant colonel for the QAF, and the consulting firm was majority-owned by Cheikh Joaan, according to business registration files included by Mr. Fouad in his lawsuit. Sheikh Joaan was the majority owner of a company called Al Sedriah, which had a 60% stake in Digital Soula Systems, according to records.
Raytheon was aware of Cheikh Joaan’s stake in Digital Soula Systems, according to Mr. Fouad’s lawsuit. An email included by Mr. Fouad in his lawsuit appears to show that a member of Raytheon’s compliance staff asked Mr. Fouad in 2013 for information about the owners of Al Sedriah. Mr. Fouad in his response identified Sheikh Joaan as the owner of Al Sedriah.
“The fact that [Digital Soula Systems] had such close ties not only to the ruling family but also to a serving military officer, presumably with some degree of influence or insight into Qatari defense purchases ”would have been of concern to the Compliance Department of Raytheon, said Ryan Rohlfsen, a former member of DOJ’s FCPA unit and a partner at law firm Ropes & Gray LLP.
“There are red flags everywhere from an FCPA accountability standpoint,” he said.
In motions to dismiss Mr Fouad’s lawsuit last year, QAF and Digital Soula Systems denied his claim that the consulting firm still owed money for the work it had done. on Project Falcon, claiming they had already reached a $ 2.4 million deal to resolve any unpaid bill issues.
The QAF and Digital Soula Systems in their cases argued that Mr. Fouad did not have the authority to bring legal action on behalf of the consulting firm and that a US court was an inappropriate forum to resolve his claims. . The documents did not address Mr. Fouad’s corruption allegations.
Digital Soula Systems in its written submissions further argued that Mr. Fouad had been removed from his duties as a company director and that the only persons authorized to act in that capacity at the time of the trial were his two former co-directors.
Mr Fouad’s lawsuit was dismissed in 2020 by a district court judge who agreed with the QAF that the United States was an inappropriate forum to resolve the dispute. An appeals court upheld the lower court’s decision in February.
A formal request for bids from defense contractors to build Project Falcon, launched in 2016, had elicited only one response – from a consortium of companies led by Raytheon, according to former Digital Soula Systems employees and Letters. consulted by the Journal. But the project never saw the light of day.
A sharp drop in oil prices in 2016 prompted the Qatari government to look for ways to cut costs and launch a project review that caused further delays to the Falcon project, Fouad said in his lawsuit.
Raytheon’s proposal has been closed by Qatar’s Defense Ministry and the project has not been pursued, former Digital Soula Systems employees said.
Write to Dylan Tokar at [email protected]
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