A Look At The Raytheon – United Technologies Merger Through An FCPA Lens
A few days ago Raytheon Company and United Technologies Corporation announced entry “into an agreement to combine in an all-stock merger of equals.” The merger was unanimously approved by the Boards of Directors of both companies and is expected to close in the first half of 2020.
The aerospace and defense industries have significant points of contact with “foreign officials” in the global marketplace and thus a relatively high degree of FCPA risk. Indeed, United Technologies resolved an approximate $14 million FCPA enforcement action in 2018 regarding conduct in Russia, Azerbaijan, China, Kuwait, South Korea, Pakistan, Thailand, and Indonesia.
This post examines the Foreign Corrupt Practices Act and related provisions of the merger agreement as well as a prior example of how FCPA issues scuttled a defense industry merger.
Friday Roundup
Good lord, scrutiny alert and updates, across the pond, and for the reading stack. It’s all here in the Friday roundup.
Good Lord
Here is how Rep. Jackie Speier (an individual with a law degree) described the Foreign Corrupt Practices Act on a recent CNN program – “It is a requirement that anyone doing business with a foreign entity make sure that none of the money that comes into a project has been laundered.”
Good lord, get it right or stop talking about the FCPA.
Issues To Consider From The United Technologies Enforcement Action
This prior post went in-depth into the SEC’s $13.9 million Foreign Corrupt Practices Act enforcement action against United Technologies Corp. and this post continues the analysis by highlighting additional issues to consider.
Timeline
As highlighted in this prior post, UTC’s FCPA scrutiny began in late 2013/early 2014. Thus, from start to finish its scrutiny lasted approximately 4.5 years.
United Technologies Corp. Resolves $13.9 Million Enforcement Action
Yesterday, the SEC announced that United Technologies Corporation resolved a $13.9 million Foreign Corrupt Practices Act enforcement action.
The conduct at issue concerned Otis Elevator Co. (a wholly-owned subsidiary of UTC), Pratt & Whitney (an operating division of UTC), and International Aero Engines (a joint venture of five aerospace companies including Pratt & Whitney) regarding a Russian and Azerbaijani improper payment scheme, a China aviation scheme, improper payments for Otis Elevator sales in China, and leisure travel for foreign officials from several countries including China, Kuwait, South Korea, Pakistan, Thailand, and Indonesia.
Friday Roundup
Scrutiny alert, coincidence or FCPA-related, ripple dismissed, and more shallow commentary, and ISO 37001 laughable. It’s all here in the Friday roundup.
Scrutiny Alert
As highlighted in this previous post, in late 2013/early 2014 United Technologies Corp. (UTC) disclosed FCPA scrutiny concerning a non-employee sales representative retained in China. Recently, the company disclosed: “On March 7, 2018, the DOJ notified UTC that it had decided to close its investigation of this matter. Based on our ongoing discussions with the SEC staff to resolve this matter, UTC recorded a charge of approximately $11 million in the second quarter of 2018.”