U.S. Probes Examine Raytheon’s Dealings With Qatari Defense Contractor

The U.S. Department of Justice is looking into a proposed sale of a missile defense system to the Government of Qatar. The deal, which has been criticized by human rights groups, has been put on hold after a request from the U.S. Department of State, but it has moved forward in other areas. The Trump administration has been tight-lipped about the deal, but it is not clear what its intentions are. The State Department has been trying to get the Defense Security Cooperation Agency to remove the Qatari deal from its schedule, but that has not happened.

Raytheon, a military contractor, has recently been in the news for $300 million worth of deals with the Qataris. Raytheon does not identify the contracts’ parties, but has acknowledged it works with the Qataris on the F-15 fighter jet program. Raytheon’s activity in Qatar comes at a time when the U.S. military is presenting a sharp picture of the Trump Administration’s Gulf allies. The U.S. military has been pulling out of Syria, where Raytheon has been building a base to house the F-15s, and has stated it will pull out of Afghanistan, where Raytheon has significant installations. Raytheon has also been accused of building a massive radar system in Saudi Arabia

According to individuals familiar with the situation, US officials are looking into whether payments made by Raytheon Technologies Corp. to a consultant for the Qatar Armed Forces were meant as bribes for a member of the country’s governing royal family.

Raytheon was accused of funneling approximately 7 million Qatari riyal ($1.9 million) in payoffs via Digital Soula Systems, a Doha, Qatar-based military and security-consulting company that was part-owned by a brother of the country’s emir. The case was rejected last year on jurisdictional grounds.

According to people familiar with the matter, the lawsuit, filed in 2019 by a former Digital Soula Systems director who claimed the QAF had failed to pay for work the consulting firm did on a defense-procurement contract, prompted inquiries from the US Securities and Exchange Commission and the US Justice Department.

According to one of the individuals familiar with the case, the SEC started looking into the lawsuit’s bribery claims months after it was filed. The Department of Justice quickly followed suit, according to the source. The agencies are jointly responsible for enforcing the Foreign Corrupt Practices Act, which bans businesses from paying bribes to foreign public officials in exchange for a competitive advantage and requires businesses to establish measures to prevent such payments.

Raytheon hired the legal firm Wilmer Cutler Pickering Hale and Dorr LLP to look into the claims in the complaint, and according to multiple individuals who claimed they were contacted by the company, the firm has questioned people with knowledge of Digital Soula Systems and its interactions with Raytheon.

Raytheon officially revealed parallel FCPA investigations in securities filings last year, stating only that authorities were looking into whether Raytheon or its joint venture with France’s Thales SA made illegal payments in the Middle East since 2014. The firm hasn’t revealed any more information regarding the investigations.

Raytheon maintains a “rigorous” anti-corruption compliance policy, according to a spokesperson, and is working with federal investigations. The spokesperson refused to comment on the investigation’s focus, citing ongoing investigations as an excuse.

According to a Thales spokesperson, the Raytheon investigations involved Raytheon or a joint venture under Raytheon’s complete control, and the French firm had not received any queries about the issue from US or French authorities.

Sheikh Joaan bin Hamad Al Thani of Qatar.

Reuters photo/ibraheem al omari

A spokesperson for the Justice Department refused to comment. Requests for comment were not returned by the SEC.

According to former workers who talked to The Wall Street Journal, Digital Soula Systems was recruited to assist Qatar improve the way it buys military goods in 2013. Former workers claim that although the nation has a significant military budget for its size, it lacks the competence and scale to effectively handle procurement procedures and even some of the sophisticated equipment it purchases.

According to the International Institute for Strategic Studies, Qatar, which has a population of less than 3 million people, spent $6.5 billion on military in 2020. According to a tally of public documents compiled by the Journal, Raytheon has been granted contracts in Qatar worth more than $7 billion since 2014, including for the construction and maintenance of its iconic Patriot missile system and other air-defense assets.

According to a copy of the agreement seen by the Journal, Digital Soula Systems signed a contract with the QAF in March 2015 to advise on the purchase of a sophisticated command-and-control system known as the Falcon Project. According to former workers, the firm’s workforce, which mainly comprised of retired military professionals from the United Kingdom, Germany, and other countries, started arriving in Doha shortly after to begin work on the project’s technical requirements.

The Falcon Project received an official call for bids in 2016, but the project was already experiencing significant delays due to QAF instability and infighting, according to former workers. Digital Soula Systems continued to operate until mid-2017, anticipating being recruited to evaluate bids for the Falcon Project, but the Qataris quickly abandoned the planned command-and-control system, according to them.

Tarek Fouad, a dual U.S. and British citizen and one of Digital Soula Systems’ three directors, sued the QAF for $4.4 million in payments he said were due for the consultancy firm’s services after the project failed. Mr. Fouad also claimed in the complaint that his two former co-directors negotiated an illegal settlement with the QAF in order to escape punishment in Qatar for allegedly aiding Raytheon’s bribery.

According to Mr. Fouad’s court complaint, the alleged payments were meant for Sheikh Joaan bin Hamad bin Khalifa Al Thani, Qatar’s emir’s brother, in a “apparent attempt” to influence Qatar’s defense system purchase.

Mr. Fouad’s complaint alleges bribery, and a spokesman for Qatar’s Government Communications Office said he couldn’t offer anybody who could comment on the bribery accusations or similar charges regarding Qatar’s military expenditures in general. Mr. Fouad’s two former co-directors, both Qataris, were unavailable for comment.

Mr. Fouad said that between 2014 and 2016, Raytheon made a series of payments to Digital Soula Systems bank accounts. Raytheon made numerous similar payments to the former director in 2014, according to bank records contained in his complaint.

Mr. Fouad said in his lawsuit that the payments were intended to be remuneration for military studies that Digital Soula Systems would provide for Raytheon. According to a forensic study commissioned by Mr. Fouad and included in his complaint, information recovered from digital files of the studies seem to indicate that Raytheon produced them. Secure Network Technologies Inc., a Syracuse, New York-based information security consulting company, performed the forensic study.

Mr. Fouad claimed in a written declaration submitted in his complaint that the study work orders were a ruse since none of the contracts’ deliverables were produced by Digital Soula Systems directly or indirectly for Raytheon. “A no-work contract is a common term for this kind of bribe,” he added in the statement.

According to attorneys who examined the bribery claims and records from Mr. Fouad’s complaint, payments like those claimed in Mr. Fouad’s lawsuit would have presented a significant FCPA risk for Raytheon.

According to business registration documents submitted by Mr. Fouad in his complaint, one of Digital Soula Systems’ directors was an active-duty lieutenant colonel with the QAF, and the consulting company was majority-owned by Sheikh Joaan. According to the documents, Sheikh Joaan was the main owner of a business named Al Sedriah, which had a 60% interest in Digital Soula Systems.

According to Mr. Fouad’s complaint, Raytheon was aware of Sheikh Joaan’s interest in Digital Soula Systems. A member of Raytheon’s compliance team seems to have asked Mr. Fouad for information on Al Sedriah’s owners in 2013, according to an email included in Mr. Fouad’s complaint. Sheikh Joaan is the owner of Al Sedriah, according to Mr. Fouad’s answer.

“The fact that [Digital Soula Systems] had such close ties not only to the ruling family, but also to a sitting military official, presumably with some degree of influence or insight into Qatari defense purchases,” said Ryan Rohlfsen, a former member of the DOJ’s FCPA unit and partner at law firm Ropes & Gray LLP.

“From an FCPA liability perspective, there are red lights all over the place,” he added.

Last year, the QAF and Digital Soula Systems filed motions to dismiss Mr. Fouad’s case, denying that the consulting company was still due money for services done on the Falcon Project, claiming that they had previously struck a $2.4 million deal to settle any outstanding invoices.

In its papers, the QAF and Digital Soula Systems claimed that Mr. Fouad lacked the right to sue on behalf of the consulting company and that a US court was an inappropriate venue to settle his claims. Mr. Fouad’s bribery accusations were not addressed in the papers.

Mr. Fouad had been removed from his position as a company management, according to Digital Soula Systems’ papers, and the only people allowed to operate in that capacity at the time of the complaint were his two former co-directors.

In 2020, a district court judge rejected Mr. Fouad’s case, agreeing with the QAF that the United States was an inappropriate venue for addressing the issue. In February, an appeals court upheld the lower court’s decision.

According to former Digital Soula Systems workers and documents seen by the Journal, a formal call for bids from military contractors to construct the Falcon Project, issued in 2016, had garnered a single response—from a consortium of firms headed by Raytheon. However, the project was never completed.

According to Mr. Fouad’s complaint, a significant drop in oil prices in 2016 led the Qatari government to seek for methods to reduce costs and initiate a project review, which resulted in additional delays to the Falcon Project.

According to former Digital Soula Systems workers, Raytheon’s proposal was filed away by Qatar’s minister of defense, and the project was never pursued further.

Dylan Tokar can be reached at [email protected].

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