Raytheon's Arms Sales to Taiwan Under Scrutiny for Price Gouging
United Daily News, October 3, 2024
U.S. defense contractor Raytheon is facing allegations of overcharging for arms sales to Taiwan, raising international concerns. Taiwan's Ministry of National Defense confirmed that the U.S. Department of Justice has reached a plea agreement with the company, requiring full restitution for the overcharges. This indirectly confirms suspicions of misconduct in Raytheon’s dealings with Taiwan.
According to a United States Department of State spokesman, the United States does not tolerate misconduct in foreign arms sales and is committed to maintaining integrity in the procurement process. The Department of State emphasized that the investigation is ongoing and refrained from further comments.
The case originated from a Bloomberg report in June, revealing that the U.S. government is conducting a criminal investigation into RTX (formerly Raytheon) for price gouging on missiles and defense services.
Bloomberg noted that RTX, along with other major defense contractors, has faced backlash for excessively high weapon sales. In 2023, U.S. lawmakers expressed concern that these companies exploited their exclusive supply status to inflate prices beyond inflation levels, prompting them to urge Secretary of Defense Lloyd Austin to investigate the price gouging. The investigation covers all bids from Raytheon related to missile and defense contracts signed between 2011 and 2013 and in 2017.
According to sources cited by Bloomberg, the U.S. government’s criminal investigation into RTX involves price gouging on missiles and defense services, and the settlement agreement will conclude the inquiry into improper payments in RTX's contracts with Middle Eastern countries. The Wall Street Journal reported that RTX ultimately agreed to a settlement of $1.24 billion with the U.S. government.
While the Bloomberg report did not mention Taiwan or the specifics of its contracts with Raytheon, a recent Next Digital report indicated that the U.S. Department of Justice found direct connections to Taiwan, particularly regarding the 2013 procurement of the Patriot missile system and the 2017 radar system. Taiwan reportedly incurred losses exceeding $100 million due to Raytheon's inflated prices.
According to the Next Digital report, after the United States discovered the issues, it informed Taiwan about the investigation results. However, due to concerns over the international credibility of U.S. arms sales, the American Institute in Taiwan (AIT) advised that reports would not mention Taiwan.
In response to these reports, Taiwan's Ministry of National Defense issued a statement addressing the unfounded allegations of "fraud in U.S.-Taiwan arms sales." The Ministry clarified that the U.S. government initiated the investigation and informed Taiwan and would seek restitution from the contractors on Taiwan's behalf. The U.S. Department of Justice has reached a plea agreement with the company, requiring full restitution of the improper profits. Both parties will continue to collaborate closely to enhance mechanisms for preventing procurement corruption.
Legislator Lai Shih-pao of the Kuomintang (KMT) emphasized the need for the Ministry of National Defense to clarify the situation, stating that U.S. weapons are already expensive and now involve misconduct. He called for an investigation into the potential damages to Taiwan's interests and suggested that the Audit Office should intervene. Legislator Lai urged President Lai and the Office of the President to take a firm stance, asserting that Taiwan should not be treated as a "sucker" in these transactions.