Raytheon agreed Wednesday to pay the Securities and Exchange Commission $13 million in penalties and disgorgement to settle charges of improper disclosure and accounting practices.
Chairman and CEO Daniel P. Burnham and Aldo R. Servello, the former Deputy CFO and controller of Raytheon Aircraft Company (RAC), also agreed to settle by consenting to the entry of a cease and desist order. Burnham will pay $1,238,344 and Servello will pay $34,628 in disgorged bonuses, fines, and interest.
Raytheon said in a press release that the settlement was consistent with the terms of a settlement offer the company made to the SEC in April 2005.
The SEC charged that from 1997 to 2001, Raytheon made false and misleading disclosures and used improper accounting practices by failing to accurately disclose the declining financial results and deteriorating business of RAC, Raytheon’s commercial aircraft manufacturing subsidiary.
Specifically, the SEC accused Raytheon of improperly recognizing revenue on RAC’s sale of unfinished aircraft through “bill and hold” sales transactions that did not comply with generally accepted accounting principles.
The SEC’s cease and desist order also found that Raytheon had engaged in improper disclosure and accounting practices related to RAC’s commuter aircraft business, including the failure to adequately disclose in the company’s financial reports material risks, trends, and uncertainties associated with the deterioration of that business line.
“At the core of Raytheon’s improper accounting and disclosures was the all too common practice of prematurely recognizing revenue or delaying significant losses in hopes of eventually turning a business segment around,” said Linda Chatman Thomsen, the SEC’s director of enforcement, in a statement.