Jan 14, 2003 2 min read

LEXINGTON, Mass. (AP) – The Securities and Exchange Commission has begun an informal investigation into accounting practices at Raytheon Co.’s commuter aircraft business, the defense contractor said Monday. Raytheon said the investigation relates to “the timing of revenue recognition at its Raytheon Aircraft subsidiary in the period 1997 to 2001.”

The company said it believes the practices are appropriate and it would cooperate fully.

The disclosure came as a federal prosecutor in Kansas announced that Raytheon Aircraft Co. has paid $3.99 million to settle allegations it incorrectly billed the cost of aircraft product liability insurance to the Department of Defense from 1988 to 1999.

The settlement did not include an admission of liability, and Raytheon denied the allegations, U.S. Attorney Eric Melgren said in Wichita, Kan.

It could not immediately be determined if the two cases were related.

The Department of Defense had agreed in its contract to pay Raytheon part of the cost of aircraft product liability insurance.

However, the federal government contended that between 1988 and 1999, Raytheon billed the defense department using a method not in compliance with cost accounting standards, which resulted in higher charges to the defense department.

Raytheon changed the practice starting in 2000.

Raytheon spokesman Tim Travis said the company had no immediate comment on the settlement.

The settlement follows a 15-month investigation by the U.S. Attorney’s Office in Kansas, the Defense Contract Audit Agency and the Department of Defense.

In November, Raytheon agreed to a settlement with federal regulators in one of the first cases involving alleged violations of a rule barring companies from revealing information to stock analysts before the general public.

Last month, Frank Caine resigned as the Lexington-based company’s chief financial officer and was replaced by Edward S. Pliner.