Raytheon 2006 Annual Report Download - page 52

ITEM 3. LEGAL PROCEEDINGS
Previously Reported Proceedings
In re Raytheon ERISA Litigation. As previously reported, in May 2003 two purported class action lawsuits captioned,
Benjamin Wall v. Raytheon Company et al. (Civil Action No. 03-10940-RGS), and Joseph I. Duggan, III v. Raytheon
Company et al. (Civil Action No. 03-10995-RGS), were filed in the U.S. District Court in Massachusetts on behalf of
participants in our savings and investment plans who invested in our common stock between August 19, 1999 and
May 27, 2003. The two class action complaints are brought pursuant to the Employee Retirement Income Security Act
(“ERISA”). Both complaints allege that we and certain officers and directors breached ERISA fiduciary and co-fiduciary
duties arising out of our savings and investment plans’ investment in our common stock. The Court consolidated these
actions in September 2003. In April 2004, a second consolidated amended complaint (the “Second Consolidated
Amended ERISA Complaint”) was filed on behalf of participants and beneficiaries in our savings and investment plans
who invested in our common stock since October 7, 1998. We believe that we and the other defendants have meritorious
defenses. After certain preliminary motions and mediation conferences, the parties reached a tentative settlement in 2006.
On February 6, 2007, the Court approved the settlement agreement. The settlement agreement requires us to pay $5.5
million, with part of that amount payable directly to the Company’s savings and investment plans, part payable directly
to certain participants and beneficiaries and part payable for expenses of administering the settlement. The Court also
approved an order requiring us to pay plaintiffs’ attorney fees of $1.4 million, as determined by a federal Magistrate in
September 2006, and approximately $61,000 in plaintiffs’ attorney expenses. The class for purposes of settlement consists
of any person who was a participant or beneficiary at any time between October 7, 1998, and April 30, 2006, and whose
plan accounts included investments in the Raytheon Common Stock Fund. If no appeal or request for reconsideration of
the Court’s February 6, 2007 orders is requested within 30 days, those orders will become final. Based on the Court’s
approval of the settlement, the outcome of this matter is expected to be immaterial.
Other Matters
We are primarily engaged in providing products and services under contracts with the U.S. government and, to a lesser
degree, under direct foreign sales contracts, some of which are funded by the U.S. government. These contracts are
subject to extensive legal and regulatory requirements and, from time to time, agencies of the U.S. government investigate
whether our operations are being conducted in accordance with these requirements. U.S. government investigations of
us, whether relating to these contracts or conducted for other reasons, could result in administrative, civil, or criminal
liabilities, including repayments, fines or penalties being imposed upon us, the suspension of government export licenses,
or the suspension or debarment from future U.S. government contracting. U.S. government investigations often take
years to complete and many result in no adverse action against us. Defense contractors are also subject to many levels of
audit and investigation. Agencies which oversee contract performance include the Defense Contract Audit Agency, the
Department of Defense Inspector General, the Government Accountability Office, the Department of Justice and
Congressional Committees. The Department of Justice from time to time has convened grand juries to investigate
possible irregularities by us.
We are involved in various stages of investigation and cleanup relative to remediation of various environmental sites. All
appropriate costs expected to be incurred in connection therewith have been accrued. Due to the complexity of
environmental laws and regulations, the varying costs and effectiveness of alternative cleanup methods and technologies,
the uncertainty of insurance coverage and the unresolved extent of our responsibility, it is difficult to determine the
ultimate outcome of these matters. However, in the opinion of management, any liability is not expected to have a
material effect on our financial position, liquidity or results of operations. Additional information regarding the effect of
compliance with environmental protection requirements and the resolution of environmental claims against us and our
operations is contained in “Environmental Regulation” within Item 1, Item 1A “Risk Factors,” “Commitments and
Contingencies” within Item 7, and “Note 12: Commitments and Contingencies” within Item 8 of this Form 10-K.
Various other claims and legal proceedings generally incidental to the normal course of business are pending or
threatened on behalf of or against us. While we cannot predict the outcome of these matters, in the opinion of
management, any liability arising from them will not have a material adverse effect on our financial position, liquidity or
results of operations after giving effect to provisions already recorded.
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