DEFENSE/Overcharge by U.S. arms vendor to be refunded to Taiwan: Defense head

Taipei, Oct. 4 (CNA) The amount that United States defense contractor RTX Corp. overcharged Taiwan for weapons will be fully compensated, Defense Minister Wellington Koo (顧立雄) said Friday.

The overpricing case involving RTX Corp. -- formerly known as Raytheon Technologies Corp. -- was voluntarily investigated by U.S. authorities to crack down on improprieties in the U.S. arms sales system, Koo said on the sidelines of a legislative hearing.

After U.S. authorities informed Taiwan of the investigation's results, judicial proceedings began and should result in the amount of the overcharges to be returned to Taiwan, Koo said.

Asked by reporters about the amount of funds involved, whether the overcharged funds will be fully returned, and when the U.S. notified Taiwan of the RTX overpricing case, Koo said all of the funds will be returned but he declined to provide further details on other questions.

Koo did say, however, that the major sale on which the case is based occurred in 2013 and that because the case involved other countries as well, Taiwan benchmarked the prices of the sales with those other countries.

It was later found that there was overpricing, though Koo did not say who discovered that or what the response was.

According to a Bloomberg article in July, the U.S. Justice Department began investigating RTX in October 2020 on pricing issues with Raytheon contracts entered into between 2011 and 2013 and in 2017.

Koo was replying to a report by local news outlet Yi Media on Oct. 1, which said U.S. arms sales to Taiwan might involve "international fraud."

It alleged that RTX Corp. raised prices for defense items such as missile and radar systems and "kept Taiwan in the dark" about it.

The report also said that after the U.S. found out about the RTX overpricing case, the two countries established an additional "secret agreement" stipulating that Taiwan cannot publicly disclose the matter on its own initiative due to diplomatic considerations and the importance of maintaining the U.S.' reputation in foreign arms sales.

Taiwan's Ministry of National Defense responded with a statement on Oct. 1 that said the U.S. Department of Justice had reached a plea agreement with the defense contractor and that the improper gains will be returned to Taiwan.

The statement also said the Yi Media report's claims of a secret agreement or a cover-up were false, and speculated it was trying to stir up sentiment aligned with "America Skepticism Theory."

According to a report by the Global Taiwan Institute, the "America Skepticism Theory" is a narrative that America is an "untrustworthy and treacherous" ally which is "exploiting Taiwan for its own purposes."

Koo said Yi Media's report portrayed Taiwan as being "a person taken advantage of," and he argued that such a description was part of an effort to support "America Skepticism Theory" that does not reflect reality.

The Bloomberg report noted, however, that RTX was in the process of settling a criminal investigation and was setting aside US$575 million to cover penalties for pricing issues to sales to several countries and another US$384 million for a corruption investigation.

In a separate Bloomberg report in June, it said American lawmakers had urged Defense Secretary Lloyd Austin to investigate "price-gouging" of the U.S. government by defense contractors.

Taiwan and the U.S. -- a major weapons supplier to the island country -- have maintained close communication, and the final details of the judicial procedures are still being worked out, Koo said.