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The U.S. Securities and Exchange Commission is investigating Raytheon Co. in connection with an engineering and construction unit the company sold last year. The SEC issued a subpoena for information about Raytheon Engineers & Constructors, which Raytheon sold to Washington Group International Inc. for about $500 million, Raytheon said in a statement Thursday. The company said it would comply, but added that the subpoena “does not suggest that Raytheon has violated any law or regulation.” An SEC spokesman declined to comment. WGI, a Boise, Idaho-based construction company formerly known as Morrison Knudsen Corp., bought Raytheon’s engineering unit last July for $53 million in cash and $450 million in assumed liabilities. In March, the company filed a document with the SEC stating that Raytheon had provided incorrect information about certain contracts entered by the engineering unit before the transaction. Those contracts forced WGI into a liquidity crunch that could push the company into bankruptcy, WGI officials claimed in the document. The deal was one of several recent divestitures Raytheon made to pay down more than $9 billion in debt. Among these moves was the sale of Raytheon’s flight-simulation business in January 2000 for $160 million and last month’s sale of its stake in an aviation support company for $270 million. Raytheon is also said to have tried to sell its aircraft manufacturing unit last year, but buyers balked at the $4 billion asking price. WGI also said that Raytheon, a Lexington, Mass.-based defense company, has failed to produce an audited balance sheet for the engineering unit. Without that balance sheet, WGI cannot adjust the purchase price, as stipulated in the purchase agreement, WGI said. WGI officials did not return calls about the SEC inquiry. Also in March, WGI filed suit in Idaho District Court accusing Raytheon of fraud and seeking damages of no less than $700 million. The case was sent to private arbitration last month. Raytheon has repeatedly denied the allegations. “We have made extensive disclosures regarding Raytheon Engineers & Constructors and its disposition to WGI and believe that our policies and practices are in compliance with all regulations and laws,” Raytheon chairman and chief executive Daniel Burnham said in a statement Thursday. Raytheon has also said it previously informed WGI in writing that it could not complete the audited balance sheet on time. Raytheon had to take a $325 million charge to earnings in first-quarter 2001, reflecting the cost of hiring Duke/Fluor Daniel, a subsidiary of Charlotte, N.C.-based Duke Energy Corp., to complete two construction projects run by the engineering unit. Raytheon says it is entitled to reimbursement from WGI. Copyright (c)2001 TDD, LLC. All rights reserved.

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