Paragon Dynamics of Aurora agreed to pay $1.15 million to settle allegations that it stole confidential information from Raytheon as the companies competed for a defense contract, federal prosecutors said Tuesday.

The United States alleged that Paragon violated the Procurement Integrity Act by illegally obtaining some of Waltham, Mass.-based Raytheon’s proposal documents.

From February 2008 to August 2009, prosecutors say Raytheon was competing to win contracts from the National Reconnaissance Office, the federal agency that oversees U.S. intelligence satellites.

During that time, a Paragon employee who had access to Raytheon’s Aurora facility managed to steal drafts of Raytheon’s proposals for two contracts, as well as other related information.

The employee was caught on a security camera faxing part of a proposal to Paragon’s president, prosecutors said. The president then forwarded the information to another company that was working with Paragon on one of the NRO contract competitions.

Investigators located the documents on another Paragon employee’s computer system.

The FBI, NRO, Defense Criminal Investigative Service and various law enforcement partners participated in the investigation.

The Procurement Integrity Act was enacted in the late 1980s. One of its provisions forbids disclosing or obtaining various types of contractor bid and proposal information.

This settlement pertains only to the allegations. Liability has not been determined.

“When companies cheat in the bidding process for government contracts by stealing the work of their competitors, they face strict penalties,” said John Walsh, U.S. Attorney for the District of Colorado.

Kristen Leigh Painter: 303-954-1638, kpainter@denverpost.com or twitter.com/kristenpainter