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Investigators Look At Other Companies In GE-Israeli Scandal

July 30, 1992

WASHINGTON (AP) _ Federal investigators are looking into possible involvement by a half dozen more defense contractors in a multimillion-dollar procurement scandal, according to congressional testimony.

The scandal already has led to the sentencing of Israeli Gen. Rami Dotan to 13 years in prison and an admission of guilt by General Electric Co. GE last week agreed to pay $69 million in a lawsuit by a whistleblowing employee who documented company dealings with Dotan.

GE Chairman John F. Welch Jr., appearing at a congressional hearing Wednesday, apologized for GE’s errors, saying the company accepts full liability. But he pointed to Dotan and a fired GE executive, Herbert Steindler, as the culprits.

″They colluded to divert and steal millions, at least some of which went into their own pockets,″ Welch testified.

GE Senior Vice President Frank Doyle said 21 other employees had either been forced to resign or were demoted or reprimanded, although none of them was accused of receiving any of the funds.

Doyle said $11 million of an illegally diverted $40 million has been traced to European bank accounts controlled by Dotan and Steindler. Some of the funds went to unauthorized military projects, he said, but the bulk of the money has not been traced.

Jerome Silber, counsel for the Defense Security Assistance Agency, said at least a half dozen other defense contractors are being investigated by the Justice Department in the case. He refused to identify any of them.

Silber at first asked not to discuss the matter before the investigative subcommittee of the House Energy and Commerce committee. But the chairman, Rep. John Dingell, D-Mich., insisted and Silber was sworn in under the stipulation that he was testifying involuntarily.

Dingell vowed to change a military assistance system he said ″affords enormous opportunity for rascals, both individual and governmental, to rip off American taxpayers.″

Silber, in a memo obtained by the committee, had said there was no way to ensure that the fraud in military procurements was not committed with the approval of officials in the Israeli government.

Lt. Gen. Teddy Allen, director of the military assistance agency, said he disagreed with his counsel that the Israeli government could be involved. He said the scandal appeared to be perpetrated ″with the collusion of Dotan, people around him, GE and other companies.″

A high-level Israeli delegation is to come to discuss access to Israelis, including Dotan, who have been kept for two years from talking to U.S. investigators, Allen said.

The general said the military assistance agreement Israel signs each October requires that if Israelis are not made available to U.S. Defense or Justice department investigators looking into any deals, the agreement is in default. Israel has refused to comply in the Dotan case for more than 18 months.

Allen told the committee there have been no audits of U.S. companies’ direct sales to Israel, which are then reimbursed by the U.S. government under military assistance programs. He said officials take Israel’s word for what is done with the bulk of the money.

The Defense Department last month suspended GE from bidding on any new government contracts because of its role in the scandal, but the suspension was lifted after the company demonstrated full cooperation, Allen said.

Dingell, who said he will call further hearings to look into the role of other contractors in their dealings with Dotan, asked GE to help. Welch pledged to cooperate with both congressional and Justice Department investigations.

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