Israeli Arms Fraud, Kickbacks Told : Defense: An air force officer made $12 million via a maze of phony companies. ‘I am a subhuman,’ he says.

In the wake of a guilty plea by an Israeli air force purchasing officer, details emerged Monday of a major and intricate scandal involving millions of dollars in theft, kickbacks and fraud in the procurement of airplane engines and other equipment from U.S. firms.

Brig. Gen. Rami Dotan, who once headed the air force’s quartermaster corps, admitted to $12 million in illicit earnings over nearly 10 years. In a plea bargain with a military court that was announced over the weekend, he agreed to repay the Defense Ministry. Dotan, arrested last October, faces a sentence of up to 12 years in jail.

“You can strike me freely. I am a subhuman, a zero,” he told the court as he confessed and asked for forgiveness. “This is not the way I wanted to act.”

According to Israeli newspaper accounts of the trial, Dotan and a string of accomplices set up companies that overcharged clients for services involving the testing of engines being sold to the air force. Dotan also received kickbacks from another company in which he was a secret partner, in return for forwarding business to it from both Israeli and American firms, according to the daily Haaretz.

Through an associate, Dotan paid $50,000 to hire a U.S. resident to harass and follow a whistle-blower who informed the Defense Ministry of possible shady dealings, the paper added, quoting Dotan himself.

Dotan told the associate, identified as Warrant Officer Yaakov Frank, “not to kill” the whistle-blower, Ofer Pail, a former Defense Ministry official in New York, Haaretz reported. Dotan said that no harm had come to Ofer, although Frank broached a plan to drug, beat and kidnap him using the services of a “religious friend” in Florida, the newspaper said.

The case throws a negative light on the usually hidden world of Israeli defense purchases. In a special arrangement, the United States gives Israel $1.8 billion a year in aid, mostly for military purchases. The money is given as a lump sum and is not subject to oversight by the Pentagon or other U.S. agencies.

The scandal is doubly embarrassing because it involves the air force, which many Israelis consider the cream of the country’s military.

Some of the deals involve General Electric, the United States’ third-largest defense contractor in 1989. Israeli newspaper accounts and court testimony report that the company has suspended one of its employees. He is suspected of funneling money into private bank accounts belonging to himself, Dotan and a civilian accomplice, Yoram Ingbir, who ran a company that tested aircraft engines, according to charges cited in the press here.

Dotan admitted to being a partner in Ingbir’s company and referring Defense Ministry business to it.

Money totaling $7.5 million for flight testing of jet engines was also paid by GE to a company under the suspended employee’s control, the prosecution charged.

There are no allegations of wrongdoing on the part of GE or other U.S. contractors.

GE spokesman George Jamison said that the firm first learned of the charges against Dotan last December from Israeli investigators. Jamison said that GE notified the U.S. government and “offered its complete cooperation” in any U.S. government investigation.

At the same time, GE launched an internal investigation “to determine whether any GE employee participated with Dotan in such schemes and improperly received personal gain,” said Jamison, who added that the internal investigation would continue.

“It appears that both the Israeli government and GE were victimized by Dotan, who used claims of Israeli security to hide schemes for his own enrichment,” said Jamison.

A Pentagon spokesman refused to comment when asked whether the Defense Department is investigating GE. The House Energy and Commerce Committee’s subcommittee on oversight and investigations is expected to make inquiries into GE’s role in the case, according to a congressional source.

In 1988, the Justice Department expanded its ability to investigate fraud cases involving foreign military sales. The department required defense company officials to sign forms that would give U.S. investigators access to information on domestic and foreign bank accounts of any company personnel involved in foreign sales contracts.

Times staff writer Melissa Healy, in Washington, contributed to this story.