Government Enlarges Fraud Case Against GE
The Justice Department on Monday substantially expanded a major defense fraud case against General Electric Co., saying in new court documents that the company illegally diverted more than $40 million from U.S. military aid funds earmarked for Israel.
The filing in a Cincinnati federal court was the latest revelation in a scandal that has rocked the Israeli Air Force and embarrassed GE, the nation’s third-largest defense contractor.
The Justice Department alleges that $7.85 million was disguised as a payment for supporting a flight test that never occurred. In fact, the money went to Israeli Air Force Gen. Rami Dotan, the government says. It was intended to influence his selection of a contractor for jet fighter engines, which GE makes, the government charges.
Moreover, the amended complaint contends that GE paid $3.5 million to intermediaries who deposited the money in secret European bank accounts controlled by Dotan and a GE official.
Last March, Dotan admitted in an Israeli court to $12 million in illicit earnings over 10 years. He is serving a 13-year prison term for bribery, accepting kickbacks, fraud, obstruction of justice and conspiring to kidnap a fellow Israeli Ministry of Defense official who assisted in Israel’s investigation of Dotan.
The suit, filed under seal in November, 1990, by longtime GE employee Chester Walsh, alleged that key GE employees based in a Cincinnati suburb, together with Dotan, falsified documents to misdirect up to $30 million.
The Justice Department, after an eight-month investigation by several U.S. agencies including the FBI, joined the suit last August and the case became public.
Under treble-damage provisions of the False Claims Act, GE could be liable for $120 million.
“As a result of the suit, GE has quietly taken disciplinary action against 20 to 25 company employees, including top executives at its aircraft engines division in Evendale, Ohio,” according to Los Angeles lawyers John R. Phillips and Mary Louise Cohen, who represent Walsh.
