The Pentagon said this week it was barring the aircraft engines division of General Electric from competing for U.S. government contracts because of allegations of fraud involving a former Israeli air force brigadier general.
Israel announced that it, too, has halted future business with the division, at the request of the United States. Complying with the request is a condition of Israel receiving U.S. military aid, said Ruth Yaron, the spokeswoman at the Israeli Embassy here.
But the ban will have little if any effect on the Israel Defense Force, according to senior IDF officers in Tel Aviv.
They pointed out that existing contracts for G.E. engines are not covered by the Pentagon order. Moreover, the jet engines are purchased by the Israeli Defense Ministry from the U.S. government, not the supplier.
Israel, in any event, has a sufficient reserve of engine units and spare parts to cope with any delays in deliveries, the IDF sources said.
The suspension was imposed by the Pentagon’s Defense Logistics Agency following a Justice Department complaint against G.E. charging the aircraft engines division fraudulently diverted $40 million in foreign military sales funds.
The complaint, scheduled for trial in Cincinnati in November, alleges that as part of the scheme a high-level G.E. employee made $11 million in unauthorized payments to Brig. Gen. Rami Dotan, who was then the Israeli air force’s chief procurement officer in the United States.
Dotan, tried in Israel, was reduced in rank to private and given a 13-year jail sentence.
ISRAEL SAYS IT’S COOPERATING
Israeli officials, meanwhile, have denied reports that Jerusalem has been faulted for failure to cooperate in the investigations. Israel has given the United States every facility in its investigation of the bribery scandal here and in the United States, officials in Israel said Thursday.
They said that Washington has in fact expressed appreciation to Israel for opening its files and documents to U.S. investigators.
The indefinite suspension on G.E. bids was imposed to protect U.S. government interests, said Larry Wilson, public affairs director for the Defense Logistics Agency.
Wilson said the suspension would be lifted if G.E. “takes appropriate disciplinary action” against the employees involved and if it strengthens internal controls to prevent more fraud.
The engines division is currently under obligation for 2,600 Defense Department contracts, with a total face value of $23.5 billion, said Wilson. These contracts will be unaffected by the suspension.
The engines division employs 32,000 people and is concentrated primarily in the Cincinnati area and in Lynn, Mass.
General Electric is appealing the suspension, said Jane Juracek, a company spokeswoman in Ohio. She said G.E. officials believe the Pentagon action is unfair and “hope it is of short duration and of limited scope.”
(JTA correspondent Hugh Orgel in Tel Aviv contributed to this report.)
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