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G.e. Pleads Guilty, Makes Settlement in Israeli Arms Procurement Scandal

July 23, 1992
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General Electric Co. has pleaded guilty to four criminal charges and agreed to pay fines totaling $69 million in connection with a fraud and bribery scandal involving sales of military jet engines to Israel.

The electronics giant, which manufactures jet engines, pleaded guilty, in federal District Court in Cincinnati, to U.S. Justice Department criminal charges involving conspiracy, submitting false claims, failure to keep accurate records and money laundering.

The charges led to a fine of $9.5 million.

G.E. also agreed to pay $59.5 million to settle a civil case involving the diversion of $40 million in U.S. military aid earmarked for Israel.

The charges arose in December 1990 after Chester Walsh, a whistle-blower at G.E. who had previously worked in Israel, claimed that a high-level G.E. executive had made $11 million in bribery payments to secure Israeli contracts for jet engines.

The bribes were made to Brig. Gen. Rami Dotan, the Israeli air force’s chief procurement officer in the United States during the mid-1980s.

Dotan, tried in Israel, was reduced in rank to private and given a 13-year jail term.

Herbert Steindler, the G.E. executive who was named in the lawsuit as a participant in the alleged fraud, was fired by the company last year and is now thought to be living in Rome.

On June 1, the Pentagon’s Defense Logistics Agency suspended the aircraft engines division of G.E. from competing for U.S. government contracts because of the allegations of fraud.

But, according to a spokesperson for the agency, that suspension was lifted four days later, after G.E. officials agreed in writing to provide compensation for any wrongdoing in the matter and to initiate safeguards against its recurrence.

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