[Updated: 28 July 2006 at bottom of page]
Press release from U.S. Department of Justice
General Electric Pleads Guilty In Defense Fraud Case
To: National Desk
Contact: U.S. Department of Justice, Press Office, 202-514-2007
CINCINNATI, July 22 /U.S. Newswire/ --
The Department of Justice today announced that the General
Electric Co. has pleaded guilty to charges of defrauding the federal government
of $26.5 million in the sale of military equipment to Israel.
The department said that General Electric at the same time
had agreed to pay $69 million in fines, penalties, and damages for committing
the offenses.
United States Attorney D. Michael Crites of the Southern
District of Ohio said General Electric's guilty plea involved funds diverted
from the U.S.-financed F-16 jet engine program with the Israeli Air Force
from 1984 to 1990.
Crites said General Electric pleaded guilty to offenses that
included diversion of millions of dollars to former Israeli Air Force (IAF)
brigadier general Rami Dotan to influence Dotan to assist General Electric
in securing favorable treatment in connection with the F-16 program contracts.
Funds were also diverted for other projects and for the personal benefit
of the then manager of international government sales for General Electric
Aircraft Engines. Dotan and the sales manager were longstanding friends,
and Dotan was General Electric's principal contact with the IAF. Tn 1984,
when the conspiracy began, Dotan was in charge of the IAF's Propulsion
Branch, and became IAF Quartermaster General. He was arrested by the Israeli
police, court martialed, and sentenced in 1991 by an Israeli military tribunal
to 13 years imprisonment.
General Electric pleaded guilty to a four-count information
charging: conspiracy to defraud the United States and to commit offenses
against the United States (Title 18, United States Code, Section 371);
violation of the Foreign Corrupt Practices Act of 1977, by failure to make
and keep accurate books and records (Title 15, United States Code, Sections
78m(b)(2)(A) and 78ff(a)); false claims against the United States (Title
18, United States Code, Section 287); and engaging in monetary transactions
in criminally derived property, in violation of the Money Laundering Control
Act of 1986 (Title 18, United States Code, Section 1957). It was the first
time a defense contractor had been charged with money laundering. Pursuant
to the plea agreement filed today, General Electric paid a criminal fine
of $9.5 million.
The information said General Electric, Dotan, and others
conspired to create false billings for fictitious IAF projects in order
to divert funds to their own personal use and to unapproved IAF projects.
The false billings were submitted under contracts financed by a U.S. government
program that provides financial aid to certain foreign countries to purchase
products and services for military uses.
The diversions were effected in part by covertly siphoning
funds from U.S. government-funded projects subcontracted to Ingbir Engineering
and Maintenance Co. of Tel Aviv, Israel, in which Dotan had a secret financial
interest, the information said. At Dotan's direction, Ingbir Engineering
was selected for all subcontract work in Israel on a jet engine support
contract Israel had awarded to General Electric.
From 1984 through 1990, General Electric regularly made payments
to a New Jersey corporation purporting to act as Ingbir Engineering's U.S.
agent, the information said. That corporation transmitted approximately
$23.8 million to Ingbir Engineering, and approximately $3.7 million was
withheld as a secret fee, the information said. This fee was actually a
device for diverting funds for the benefit of Dotan and the GE sales manager,
and most of these funds were transferred to a network of European bank
accounts controlled by Dotan and the sales manager, the information said.
Diversions were also effected through a scheme whereby, in
1989 and 1990, General Electric paid a total of approximately $7.875 million
to supposedly finance flight tests of a jet engine model sold under a U.S.
government-funded contract between General Electric and Israel. Approximately
$7;425,000 was transmitted to the network of European bank accounts controlled
by Dotan and the GE sales manager.
General Electric employees created false documentation attesting
that the payments to the agent's corporation represented funding for flight
tests. General Electric also implemented a plan to recover the cost of
these payments from sales of the engines. This cost and the plan to recover
it through the engine sales were not disclosed to Israel or the U.S. government,
which provided funding for the engine procurement.
In addition, the information said, funding for unapproved
uses was generated through the following schemes involving fictitious projects,
sold under a U.S. government-funded contract:
A. General Electric purportedly sold to Israel two jet engine
data collection devices called portable test units, but no such units were
designed or manufactured. Instead, in 1984, 1985 and 1987, General Electric
remitted approximately $1,561,960 for uses by Dotan and others not authorized
for U.S. government funding, and retained the balance of the approximately
$4 million collected from Israel.
B. General Electric purportedly sold to Israel a jet engine
test facility called an enclosed jet engine test cell and a collection
of equipment for this facility referred to as the test cell measurement
kit, but neither was ever built or delivered. Israel paid General Electric
approximately $6.85 million for the non-existent enclosed test cell, and,
in 1988 and 1990, General Electric remitted to Ingbir's purported agent
approximately $2.35 million for undisclosed and unapproved uses. Israel
also paid General Electric approximately $614,450.55 for the non-existent
test cell measurement kit.
C. General Electric purportedly sold to Israel kits to retrofit
jet engine test cells so that they would be compatible with an additional
configuration of the F110-GE-100 jet engine, but no such kits were ever
built or delivered. General Electric nevertheless billed and collected
from Israel approximately $3,996,500 for the sale of the non-existent kits,
in 1988 and 1989. This scheme was devised to generate funding for the development
of the F110-GE-100A jet engine. At the time, General Electric planned to
sell this engine to Israel pursuant to a contract that had not yet been
awarded. This use of funds was neither disclosed to nor approved by Israel
or the U.S. government which funded the contract under which the kits were
purchased.
In the course of these diversion schemes, General Electric
violated part of the Money Laundering Control Act, which prohibits a person
from engaging in any monetary transaction over $10,000 if that person knows
the funds involved are derived from a criminal offense and if the funds
are derived from any of a number of crimes specified in the statute. The
listed crimes include wire fraud.
All of the fraudulent schemes charged in the pleadings involved
violations of the accounting provisions of the Foreign Corrupt Practices
Act of 1977 (FCPA). The FCPA, among other things, requires every company
which issues stock to the public to make and keep books, records, and accounts,
which, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company.
The investigation was conducted by the Department of Justice
Criminal Division (the Money Laundering section and Fraud Section), the
United States Attorney for the Southern District of Ohio, the Department
of Justice Civil Division (the Commercial Litigation Branch), the Federal
Bureau of Investigation, the Defense Criminal Investigative Service, the
Internal Revenue Service Criminal Investigation Division, and the Defense
Contract Audit Agency. The guilty plea was entered into in conjunction
with General Electric's agreement to settle civil claims in United States
ex. rel. Taxpayers Against Fraud, a nonprofit-corporation, and Chester
L. Walsh vs. General Electric Co., a New York corporation, Civil Action
No: C-1-90-792 (U.S.D.C. S.D. OH). To settle the civil action, General
Electric has agreed to pay $59.5 million in civil penalties and damages.
The statement of facts filed with the court said that General
Electric provided substantial cooperation in the investigation.
Although the above link has not been changed, the content at "General
Electric" was changed. Here is the original content:
INTEGRITY
Integrity editor's note:
The "Spirit & The Letter" is the GE integrity policy, and
each GE employee signs a pledge to adhere to it when they join the company.
Chairman & CEO Jeff Immelt's Message to Employees
As GE learns and grows in the 21st century, three traditions of our company
become more important. Along with commitment to performance and thirst
for change, we must always display total, unyielding integrity.
This is a company of integrity. It's a company of standards. Our worldwide
reputation for honest and reliable business conduct, built by so many people
over so many years, is tested and proven in each business transaction we
make.
Today's GE is far more dynamic, globally directed and customer-driven
than ever before. We are playing offense - trying new things to build our
business success - our quality products and services; our forthright relations
with customers, suppliers and each other; and, ultimately, our winning
competitive record. But the GE quest for competitive excellence begins
and ends with our commitment to lawful and ethical conduct. As a global
company, we must create and follow a set of global rules.
Each person in the GE community makes a personal commitment to follow
our Code of Conduct. Guiding us in upholding our ethical commitment is
a set of GE policies on key integrity issues. All GE employees must comply
not only with the letter of these policies but also their spirit.
I, and all GE leaders, have the additional responsibility of nurturing
a culture in which compliance with GE policy and applicable law is at the
very core of our business activities. It is, and must be, the way we work.
The stakes are high in today's business environment, and, especially
while skepticism of corporate activities persists, we must meet and surpass
requirements and expectations.
We must preserve and strengthen for those who will follow us what has
been the GE foundation for success for more than 100 years - the GE commitment
to integrity.
Cordially,
Jeffrey R. Immelt
CEO and Chairman of the Board
AND JUST SO THERE IS NO DOUBT, HERE IS THE ORIGINAL SCREEN SHOT:::
