Foreign Military Aid to Israel: Diversion of U.S. Funds and Circumvention
of U.S. Program Restrictions (Testimony, 10/27/93, GAO/T-OSI-94-9).

Pratt & Whitney, an American jet engine manufacturer, should have known
or strongly suspected that Israeli officials and others were siphoning
off millions of dollars in U.S. funds meant for the Israeli military.
GAO testified that about $12.5 million in U.S. funds was diverted from
1986 to 1991 as part of an overpricing scheme run by former Israeli Air
Force Brigadier General Rami Dotan and others.  By the time Dotan was
arrested in October 1990, Pratt & Whitney had steered nearly $6.5
million to two of its small subcontractors in New Jersey--Yrretco and
Air Tech--although the work they did was worth less than $600,000.
Pratt & Whitney had many indications that the contracts directed to
Yrretco and Air Tech were grossly overpriced and that those companies
were closely tied to the Israeli Air Force.  Although the Israeli
government knew of such problems as early as 1987, significant new
program controls were not established until 1990, after evidence arose
that Dotan was accepting bribes.  Further, U.S. government oversight
still cannot guarantee effective oversight of subcontractors, that
contractors actually provide the goods and service paid for, or that
sole-source purchasing is justified.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-OSI-94-9
     TITLE:  Foreign Military Aid to Israel: Diversion of U.S. Funds and 
             Circumvention of U.S. Program Restrictions
      DATE:  10/27/93
   SUBJECT:  Foreign military sales
             Foreign military assistance
             Foreign military sales procurement
             Foreign economic assistance
             Foreign military sales contracts
             Fraud
             Contract monitoring
             Department of Defense contractors
             Funds management
             Records management
IDENTIFIER:  Israel
             Foreign Military Sales Program
             
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