Summary

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.