August/September 1992, Page 13

Special Report

House Subcommittee Protests Stonewalling of U.S. Investigation

By Frank Collins

Each year, in addition to its annual grant of more than $1.2 billion in economic aid, Israel receives a grant of $1.8 billion or more in U.S. military aid with practically no accounting of how the money is spent. Although Israeli expenditures under the military grants involve thousands of contracts with U.S. companies, the Pentagon assigns only one desk officer to review them. Such lack of supervision of vast sums of money invites embezzlement and criminal misappropriation of funds.

The best-documented case of large-scale theft of funds was that of Israeli General Rami Dotan, who skimmed off tens of millions of dollars from U.S. military aid funds over at least a five-year period. An Israeli court sentenced him in 1991 to a prison term of 13 years, which he is currently serving. The case was well publicized in Israel, but not in the United States.

Others involved included employees of the aircraft divisions of General Electric, United Technologies and possibly other defense companies, as well as go-betweens in Israel. The Wall Street Journal has given considerable space to American aspects of the case this year, including names of suspected wrongdoers and dummy corporations here and abroad through which money was processed. One of the names was that of Harold Katz, a dual citizen of the U.S. and Israel. Katz, originally from Boston, has long had relations with Israeli intelligence. An apartment purchased in his name near the Israeli embassy in Washington, DC was used by Israeli government handlers for the copying of classified U.S. government documents supplied by the American spy Jonathan Pollard.

The more than $11 million diverted from General Electric contracts alone was passed to foreign accounts through an obscure New Jersey company owned by a Benjamin Sonnenschein, who has now confessed. The total in misappropriated funds in the Dotan case has been reported as being between $40 million and $70 million. Investigations of American co-conspirators by the U.S. Defense and Justice Departments have proceeded slowly and with indeterminate results.

Now the subcommittee on oversight and investigations of the House Committee on Energy and Commerce, chaired by Congressman John D. Dingell (D-MI), has undertaken an independent investigation of the matter and is demanding action from the Defense Department.

In a June 6, 1992 letter to Defense Secretary Richard B. Cheney, Dingell pointed out that the government of Israel "has been markedly uncooperative with the executive branch agencies charged with pursuing this matter, as well as this subcommittee."

Dingell wrote: "As the Department is surely aware, investigators from the Defense Criminal Investigative Service (DCIS) in the Department of Defense's Office of of Inspector General and the Department of Justice have been effectively stonewalled by the Israeli government since they began investigating this matter in 1990."

Dingell complained particularly that U.S. government investigators have not been allowed by the Israeli government to question either Rami Dotan, who is in prison, or Harold Katz, who remains an Israeli government official.

The Israeli refusal of course leads to the suspicion that, if Dotan and Katz were directly questioned, they would reveal the identities not only of other Americans involved, but also of Israeli higher-ups.

The Dingell letter pointed out that the contracts covering the U.S. military grants provide for Defense Department access to all Israeli files relating to the spending of military grant money, and also access for direct interviews with Israeli officials and other Israeli nationals in U.S. criminal investigations relating to military grants to Israel. In case of failure to provide this access, the United States can declare as immediately due and payable all debts and accrued interest owed the U.S. by Israel, and, further, the United States can terminate or suspend further disbursements to Israel.

Three Questions

The Dingell letter concludes with three questions for the Department of Defense.

Has DOD made a formal written request to Israel for access to files and direct access to individuals for direct interviews?

If this request has been made of Israel and Israel has not yet complied, has DOD notified Israel that it is in default of the grant agreement?

If such demands have not been made, the subcommittee wants to know the reasons for DOD's failure to act and the steps that it intends to take to insure that "the recipient of American taxpayer dollars fulfills the promises that it made as a condition of multi-billion dollar assistance."

In its reply to the subcommittee, the Department of Defense failed to answer all of these questions. The DOD response to the subcommittee's demand for an explanation is that discussions with the Israeli government are continuing on the lack of direct access to individuals and records, and that DOD is hopeful that the dialogue will resolve the issue. In fact the dialogue has continued for two years, and the reason Israel feels able to ignore the U.S. government's requests is spelled out in the second to last paragraph of the response to Chairman Dingell by DOD's Acting General Counsel, Chester Paul Beach, Jr.:

"Our support for Israel's security has long been a fundamental component of U.S. foreign policy and, as such, historically been endorsed by this and past administrations and certainly by a large majority of members of Congress. No action will be taken that affects the provision of military assistance to Israel without careful, high-level consultation with other executive branch agencies."

So long as this declared policy of U.S. inaction prevails, it can be predicted safely that the Israeli government also will follow a policy of selective inaction when it comes to complying with its obligations to the United States.

Frank Collins is a free-lance journalist specializing in the Middle East.

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