Susan L. Rosenbluth

The Jewish Voice and Opinion

A new report seems to validate the theory that Prime Minister Ariel Sharon’s expulsion plan is based on corruption, which, the report says, is rampant throughout Israel’s government.
The report, issued at the beginning of August, placed Israel’s government as the second “most corrupt” among developed nations. Only Italy scored worse. In terms of political stability, Israel emerged last. Israel’s rating was 15 percent. It’s closest “competitor” for this honor, Italy, scored 56.3 percent.

The report, produced by Business Data Israel, is based on World Bank statistics.

It placed Israel second to last among developed nations in terms of government efficiency, and dead last in terms of over-regulation.

Tip of the Iceberg

According to Middle East commentator and analyst Rachel Neuwirth, figures like these may explain “Israel’s insanely self-destructive decision to expel the Jewish population of Gaza and part of Samaria, and to withdraw Israel’s military outposts from these areas, which are essential for Israel’s defense.”

While some of Israel’s newspapers covered the dismal facts included in the report, virtually none of the mainstream media noticed the connection between corruption and the expulsion plan. However, the Israeli Knesset Controls Committee, whose mandate is to consider accountability in government service and to report to Israel’s State Comptroller, did seem to connect the dots, revealing that Eival Giladi, the prime minister’s appointee to administer the entire disengagement plan, has a special incentive to succeed: He is paid handsomely by Palestinian interests to orchestrate the incursion of Palestinian enterprises—resorts, housing, and casinos—that are slated to replace the evicted Jewish communities.

“This is the tip of the iceberg of people close to the prime minister who stand to reap personal benefit from the disengagement,” said David Bedein, bureau chief of the Jerusalem-based Israel Resource News Agency.

Others include Cyril Kern, an old friend and army buddy who is now a wealthy British businessman; Austrian financier Martin Schlaf; and Mr. Sharon’s closest advisor, chief of staff, and personal emissary Dov Weisglass.

Tangible Motive

Ms. Neuwirth dismissed some of the more widespread explanations behind the disengagement, including the “deeply engrained Jewish tendency to seek to please friends and protectors and to appease all enemies at all costs” and the possibility that Mr. Sharon is being blackmailed by Israel’s leftist public prosecutors, “who are zealous supporters of the ‘peace process’ and who have been threatening to bring criminal charges against Sharon and his two sons.”

Rather, she said, the explanation is more likely corruption. New revelations, she said, have caused this tangible motive to become increasingly plausible.

“Sharon appears to be personally and financially beholden to a circle of financial backers and campaign contributors who stand to make a killing from the Gaza disengagement. In addition, at least one, and possibly three, other powerful officials in the Sharon administration seem to have a financial interest in the expulsion/withdrawal operation,” she said.

Mysterious Loan

Her explanation began with the mysterious loan received by Mr. Sharon from his old friend and former army buddy, Cyril Kern, now a wealthy British businessman. According to reports, Mr. Sharon used the loan to pay a stiff fine imposed on him by Israel’s election authority for his solicitation of illegal campaign contributions.

Unfortunately for Mr. Sharon, it is also illegal in Israel for a public official to   accept loans from a foreign national.

Despite a widely publicized investigation by Israel’s public prosecutors office, Mr. Sharon was never charged with a crime. One of his defense arguments was that since Mr. Kern had no business interests in Israel, the loan could not be construed as a bribe.

Gaza Casino

Now it appears that is not so clear-cut. A new corporation has been formed to develop a gambling casino on the site of the Gaza Jewish community of Elei Sinai whose land was slated for confiscation and whose residents were marked for expulsion. The principal organizer of the venture is financier Samuel Flatto-Sharon, an Israeli who fled from justice in France more than 20 years ago after he was charged with embezzling hundreds of millions of dollars from investors in a fund he had managed. Under the law of return, Mr. Flatto-Sharon received refuge and citizenship in Israel.

Other investors in the new corporation include a Saudi billionaire and Mr. Kern.

According to Ms. Neuwirth, this is not Mr. Kern’s first venture into the Palestinian casino world. He was a major investor in the casino in Jericho which was forced to close during the recent intifada. Palestinians were always barred from the casino, and the Palestinian violence prompted the Israeli government to prohibit Jewish travel to the city.

One or Two Casinos

Another major investor in the Jericho casino was Austrian financier Martin Schlaf, who is described in the Israeli press as a close personal friend of Mr. Sharon. According to Ms. Neuwirth, he was also a major source of the   illegal campaign contributions that Mr. Sharon used in his run for prime minister in 2001.

According to Ms. Neuwirth, the Jericho casino’s investors have not given up hope that their enterprise there can be revived. The casino is still standing and could easily be refurbished. The Israeli military, however, has expressed doubts that the Palestinian Authority, which governs Jericho, is willing to provide even minimal security in the town.

“Hence, the interest in a new casino in the Gaza-Gush Katif area,” said Ms. Neuwirth.

Resolving the Conflict

She said she would not be surprised if Mr. Schlaf becomes a player in the proposed new casino, because his company has exclusive rights to operate other casinos in territories administered by the PA. However, Ms. Neuwirth said, it is still unclear how the separate groups managed by Mr. Flatto-Sharon and Mr. Schlaf would resolve their conflicting interests in the Gaza casino development.

“Will they cooperate or fight it out for control?” she said, suggesting that perhaps Mr. Kern, who has been described in the Israeli press as an investor in both casino enterprises, will act as “a bridge between them.”

“Those possessing a morbid fascination with evil will undoubtedly watch closely to see how the jackals divide up the spoils,” she said.

Portland Trust

However, the Flatto-Sharon and Schlaf groups are not the only ones who stand to profit from the properties of Jews forced to leave Gaza. The managing director of yet a third such enterprise, Portland Trust, is Mr. Giladi, who was appointed by Mr. Sharon as the official “coordinator” of the expulsion-retreat. In this capacity, Mr. Giladi, a reserve brigadier-general in the IDF, oversees all public policy aspects of the disengagement relating to all government offices in the process, including the police, the general secret service, the IDF, the government press office, the relocation authority, the Prime Minister’s Office, and the Foreign Ministry.

The British-owned Portland Trust corporation has plans to raise $500 million to build 150,000 housing units for Arabs on the land seized from the Jewish farmers in Gaza. The corporation also plans to invest in the social and economic development of Gaza and, in general, to help Palestinians replace the Jewish community of Gush Katif once the Jews are gone. It, too, has “recommended” casino development for the formerly Jewish areas of Gaza.

“Giladi will substantially augment his meager income as an Israeli civil servant by directing the development of the land, whose former owners were to be evacuated, after he supervises their evacuation himself. No public official, it would seem, has ever had a stronger incentive for getting his job done,” said Ms. Neuwirth.

Promoting Britain’s Goals

The principal investor in the Portland Trust is Sir Ronald Cohen, a British billionaire who serves as a close advisor and political backer of the second   highest official in the British government, Chancellor of the Exchequer Gordon Brown. Mr. Cohen also recently bought Israel’s monopoly telephone company, Bezeq.

According to the Portland Trust’s corporate charter, one of its objectives is   to promote the foreign policy goals of the British government and the European Community in the Middle East.

“One of these goals is, of course, to bring about Israel’s withdrawal to its pre-1967 ‘Auschwitz borders,’ as the late Israeli foreign minister Abba Eban named them,” said Ms. Neuwirth. “That makes corporate CEO and withdrawal-expulsion coordinator Giladi a foreign agent as well as a public official with a massive conflict of interest.”

Knesset Scrutiny

Mr. Giladi’s conflict of interest did not escape the notice of the Knesset Controls Committee. On July 26, the committee’s chairman, [the late] Dr. Yuri Shtern, asked representatives of the Prime Minister’s Office for their rationale in appointing Mr. Giladi to his position.

They responded that they had received a letter from Gideon Meir, the deputy director of the Information Division of the Ministry of Foreign Affairs, stating that Mr. Giladi was “the only man qualified for the job.” The letter was dated April 4, 2005, and Mr. Giladi was appointed on April 10.

The Prime Minister’s Office had no response when asked why the position was not filled in the usual manner, which would include the framework of a public tender in order to interview other candidates.

Conflict of Interest

Other members of the committee, including MKs Uri Ariel (National Union) and Zevulun Orlev (National Religious Party), asked if Mr. Giladi had signed a “conflict of interest” agreement, which would prevent him from entering into any situation in which he might personally benefit from any government role he would undertake.

The prime minister’s representatives responded that Mr. Giladi had signed the agreement one hour before the Knesset Controls Committee meeting.

Nevertheless, Ozrad Lev, a former high-ranking Israeli intelligence officer who also served as financial advisor to the PA and wrote what is considered a seminal book on Yasir Arafat’s bank accounts, testified to the   committee that Mr. Giladi’s appointment represents “a built-in conflict of interest.”

“Giladi must choose between Portland Trust and the Israeli government,” said Mr. Lev, mentioning the precedent of the Israeli government liaison to the PA, the late Yossi Ginosar, who was subsequently hired by Mr. Arafat to represent PA business interests.

Mr. Lev noted that former Attorney General Elyakim Rubenstein ruled that Mr. Ginosar could not perform both roles at once, since the government of Israel was also in negotiation with the PA.

No Coverage

The Knesset Controls Committee agreed, and requested that the Knesset as a whole order a mandatory investigation by the State Comptroller into the conflict of interest posed by Mr. Giladi.

Although the Speaker of the Knesset, Reuven Rivlin (Likud), approved the subject for “quick” consideration, the entire issue has barely received any mention in any of Israel’s major newspapers or on Israeli radio or television.

“The mainstream media in Israel will not cover this subject,” said Mr. Bedein.

Many observers have noted that the mainstream media in Israel refuses to cover any issue that might impact adversely on the expulsion plan. Mr. Bedein said public pressure might have persuaded the Prime Minister’s Office to suspend Mr. Giladi until the investigation had concluded.

Weisglass

Another public official who has a possible financial interest in the disengagement is Dov Weisglass, reputed to be the principal architect and driving force behind the expulsion plan.

“His only qualification for advising the prime minister about matters vital to Israel’s security is the fact that he has long been Sharon’s personal attorney, the man who has helped him bail out of countless legal scrapes over the years,” said Ms. Neuwirth.

According to press reports, Mr. Weisglass’s law firm, from which he is on temporary leave while he works in the Prime Minister’s Office, represents Mr. Schlaf’s Austrian company that is a part owner of the gambling casino in Jericho and has a franchise from the PA to develop future casinos.

PA Connection

Mr. Weisglass’s firm also represents the business interests of the PA itself, which owns a substantial interest in the Palestinian casino companies and is either a part or full owner of nearly all businesses in the territory it rules.

According to Ms. Neuwirth, Mr. Weisglass is also a friend of Muhammad Rashid, often referred to as the “shadowy” Palestinian financier who managed to loot PA-owned companies and transfer their assets to the personal accounts of Mr. Arafat and other Palestinian officials.

According to Ms. Neuwirth, Messrs Weisglass and Rashid celebrated Mr. Sharon’s 2001 election victory, along with Mr. Sharon’s sons, in the swank apartment owned by Mr. Rashid in Tel Aviv.

Shimon Peres

Ms. Neuwirth also named veteran Israeli politician and the current Israeli Deputy Prime Minister, Shimon Peres, as yet another Israeli official who may have a financial interest in the expulsion.

Mr. Peres was the founder of a venture capital entity called the “Peace Technology Fund” (PTF), which was chartered in the Cayman Islands and took as its stated goal bringing together investors from throughout the world to promote development in the PA territories, including Gaza. It also sought to encourage cooperation between Israel and the PA.

Among the fund’s investments were real estate companies. Many press reports have acknowledged that, in the months before the expulsion plan was implemented, real estate prices in the vicinity of the Israeli communities slated for evacuation, went sky high.

In early 2005, Mr. Bedein asked how much the secretive PTF was paying Mr. Peres to act as an “investment finder.”

Personal Financial Stake

PTF was managed by the Evergreen Partners investment company, which is controlled by chairman Jacob Burak, who raised $65 million for it. By the   time PTF dissolved in April 2005, the fund had invested $20 million in enterprises in the PA, including shares of the Palestinian Telecommunications Company, the Ramallah shopping mall, and a Palestinian mortgage bank.

When it went out of business, PTF sold all its holdings, returned money to its investors, and liquidated its activity. It sold its investments to Palestinian entities.

According to Evergreen Partners, the official reason for closing the fund was “because of the security situation, which does not allow it to operate as its founders envisioned.”

According to Mr. Bedein, it is still not clear what Mr. Peres’s personal financial stake was in PTF and how much he derived, and may continue to derive, from its investments.

“Sense of Shame”

Faced with the picture of Israel’s government depicted in the BDI report, Attorney-General Menahem Mazuz said that fighting corruption could not be the task only of the country’s legal system. Some attention, he said, must be accorded to “the swamp that nourishes it.”

His solution is to seek a societal transformation that would restore a sense   of shame. Israel’s Movement for Quality Government has demanded the establishment of an anti-corruption council.

In an editorial on the issue of the report, the Jerusalem Post said what was needed “is a complete revision of who gets to govern and how.”

It is no secret that, in Israel, civil service and party loyalty are infamously intertwined. One of the secrets to Mr. Sharon’s success in staying in office, despite his having fractured the population, is his largesse in handing out jobs. The number of portfolios in the Knesset is such that cabinet ministers and deputy ministers, who enjoy financial control and numerous perks, make up nearly one-third of the parliament. Once entrenched, these politicians are usually not so willing to jeopardize their positions over the mere matter of ethics.

“The apparent reality is that Israel’s government is a cesspool of corruption and treason. Its prime minister appears willing to place his people in mortal peril by destroying their national security, unity, and morale, for no better purpose than to confer financial benefits on his financial backers and political hangers-on,” said Ms. Neuwirth.