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26 Shevat 5760 - February 2, 2000 | Mordecai Plaut, director Published Weekly








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The Prime Minister and the Amutot

by Mordecai Plaut and Arye Zisman

Many nonprofit organizations (NPOs) sought to advance Barak's chances in the last elections. Last week, the State Comptroller's Report -- nicknamed "the Barak Amutot Report" -- was finally presented. It was extremely critical of the One Israel campaign, and of Israeli prime minister Ehud Barak, the victor in the last election and beneficiary of the election campaign.

Calling the misdeeds described in the report, "a serious blow to the rule of law" and "a scourge which must be uprooted," the Comptroller levied a fine of close to NIS 14 million ($3.5 million) on the Labor party. The Comptroller charged that the prime minister, as the chairman of the election campaign, must bear responsibility and cannot be said to have discharged his duty by only giving an order to keep the law.

Prime minister Barak defended himself by saying that he made it clear in no uncertain terms that he wanted the campaign to remain within the limits of the law "with wide margins," that is not to even come close to gray areas. "I couldn't get to the bottom of the activities of the NPOs, due to the many responsibilities I had to shoulder, and I trusted my staff," Barak said.

Nonetheless, the Comptroller charged, "The extensive activities should have lit a red light in the mind of the candidate [Ehud Barak]. He should have made certain that the campaign for which he was responsible was conducted according to law."

Fifteen minutes after the report was officially released, Attorney-General Elyakim Rubinstein ordered a criminal investigation into Prime Minister Ehud Barak's campaign funding for last year's general elections. In fact the report had been available the day before to the press and to the Attorney General. Rubinstein listed the suspected violations committed by One Israel as: accepting illegal campaign contributions, keeping false corporate records, fraud and breach of faith, and grand larceny under aggravated circumstances. Rubinstein also ordered police to investigate four other parties, including the Center Party, the Likud, Yisrael Beiteinu, and United Torah Judaism.

The state comptroller's reports normally do not name names. However, in this instance, Goldberg decided that the matter was so grave that several names should be made public. First and foremost was that of cabinet secretary Isaac Herzog who acted as a funnel for foreign and domestic donations to Barak's campaign.

The law stipulates that no foreign donations whatsoever may be accepted for an Israeli election campaign, while the maximum cash donation from domestic sources is NIS 1,700 per household or organization.

The allegations against Herzog and others, such as election strategist Tal Zilberstein, are twofold: they transferred money to nonprofit organizations (NPOs) which agreed to back Barak and they acted as a go-between for other NPOs and donors.

The report found that Herzog and Tal Zilberstein were involved in raising money for the NPOs and that money donated to NPOs that supported Barak was not disclosed on official forms as required by law.

The transfer of these funds through the NPO filters disguised the illegal donations. As a result, One Israel's campaign budget disclosures to the comptroller were incomplete; they did not reflect the extent of the activities undertaken by the NPOs on behalf of Barak.

An Additional Route for Support

Immediately following his election as head of the Labor party, Barak knew that he would be unable to defeat Netanyahu by means of the corrupt Labor party system alone. Barak knew his goal, and very much wanted to win. To that end, an extensive network of NPOs were set up to bypass the party.

Barak basically neutralized the old Labor Party leadership, pushing all the old leaders away from the centers of power in the election campaign. Barak told the official party leadership about his intention to found a new party named "One Israel" to run for the Knesset. Its core would of course be the Labor Party, but Barak persuaded members of his party to go along by promising that he would get additional parties to join. He later brought in Meimad and Gesher. They allowed him to declare that One Israel was not just the old Labor Party, but it was never clear if the provided any substantial support or were nothing but window dressing. In any case so far One Israel is only a faction composed of there parties. Though Barak has tried, he has so far not been able to turn the three parties into a new One.

Even in the new One Israel party, Barak kept most of the old party stalwarts away from the action, relying on old army associates and several key friends to run most things.

The Camellia Fund and the Anonymous Donor

A lot of the outside money for the One Israel election campaign arrived from the estate of the late Octav Botner, an English millionaire (or billionaire) who in his final years resided in Switzerland and donated much money to many Israeli social purposes, mainly in the areas of health, education and welfare. Botner also supported the peace process in Israel, regarding it as the main issue for Israel and its neighbors.

The transfer of Botner's money was implemented by Yitzhak Herzog, Botner's lawyer and close confidante. At first Herzog managed Botner's interests in Israel. After Botner's death in 1998, Herzog gained control of much of his fortune as executor of his estate, and the money streamed in through the various funds and trusts which Botner had created throughout the world in tax havens.

One of these funds was the Camellia Fund, established for the expressed purpose of relieving poverty and distress in Israel. The fund had accounts in a Swiss bank and in Israel and millions of dollars streamed into them. Yitzhak Herzog managed the Camellia Fund in Israel as a trustee. Starting from the summer of '98, soon after Botner's death, he also served as special advisor to Barak and a member of his close staff.

Throughout the election campaign, through Herzog, sums from the Botner funds were used for activities related to the election campaign of Barak. Herzog testified that he acted according to the general guidelines of the donor regarding the use of the money, but that he had the discretion to decide the specific implementation of these guidelines.

The transfer of the moneys by means of the funds, succeeded in keeping the identity of Botner secret. This made it difficult to determine the source of the money during the investigation, and Herzog explained that he had acted according to the wishes of the donor.

An Example

Seeing the way the NPOs operated, it is clear that they were not innocently going about their business, but set up with the intent of avoiding the campaign finance laws.

Everyone's Israel - Our One Israel was the name of an NPO that operated until February 1999. It was registered at 14 Abba Hillel Street in Ramat Gan, the address of Attorney Doron Cohen, Barak's brother-in-law and close associate. Herzog paid the registration fees from the Camellia Fund.

This NPO ordered and paid for campaign billboards and signs, such as "One Israel - Ehud Barak for All of Us," or "Netanyahu - too much time, too many lies," and "Places of Work before Settlements," and "Education before Settlements." Zilberstein was the architect behind this NPO's establishment. Other workers were Einav Ezriyah and Ronen Yemeni, both of whom worked at One Israel campaign headquarters. They acted in conjunction with Zilberstein.

The NPO's expenditures totaled NIS 121,000. This was financed partly by sources totaling $20,000 that were funneled by Herzog from the Camellia fund; Herzog relayed another $10,000 from another foreign donor, a man whose accounts were handled by Herzog.

According to its papers, the purpose of this organization was "to bridge the social gaps between various populations in Israel, to bring about unity and to raise the subject of education to the top priority." Zilberstein claimed that the NPO was supposed to garner broad support and eventually lead to the founding of the One Israel party.

One NPO Leads to Another

After the first one was dismantled in February, another one was founded at the same address and with some of the same key employees.

Zilberstein was behind the group's establishment, and leading members were Einav Ezriyah and Ronen Yemeni (also involved in the NPO described above), along with Gil Holzman.

While negotiations were being conducted by One Israel leaders concerning the possible inclusion of Shlomo Lahiani from Bat Yam on the party's list, this NPO provided Lahiani with a variety of services, such as media consultation and cars.

This NPO appointed one of its members to work as a source of financial and organizational help to the another NPO called the NPO for the Advancement of Taxi Drivers.

This NPO's expenditures came to NIS 314,860. The main source of funding was the Camellia fund, with allocations directed by Herzog.

Zilberstein told the comptroller that "its purpose was to advance social goals and it was only incidental to that did it support the alternate candidate for prime minister with the best election chances, Ehud Barak."

The comptroller said that it was clear that the organization worked closely with the Barak campaign. One example was that the woman sent by this NPO to help the taxi drivers organization at first applied to the Labor Party for work, but was referred by them to this NPO. Her duties included ensuring that money which came to the cab drivers' NPO would be used to promote Barak's election.

Also, she organized the protest rally and sent to NPO members invitations to a One Israel convention; she also helped bring pro-Barak taxi drivers to television studios, where they were part of the audience on programs on which Barak appeared; and she supplied pro-Barak bumper stickers to cab drivers.

The dissemination of the bumper stickers and campaign materials was ultimately supervised by Zilberstein, with One Israel footing the bill.

The NPO for the Advancement of Taxi Drivers in Israel had expenditures of NIS 77,319. Herzog ordered two checks worth NIS 80,000 transferred to the NPO. One check of NIS 40,000 came from the Canadian foundation, and the other NIS 40,000 was from the Camellia fund.

The comptroller said that this money was an illegal contribution.

Hope for Israel

The chairman of this NPO was Shmuel Levi who said that this group's goal was to create a "neighborhood political party." In their response to the comptroller, they added that another purpose was to support public figures who were committed to the goals of the NPO.

Levy said that Zilberstein consulted and encouraged him in this endeavor. Zilberstein referred Levy to a variety of donor organizations and individuals.

This organization was originally registered at the address of Gil Holzman, who was also active in the We Haven't Lost Hope NPO, and later worked directly for One Israel. Its address was later changed to Levy's residence.

The NPO received NIS 2 million from abroad; NIS 1.42 million came from Butnar. This is not illegal for a social organization, but it is against the law for a campaign organization.

The comptroller found that Levy also owns a business called King Brothers, and that the Labor Party signed an agreement with King Brothers to put up pro-Barak campaign materials. Payment for the publicity work in the amount of NIS 234,000 is listed on One Israel's accounts. This covered the work of 20 publicity workers.

The comptroller found, however, that the "written agreement does not even remotely reflect the actual basis of the relationship," and that an examination of the Hope for Israel group's documents and other evidence points to an entirely different scope of work undertaken with the Hope for Israel money for Barak's campaign. According to the comptroller, the NPO paid a total of NIS 1.1 million to disseminate pro-Barak publicity materials.

In fact, Levy explained that his company employed 150 workers, who functioned as heads of teams which guarded campaign workers while they put up posters and billboards around Israel. The NPO also paid for hundreds of teams at NIS 700 a team.

The comptorller tried to verify information given in the documents of the NPO, but he found: "Addresses written on account records turned out to be nonexistent, or they referred to businesses which ceased operations right after the elections." One contractor engaged by this NPO was tracked down and said that in exchange for the money received by Hope for Israel, he put up placards for One Israel. This was not one of the stated purposes of the NPO.

The comptroller found that NIS 1.4 million spent by this NPO were an illegal contribution to One Israel. He did not go into the issue of the foreign source of the contributions.

Dor Shalom

This NPO is an independent one that was founded several years ago with the stated purpose of education youth to culture and democracy through publicity, and support of the peace process between Israel and its neighbors. It aims to transmit the "heritage of Yitzhak Rabin."

This NPO conducted quite a bit of anti-Netanyahu publicity work during the campaign. It also took out pro-Barak advertisements in newspapers and posted placards thanking "Yitzhak" (Mordechai) after Mordechai decided to withdraw from the race for prime minister. In fact, the One Israel campaign expected the Dor Shalom to support Barak, though it never did officially.

A short time before the elections, Zilberstein asked Generation of Peace Chair Doron Tamir to engage Shmuel Levy to put up posters and billboards. Zilberstein said that he wanted to help Levy earn a living, and that he asked him to put up Generation of Peace materials only.

Doron Tamir of Dor Shalom said that Dor Shalom was to pay for Levy hanging signs for One Israel. In fact Levy never put up any signs for Dor Shalom, only for One Israel.

Tamir, however, refused to sign a contract with Levy directly, since the latter was employed by One Israel.

In the end a work-order contract was signed instead with "A.H. personnel and services," through which Levy was to hang publicity materials supplied by Dor Shalom. The contract was for $150,000, including value-added tax.

The comptroller found that the A.H. company was set up only for this and a few other, similar transactions during the campaign. The company was registered in the name of an unidentified individual, who is a drug addict with a criminal record, and who was clearly only a "straw man" used by the persons who were really behind the deal. This individual was brought to a bank solely for the purpose of receiving money from a clerk for checks made out to A.H. He pocketed NIS 5,000 for doing so, and the rest of the money found its way to the campaign.

The comptroller said that not only did Levy not put up Generation of Peace materials, but also that such publicity materials were never ordered or manufactured to begin with.

Tamir relates that money paid in this connection came from the Camellia fund. Tamir adds, "I understood I was a marionette on a string. During the whole campaign, I felt that all of us were puppets in the end. But I thought of myself as a puppet who knew how to take care of himself."

There were many other instances of funds that may have been used and registered illegally. However, the comptroller said that his inclination was to be lenient and only to declare the cases where the crimes were clear, and beyond a shadow of any doubt. We have not cited them all here.

Likud was also cited for violations of the campaign finance law. On the surface the charges sound similar, however on closer inspection they are not.

An NPO for the Development of Jewish Settlement in Judea, Samaria and the Gaza Strip spent some NIS 136,800 on advertisements attacking Center Party leader and prime ministerial candidate Yitzhak Mordechai, thereby backing Netanyahu. Australian millionaire Joseph Gutnick also spent money in support of Netanyahu. Though the law requires that the Likud record and report such expenditures as donations, they were not made under the control of central figures in the Likud campaign, and no attempt was made to really hide them. The comptroller imposed a NIS 500,000 fine on the Likud.

The Center Party exceeded its allowed expenditures by a whopping NIS 17.5 million. The comptroller said that such a large amount indicated that the party was lacking in respect for the law.

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