A billion shekels, come and gone
For 20 years, the IDF deducted a sum from the salaries of all soldiers in compulsory service, to be paid out as insurance in the case of death in the line of duty. Though none of the money was apparently paid out, the defense establishment doesn't seem to know where it is
One evening in the winter of 1997, two women in civilian clothing knocked on the door of Eleanor and Yoram Alper, the parents of Eidan Alper, who had been killed a short time earlier in the helicopter disaster in the skies over the Galilee.
"We have come about the insurance," the two women explained to the surprised parents.
"What insurance?" wondered the parents aloud.
"Eidan's life insurance," the two women explained. "The insurance he signed for when he enlisted." They handed the parents two checks, each for the sum of NIS 30,000, and disappeared.
"I was in total shock," related Yoram Alper 11 years later. "At first I was certain that Eidan had bought insurance at the central bus station, on his way to the base, because he was worried about us. It was only later, when I started to look into it, that I found out that the Israel Defense Forces had obligated my son to pay for life insurance."
The family of Micha Gottlieb, another victim of the helicopter disaster, also received checks totalling NIS 60,000. "After we received the checks," said Micha's father Ya'akov Gottlieb this week, "I tried to find out what this money is. At the Defense Ministry rehabilitation department they told me that it was insurance. Since I am in the insurance profession myself, I immediately asked who pays for this insurance. They told me that my son had paid the premium. This seemed strange to me."
In an investigation undertaken by the two fathers, it emerged that in 1978 the IDF had begun deducting a sum equivalent to about $1.50 per month from the wages of soldiers doing compulsory service under the rubric "life insurance." It also emerged that on the form each soldier had to sign at the induction base at that time, he was required not only to declare his loyalty to the IDF and to sign a "declaration of the preservation of secrecy," but also to decide upon "the beneficiaries named in the instructions to pay out the sum of the insurance" - that is, to give the names of those who were to receive the insurance benefits in the event of his death during the course of his military service.
Alper and Gottlieb decided to try to find out whether the decision to deduct the insurance premiums from soldiers' wages was legal, and what had become of the moneys that the IDF had deducted from the wages of millions of soldiers. A short while after the two bereaved fathers began to ask questions, in 1998, the army stopped deducting insurance premiums from the wages of soldiers doing compulsory service.
However, no one knows what became of the money collected - deductions that, at a conservative calculation, could have amounted to about NIS 1 billion in current terms. It is also not known where this money was deposited and whether there was budgetary auditing of these monies. Although the funds were supposed to be given to bereaved families, it has not in fact been distributed to them to this day. Representatives of the defense establishment get tangled in contradictory versions, some of which do not accord with the facts.
Most of the bereaved parents decided not to press for what they were entitled to; the security establishment succeeded in exhausting them. But Gottlieb and Alper at least tried. Gottlieb spoke on the phone several times with Colonel Ariel Kapon, who at the time was the head of the individual affairs department in the IDF Human Resources Division. On March 4, 1998, Gottlieb sent Kapon a letter containing 17 questions. Among other things, he wondered when it had been decided to deduct insurance premiums from soldiers' wages, what sums had accumulated in the insurance fund, whether he would be able to examine the fund reports, and where the NIS 60,000 he had received from the fund had come from.
On April 8, Colonel Kapon replied: "In 1978 the relevant military authorities decided to create a budgetary fund, from which the beneficiaries stipulated by every soldier doing compulsory service would be given a payment in case of the soldier's death during the course of his service, as distinct from the benefits that are paid by the Defense Ministry under the conditions of the 1950 law on soldiers who perish in battle."
Further along Kapon split hairs: "Indeed, for reasons of convenience, use was made of the term 'insurance,' even though this was not insurance in the usual sense of the word, but rather a case in which the army would determine eligibility for payment ... In light of the fact that this is not an insurance arrangement ... the payments were disbursed by elements delegated to do so by the IDF. There was no need for actuarial supervision, but rather for the maintenance of the standing instructions in the military orders."
Kapon did not reply to the rest of the questions, among them how much money had accumulated in the fund and how it had been distributed to the families, if at all. Gottlieb decided to hire attorney Yehuda Ressler. On April 28, 1998, Ressler sent a letter to Colonel Kapon. Among other things Ressler wrote: "According to information that has come to several bereaved parents, the budgetary fund was indeed an 'insurance arrangement.' Therefore we would like to know with which insurance company the soldiers were insured and under what rules (what was the sum of the deduction and so on?)."
About a month later, on May 24, Kapon replied to Ressler: "The payment to which the beneficiaries, as stipulated by the soldier doing compulsory service, are entitled in the case of the death of that soldier, are paid out of the IDF budget, in accordance with the entitlement determined in the army's orders. This is not a matter of insurance [emphasis in the original], but rather of an entitlement under law to a payment in a case of death."
After many more telephone conversations and exchanges of letters between Gottlieb and Ressler and Kapon, it was decided to hold a meeting at the office of the head of the individual affairs department on September 14. In addition to the department head, an attorney from the Military Advocate General's office, Captain Ronen Baharav, also took part. When Gottlieb showed Baharav his son's pay slips, which indicate that the soldiers had been required to pay their life insurance premiums, Baharav replied: "The formulation on the form is not accurate, and has always been an incorrect term, even when it appears, inter alia, on documents that the soldier signs upon his induction into the IDF, because this was not a matter of real insurance, but rather of a payment from the defense budget." The minutes of that meeting were signed by Gottlieb, Kapon, Baharav and Yair Saguy, an attorney from Ressler's office.
After Gottlieb - an insurance professional, as noted above - remarked that the formulation makes no difference at all and that the fact that it is a matter of an insurance fund gives him the right to examine the transactions related to it, the use of its monies, its profit and loss reports, and the surpluses that accumulated in the fund after the IDF stopped deducting the insurance premiums from the soldiers, Captain Baharav replied: "The formulation 'budgetary fund' is also a flawed and erroneous formulation. There is no budgetary fund and there was no budgetary fund. The reference is to the overall budget of the IDF."
The representatives of the army tried to explain exactly what the insurance premiums were that had been deducted from the conscripts on their pay slips.
Captain Baharav: "The sum of NIS 4 was solely notational, without the soldier having paid it. An addition of NIS 4, which is a solely notational addition, was given to the soldier, for purposes of paying for the insurance. The situation as of today is that the soldier's wage is from the outset NIS 4 lower."
To this Colonel Kapon hastened to respond. "I would like to make a correction. The soldier's income has not been decreased by the sum of NIS 4, but rather he is receiving the full wage, including NIS 4."
The dispute between Kapon and Baharav would have been avoided had the two, during the course of the discussion, consulted the General Staff order that relates to soldiers' life insurance, from October 1, 1978. General Staff Order 35.0203, which was written after it was decided to deduct the insurance premium from conscripts, explicitly defines the insurance arrangement for soldiers. Provision 7 defines: "Insurance fund - a special monetary fund that will be deposited with the accountant general at the Finance Ministry, in which insurance premiums will accumulate and from which the insurance benefits will be paid." Further along it is stated that "from the soldier's monthly wage a sum to be determined by the Human Resources Division's individual affairs department, in coordination with the financial advisor to the chief of staff, will be deducted ... The insurance fund will be managed as a separate monetary fund. In it the monies from the monthly deductions of the insurance premiums will accumulate, and from it the insurance benefits will be paid out."
That is, this explicitly refers to "insurance," to a sum of money that will be deducted from the soldier's monthly wage, and it says that the money was to be deposited with the Finance Ministry, where it was to be administered by the accountant general. According to a calculation made for Haaretz by accountant David Farkash, in the 20 years during which insurance premiums were deducted from the wages of soldiers during compulsory service, about NIS 1 billion in today's terms accumulated in the fund, if the monies have not been paid out from it. The calculation is based on the number of soldiers doing compulsory service each year, about 155,000 according to foreign publications; the deduction of $1.50 monthly for insurance; linkage to the cost-of-living index and a modest annual interest of 4 percent.
An application to the Finance Ministry to clarify whether indeed the sums that had been deducted from the soldiers had been deposited at the Accountant General's Office, as stated in the General Staff order, and how they were managed, elicited a series of answers. The first time, the reply came from the office of the treasury spokesman: "In the years 1979-1997, a sum of NIS 3 was deducted for life insurance from the wages of soldiers doing compulsory service. Starting in 1998, the deduction from the wages of soldiers doing compulsory service was cancelled and responsibility for the payment of life insurance was transferred to the defense budget. The moneys that accumulated served as a budgetary source for funding the grant to bereaved parents, which has been distributed in accordance with instructions set forth in the army's orders. We would stress that over the years, the total disbursement for the death grant to the families has been larger than the total income from the deductions from the soldiers doing compulsory service; therefore there is no remainder of money in the fund."
Insofar as is known, no bereaved family has ever received moneys from this "fund." As Kapon acknowledged in his letter of April 8, 1998, the one-time grants (of NIS 60,000, as was given to the families of the helicopter disaster victims) were paid by the Defense Ministry, in accordance with the terms of the 1950 law on soldiers who perish in battle, and not from the fund that was supposed to have been used for the payment of life-insurance benefits to the families.
Another application to the treasury with a request for the records concerning the management of the fund led to a different answer the next day: "The records connected to the collection and the entire management of the distribution of the moneys from the fund were kept by the Defense Ministry. Therefore the place to check this issue is the Defense Ministry, and not the Finance Ministry." In the wake of insistent attempts to clarify where exactly the money had ended up, how much money had accumulated in the fund and whether it had really been distributed to the families, the Finance Ministry spokesman's office delivered a third and final version: "The Defense Ministry never transferred moneys to the accountant general for this fund, and therefore the place to check the issue is the Defense Ministry and not the Finance Ministry."
No more strength
In 2005, two demobilized soldiers, Nir Weinberg and Keren Yefet, with Alper's encouragement and with funding from him, filed a class-action suit on behalf of all the conscripts from whose wages insurance premiums had been deducted, demanding to have their money returned to them. The petitioners, who were represented by attorney Yisrael Sadeh, withdrew their suit after the state asked for it to be rejected because of the expiration of the statute of limitations, but in the state prosecutor's replies to the court there is an acknowledgment that the money deducted had indeed constituted premiums for purposes of life insurance for soldiers doing compulsory service: "It should be made clear that the 'deduction' under discussion is not connected to the moneys and payments that families receive under the law on families of soldiers who perish in battle," wrote Shamai Becker, senior deputy to the Tel Aviv region district attorney. "The payment that was defined as 'life insurance' is an additional sum that the IDF wished to grant to those families in order to ease, at least in the economic sense, their ability to cope with the loss in the initial stage."
Asked why he was no longer persisting in his demand for clear answers from the defense establishment, Yaakov Gottlieb said this week that he simply had no more strength. "I don't even have faith in the judiciary system. If I go to court against the defense establishment, the courts will never hand down a ruling against it," he smiled bleakly.
Alper, however, has not given up. After applying to Defense Ministry Director General Pinchas Buchris, and after having sent him a letter headed "Have you killed and also inherited?" - Alper was invited to a meeting in the director general's office, with some 20 representatives of the defense establishment. Alper made it clear that since his son also held U.S. citizenship, and since he has not succeeded to get clear answers from the defense establishment concerning his son's life insurance, it is his intention to sue the state in a U.S. court. Those present were surprised and promised to look into the matter again and get back to him within a month.
That was in November 2007. To this day no one has gotten back to Alper with any answer, response or explanation.
The Defense Ministry spokesman: "In a working meeting between the director general of the ministry and the chairman of the Yad Labanim soldiers' memorial organization, Mr. Eli Ben Shem, the chairman of the organization asked that the director general meet with the bereaved father, Mr. Yoram Alper ... At that meeting it was made clear that the issue was the responsibility of the IDF and the director general said that he would transmit the father's request to the proper authorities."
Now Alper is considering filing suit in Israel as well. Attorney Sadeh has prepared the documentation, which demands that the IDF pay the bereaved father NIS 540,000. Alper does not dismiss the possibility of applying to the International Court of Justice in The Hague as well.
Arens: 'A strange story'
Moshe Arens, who was defense minister in the 1980s and '90s when the insurance premiums were deducted from soldiers, says he knew nothing about the subject, that "this is a strange story." Arens was appointed defense minister for a third time in 1999. During this period, the Defense Ministry was dealing with the consequences of the 1997 helicopter disaster, including its relations with the bereaved families of the 73 victims. The comptroller of the defense establishment during the period when the insurance premiums were deducted, Major General (res.) Moshe Gordon, who had the position from 1988 to 2002, said this week that he has no recollection of the issue at all. "There was no involvement on my part in this subject," he stressed.
Major General (res.) Yoram Yair, who was head of the Human Resources Division until June 1995, was surprised to hear about the affair. "The Human Resources Division could not have known about this. All dealings with bereaved families, including money matters, commemoration, cemeteries and so forth, are the responsibility of the Defense Ministry. I am not familiar with the issue, I am not aware of it and it was never brought to my attention."
Kobi Haber - who was head of the budget division at the treasury from 2004 to 2007, and who, prior to that, served as referent to the Defense Ministry at the Finance Ministry - was asked whether the IDF had transferred to the treasury the moneys that were deducted from the wages of the soldiers doing compulsory service. Haber said that to the best of his recollection, not a single shekel was ever transferred to the treasury.
A series of questions that were submitted about two weeks ago to the IDF Spokesperson, in an attempt to clarify the exact sum that had been deducted from soldiers in total, and whether there are bereaved families who have received moneys from the fund, and if so how much, elicited an answer almost identical to the first answer from the Finance Ministry spokesman: "During the years 1979-1997, payment was deducted from soldiers doing compulsory service for life insurance. In 1998 this deduction was cancelled and the payment began to be funded from the defense budget. The moneys that had been collected served as a budgetary source for funding a grant, in a case of death, to the parents of soldiers who died in the course of their military service."
Similar questions were also sent to the Defense Ministry spokesman. His laconic reply: "The issue comes under the responsibility of the IDF."
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