Last update - 00:00 27/08/2003
PM's son paid `loan' with funds from Kern's Vienna bank
By Baruch Kra
Gilad Sharon, the son of Prime Minister Ariel Sharon, paid back a loan from South African businessman Cyril Kern with money he received a few days beforehand from anonymous businessmen who had sent the money from the same Austrian bank where Kern's loan originated. Senior police and State Attorney's Office sources believe the information, which appears in a Justice Ministry request to Austrian authorities to conduct an inquiry of the case on Austrian soil, strengthens suspicions of bribery involving Sharon and his son. Haaretz has a copy of that request to the Austrians.
Police believe that two foreign businessmen with interests in Israel are behind the mysterious money that arrived in Israel on two separate occasions from Austria. One of the businessmen is believed to be Arie Genger, and the other is a millionaire with very close ties to the Sharon family.
Israel has asked Austria to let it determine from whose bank account hundreds of thousands of dollars were transferred to Gilad Sharon in November and December. The transfers enabled him to pay back a May 2002 loan he had taken on behalf of his father from a Tel Aviv branch of Israel Discount Bank to pay back illegal campaign contributions the prime minister had received in the 1999 Likud leadership primaries campaign.
The Tel Aviv loan was made possible after Gilad Sharon provided guarantees of $1.5 million that he ostensibly received from Kern, a semi-retired British businessman living in South Africa who has maintained close ties with Ariel Sharon since the War of Independence.
The Justice Ministry request contains the answer to at least part of one of the biggest mysteries in the affair: How did Gilad Sharon manage to pay back both the $1.5 million Kern loan and the Discount bank loan so soon after discovering that investigators were examining the Kern loan?
The police inquiry found that in November, Gilad Sharon learned that police had discovered Kern's mysterious transfer of funds from a special bank account via New York to Tel Aviv. Sharon sought to quickly return the money to both Kern and Discount. That became possible when he raised the same amount of money as that of the loan.
Amazingly, the hundreds of thousands of dollars he needed came in the form of two transfers in November and December from the same Vienna bank from which Kern made his loan - Bank fur Arbet und Wirtschaft (BAWAG).
After the affair was reported in Haaretz in January, the prime minister was asked at a special press conference on the issue how his son managed to pay back such a large sum of money so quickly. Sharon's response was that "my son is a gifted economist, and I am proud of him for it. We have nothing to hide."
But the Sharon family has been hiding - Gilad Sharon remained silent when questioned by police, including not revealing the identities of the anonymous businessmen who made the money transfers in November and December, and details of the "Kern loan" that was transferred into Gilad's bank account in January.
The police have intelligence material raising suspicions about two businessmen involved in the transfers. The two are not identified in the documents sent to Austria, but Haaretz has learned that one is Genger, the Israeli-American businessman who has long been very close to the elder Sharon. In the last two-and-a-half years, Genger, who lives in the United States, has served as an occasional back-channel between Sharon and the White House.
For caution's sake, Haaretz meanwhile is refraining from publishing the name of the other businessman suspected by the police.
Genger was interrogated about the affair by the National Fraud Squad and remained silent. He was also involved in raising funds for Sharon in 1999.
Police and State Attorney's Office sources said that Genger and the other man have clear business interests in Israel, which means that there is tangible reason to suspect that a bribery deal was worked out between them and the prime minister.
According to Israeli law, if a public official does not provide a reasonable explanation for money reaching his account or the accounts of family members, he could be considered a recipient of a bribe, and the burden of proof is on him.
That is doubly true if the source of the money is businessmen who could benefit from donations to a pubic official. In other words, the explanation given by the prime minister at his January press conference - that the loan was innocently granted by a family friend meant to pay back illegal donations to his 1999 primary campaign - apparently is at best feeble, and it is unlikely that the Justice Ministry and police will accept it as a reasonable explanation for the money.
Police and State Attorney's Office sources suspect that the two businessmen - or at least one of them - have been behind Sharon from the start. They were suspected of being behind the original illegal contributions to Sharon's campaign in 1999 through the straw company Annex Research Ltd.
They are also suspected of being behind the $1.5 million that came in the form of the "Kern loan," and are suspected of transferring the money to Gilad Sharon to pay off the Discount bank loan and the "Kern loan."
The only two people who have provided any version about the events are the prime minister, at his press conference, and Kern, in an interrogation in South Africa.
Kern contradicted himself several times regarding his connections to the Sharon family: At first, he said the money was for a business project he was undertaking with Gilad Sharon, but then he said he had taken the action on behalf of his friend Ariel Sharon. Kern said at one point that he raised the money from a "fund," thus admitting it was not his private account.
The others involved in the case - Gilad Sharon, his brother MK Omri Sharon, and Genger - all have remained silent.
Police intelligence, evidence that has been gathered against all the suspects, and the Austrian court decision not to allow Israeli police to continue their inquiry in Austria, since the application concerned a possible violation of campaign financing laws - which is not a criminal offense in Austria - all increase the importance of the Tel Aviv District Attorney's Office campaign to get documents from Gilad Sharon.
If the case against the prime minister and his son turns into suspicions of bribery, the Austrians may have no choice but to allow the investigation to move to Austria.
The documents being sought by the district attorney's office include one that is supposed to clarify who was behind the Austrian bank transfers in November and December. The police are dependent on those documents to expose the second businessman.
If at a September 9 scheduled hearing the court does require Gilad Sharon to hand over the document, he will not be able to claim the document is lost, because the law against money laundering requires him to report large sums of money reaching his bank account. Since the money apparently was not defined as a loan, he should have also reported the funds to income tax. The police have also asked for that documentation. If he cannot produce it, there will be suspicions of tax evasion.