Ehud Barak Ltd.
After taking a break from politics six years ago, Ehud Barak used his name and connections to get on the fast track to financial success. How did the former kibbutznik manage to make millions and join the inner circle of Israel's affluent - and what does it mean for his next try at the premiership?
At the beginning of March, members of Israel's wealthiest class made their way to the 32nd floor of Alrov Towers in north Tel Aviv, to the spacious and luxurious home of former prime minister Ehud Barak. Among them was the entrepreneur who built the group of residential towers, Alfred Akirov; diamond tycoon Benny Steinmetz; attorneys Ram Caspi and Eli Zohar; former Bezeq chairman Ido Dissenchik; and Amos Yaron, a former director general of the Defense Ministry. They were there to celebrate Barak's 65th birthday.
A few days earlier, Barak's partner, Nili Priel, had called the actor Alex Ansky and asked him to perform for the group his one-man play "Nevelot" ("Dead Flesh"), based on a novel by Yoram Kaniuk, which Priel had read with great interest. The work is about a group of veterans of the Palmach - the pre-state commando unit of the Haganah, the forerunner of the Israel Defense Forces. The group holds a regular "parliament" in a Tel Aviv cafe, where they indulge in male chitchat, marked by blatant frustration with the younger generation, who ignore them and are indifferent to their nostalgic tall tales from the good old days.
Ephraim, the protagonist, loses a bet to the Old Boys, and they make him meet with a clinical psychologist for a one-hour session, while they wait for him next to her house. At first Ephraim is suspicious and reserved, but he finally tells the psychologist about cruel murders he and his buddies committed while in uniform.
When the performance ended, Barak went up to Ansky, gripped his shoulder and said, "Not that we didn't know about the things we heard here - but we received them in highly concentrated and succinct form." Attorney Caspi was considerably less enthusiastic. He went over to Ansky and scolded him in the presence of others. "This is an anti-Zionist and anti-Israeli play," he told the actor.
While young waitresses offered fancy petits fours, Barak's guests gazed in amazement at the impressive grand piano that stands in the spacious living room, whose keys were playing classical music by themselves, via a computer attachment.
As Barak and his pals contentedly sipped their wine, a prisoner, Ofer Glazer, was getting ready for lights-out at Ma'asiyahu Prison, where he is serving time for indecent assault and sexual harassment of two women. Two months before his imprisonment, in October 2006, Barak and Glazer traveled together to Jordan for a meeting with King Abdullah. In June that year, before the meeting, Glazer announced that he and other partners had acquired 70 percent of a company called Hom Tov (meaning "good heat"), which had developed a unique method of extracting oil from shale rock. The Hashemite Kingdom is blessed with vast quantities of this miracle rock, and the group led by Glazer and Barak had gone to see the king in order to get permission to mine the rock and set up a plant in the region.
"Apart from the fact that the shale rock in Jordan is the most effective, everything there is faster. There is a king," one of the members of the group explained this week. He added, "Barak was the one who arranged the meeting with Abdullah, who gave the group the go-ahead. He supports the project."
Barak is not listed as one of the company's shareholders, but confidants of Glazer and one of the partners in the company confirmed this week that the former prime minister is to all intents and purposes their partner. "He does not hold shares, which is a legal definition of a partner," a Barak confidant explains, "but there is activity in this sphere." Barak's close friend Loni Raphaeli, who served with him in Sayeret Matkal, an ultra-elite commando unit, and was one of the key figures in Barak's race for the Labor Party leadership in 1999, holds 2 percent of the company's shares. Also involved in the project is attorney Doron Cohen, the brother of Barak's ex-wife Nava, who despite the divorce is still considered very close to Barak.
Another senior partner in the project is businessman Avi Dudai (whose wife, Esther, holds more than 30 percent of the company's shares). Dudai has for years been running businesses in Turkey and elsewhere, and in the past was an assistant to Ariel Sharon. The company is also planning to establish a similar plant in the northern Negev, and recently asked the National Infrastructure Ministry for a franchise to mine oil shale. They also asked the Investments Center - a unit in the Industry and Trade Ministry - for recognition as an "approved plant" and a concomitant investment of tens of millions of dollars.
The oil shale project in Jordan and the Negev is not the only one in which Barak, Glazer, Dudai and Raphaeli are involved. The four, along with other partners, also sought to establish a network of parking lots in Istanbul, a vast, densely packed city of 16 million people who can't find a place to park. Two years ago, Dudai asked Alon Liel, a former director general of the Foreign Ministry who also served as Israel's ambassador to Turkey, to arrange a meeting - on behalf of the Arison family - with the mayor of Istanbul on the subject of the parking lots. (Shari Arison, the owner of Bank Hapoalim, Israel's largest bank, is married to Ofer Glazer.) Such a meeting was indeed held. Barak, according to people knowledgeable about the subject, joined the project at a later stage. His advantage was his connections in the top ranks of the Turkish establishment and his ability to gain quick access to officials and cabinet ministers. Despite the good will, however, the deal never got off the ground.
Six years ago, Barak was defeated decisively by Ariel Sharon in elections for prime minister and announced that he was going to take a break from political life in order to feather his nest. In this period, Barak tightened his relations with Israel's moneyed class. His likely return to the center of the political stage makes necessary an in-depth examination of his social and business connections.
In the United States, every candidate for a public position must inform the public about the scope of his business affairs and list the people with whom he has business connections. This public disclosure is meant to ensure that elected officials will not promote the affairs of former partners. No such obligation exists in Israel. True, Members of Knesset and cabinet ministers must provide a personal declaration of assets to the state comptroller and the Knesset speaker, but the declarations are held in extreme secrecy without the public eye being able to scrutinize them. Barak has no intention of applying stricter norms of transparency to himself. In the past few years he has refused to provide any information about his various business affairs. "The former prime minister does not comment on his private business affairs" is the standard reply journalists receive from Barak's bureau when they try to probe the subject.
The case of Barak is particularly interesting, because from the moment he left the premiership it was clear that he would return to politics. In the twilight years between his departure from politics and his return, Barak, who now has pretensions of capturing the remnants of a social-democratic party, became flesh of the flesh of the country's wealthiest group. He is a regular guest at receptions and cocktail parties given by Israel's ranking business figures. As will be seen, he tried to get some of them to enter into joint ventures with him, based on the assessment of both sides that he would likely hold senior posts in government again.
In the first months after he left politics, Barak delivered lectures through the Harry Walker Agency, the same company that marketed the talks of his predecessor in office, Benjamin Netanyahu. This was only a temporary source of income, as a former prime minister tends to be in demand for lectures mainly in the first year after leaving office. It is thought that Barak received $30,000 per lecture. At the same time, he looked for new channels in which he could earn more money. At the end of 2001, Barak was appointed a special adviser in EDS, a computer services company. There, for a very short time he was an adviser on strategic affairs and international business to the company's CEO, Richard Brown, but disagreements over EDS' future strategies led to the end of the relationship. According to estimates, Barak earned tens of thousands of dollars a month during his period at the company.
In 2002, Barak established "Ehud Barak Ltd." The company, whose revenues are almost solely from abroad, was still active in recent months, after Barak announced his intention to run for Labor chair again. In its four and a half years of existence, Ehud Barak Ltd. has taken in almost NIS 30 million - an average of more than NIS 7 million a year. Barak also holds shares together with his former brother-in-law, Doron Cohen, in another company, called Cardo Business Development. In 2006, Barak used an account of 38 million Japanese yen (the equivalent of $380,000) in the Cayman Islands branch of Mizrahi-Tefahot Bank as collateral to obtain a loan from the bank. The Cayman Islands are considered one of the world's leading tax havens.
As prime minister and former chief of staff, Barak has been receiving an annual allowance of more than NIS 400,000. In addition, the state funded his bureau at a cost of NIS 3.2 million in 2004 and NIS 1.8 million in 2005. In the past few years, the annual allowance has represented a small percentage of his income, which totaled more than NIS 10 million. Where does the rest of the money come from?
One of the paths Barak chose in the business world was that of opening doors for commercial companies. "What does Barak know about business?" one of his confidants asks rhetorically. "He studied physics and was a chief of staff and a minister. What does his resume have to do with business?"
The following story illustrates the method. About four years ago, a group of investors came to Barak with a proposal to establish a security-ranking system for airports, as part of the lessons of 9/11. The idea was to rank the world's airports and airlines based on their level of security. The investors wanted to recruit Barak as a security figure who would open the doors of the U.S. administration and the major airlines for them. Comments one of those present at the meeting: "In the end, it did not get off the ground because no understanding was reached about the terms of cooperation with him. The idea was that he would get paid for his activity and receive some kind of allocation of options or shares. The intention was that he would use his connections. At the time, his connections seemed very important to launch the project."
The idea was to use his connections more than his qualifications?
"In terms of content, this is not his area. There was a professional in the field who was behind the idea. Barak was supposed to use his name to forge connections with bodies regarding which we thought at the time he had an advantage. The connections in this case were very important."
In order to find future clients?
"Exactly. The clients were to be airlines and airport directorates. He had already been involved in projects in which his role was to create ties with bodies, mainly in the United States. For example, there was the project of escaping from high-rise buildings during fires, using a 'rescue sleeve.'"
The sleeve was the product that, more than any other, exposed Barak-as-businessman to the public consciousness. In 2002, in the aftermath of the collapse of the Twin Towers, Barak cooperated with AES (Advanced Evacuation Systems), owned by the Israeli entrepreneur Eli Nir. Nir developed a system of rescuing people in high-rise buildings, a kind of fireproof rescue sleeve that would be installed on the outside of the upper floors of the buildings and accessed by emergency doors. In an emergency, the sleeve would open, enabling those in the building to slide down to the ground safely.
In October 2002, Barak presented the system in the United States in a series of media interviews. His many appearances, a year after 9/11, contributed to the rescue sleeve's being chosen by Time magazine as one of the successful concepts of the year. It was here that Barak was reborn as a marketer.
The aftermath was less successful: The company had difficulty marketing the product abroad. Former Home Front Commander Zeev Livne said this week: "Shortly after I left the IDF, I was approached by the company's owners to take part in the firm's steering committee. The product looked good and effective, but I think they are stuck and did not succeed in selling it to significant groups. My feeling is that they didn't succeed in creating a serious marketing system that would persuade people to buy it. A good product without marketing isn't worth much in the business world."
One of the company executives, Udi Nir, this week: "Since 2002 we have been doing more and talking less. There definitely has been progress in a few countries, in Europe, in the East, in North America."
What was Ehud Barak's role in the company?
"We did presentations together. We turned to him as a civilian with a military background who could help. He presented the product in the United States. He also contributed in terms of thinking. His participation ended more or less in 2002, with the presentation of the product. Since we moved on to other channels there was less need for his work."