Billionaire Shaked helps turn wheels of Geneva Accord
Avi Shaked, the furtive billionaire who played a major part in the Geneva initiative, is hardly an unknown to the Israeli peace camp. Essentially, Shaked is one of the veterans of the camp.
Avi Shaked, the furtive billionaire who played a major part in the Geneva initiative, is hardly an unknown to the Israeli peace camp. Essentially, Shaked is one of the veterans of the camp, and his acquaintanceship with the chairman of the Shahar movement, Yossi Beilin, began back in the late 1970s, in political activity of the Labor party. It was then that Shaked also got to know MK Shimon Peres, and became identified with his camp. (Shaked was an invited guest at Peres' birthday celebration, which was heavily covered in the media last month.)
In the early 1980s, Shaked was a partner in the formation of a "feedback circle" initiated by the young Beilin, and was considered a Peres supporter. The feedback circle comprised a few dozen educated young people who pushed a dovish line through the party institutions. Shaked combined his political pursuits with thriving business activity. He was also involved in numerous initiatives in the framework of the peace camp as well as communal-social initiatives, some of them in Netanya, Shaked's home town. He was careful not be have his name associated with any of these activities. The same watchword held true for his part in the Geneva initiative.
Shaked was one of the first persons to be enlisted in the Geneva initiative. His involvement began two and a half years ago at the behest of Beilin, long before members of Knesset Amram Mitzna and Avraham Burg found out about it. In those days, he even initiated meetings between Israelis and Palestinians along the seam line, a scheme that was dubbed "Shaking Hands for Peace."
"With Beilin, there's a friendship going back 20 years, which has a common ideological foundation," says a colleague of Shaked's from the feedback circle, who like all his acquaintances respects Shaked's choice to remain anonymous, and himself maintains anonymity. "It was no problem," says the friend, "to get Avi Shaked involved in the Geneva initiative. It was natural. He is the quintessential member of the peace camp, and a familiar figure in the Palestinian peace camp." Shaked took part in nearly all of the sessions related to the initiative - in England, Japan, Jordan and Israel. He also came to the latest round of discussions at the Movenpick Hotel in Jordan, and took part in some of the discussions there. But when the initiative and his involvement in it came to light, he determinedly avoided any contact with the media.
According to one of the major figures involved in the Geneva talks, "Avi Shaked is interested in maintaining a low profile, and all of us respect that. I can only say that he played a significant role in the discussions. He helped to bring the sides together, contributed from his business experience in waging negotiations, and used a lot of examples from the business field."
And in this field, Shaked indeed has proven success. Now 50, he did not toe the line that had been outlined for him by his family - as a land developer in the Netanya area. Seven years ago, he joined with his brother Aharon and the brothers Shai and Ron Ben-Yitzhak to create the largest group of Internet gambling sites in the world. The group's best-known site is casino-on-net.com. Details of the Shaked and Ben-Yitzhak brothers' business activities were recently disclosed in the February issue of the magazine TheMarker.
In 2002, the groups' income totaled approximately $1 billion - about one-quarter of the entire income of the online gambling industry. The group's profitability share is estimated at 20 to 30 percent of revenues, meaning that the group may have realized - and distributed to its owners - profits of between $200 million and $400 million in the years since its inception.
The Shaked brothers own a larger share of the group than do the Ben-Yitzhaks. In the April issue of TheMarker, which published a list of the 500 wealthiest Israelis, the Shaked brothers' combined fortune was assessed at $100 million to $150 million.
Most of the companies involved in operating the group of Web sites are registered in Gibraltar and in Argentina - two of the few countries of the world that do not prohibit the provision of gambling services on the Internet. The main company of the group is apparently VHL (registered in Gibraltar). One of the companies, Random Logic, is listed in Israel. Its offices are located in Levinstein Tower, on Menachem Begin Road in Tel Aviv. This is also the address of the offices of Avi and Aharon Shaked.
Random Logic, which is directed by Shai Ben-Yitzhak, has two primary tasks: to develop the technological infrastructure of the Web sites and to acquire advertising space on the Internet. At the height of its popularity, the company expended some $20-30 million a month on advertising on the net - the most effective means of drawing gamblers to gambling sites. At first, owners of the largest Web sites were concerned that the new Israeli player wouldn't be able to pay for the ad space it wanted to buy. They therefore asked to see the money up front, and in cash - a demand that Random Logic easily met.
The company has about 200 employees in Israel. Two years ago, the four partners set up a huge service center in Gibraltar that employs another 200 people. All told, the group currently employs some 400-500 persons worldwide.
On the face of it, the substantial revenues and relatively low expenses make Internet gambling a very profitable and stable business. But the business is not free of risk. The greatest risk of the players in the industry at this stage has little to do with competition, or from technological development; the technology of the games of chance in flesh-and-blood casinos has not changed for decades, either. The greatest danger emanates from the law. In most countries of the world (including the United States, home to most of the online gamblers), it is prohibited to establish companies that operate Internet gambling sites. This problem is relatively easy to sidestep, by setting up the companies in countries that permit this sort of activity on their soil. It is more difficult to contend with the restrictions imposed by several major credit-card issuers on using their card to engage in Internet gambling. For example, in June 2002, Citibank, the largest issuer of credit cards in the U.S., with a 12 percent market share, decided not to permit its card holders to gamble online.
To a large degree, the attitude toward Internet gambling will be dictated by the approach adopted by the U.S., whose citizens generate about 60 percent of the revenues of the gambling sites. The trend in America is not in Avi Shaked's favor. In November 2002, the Internet operator "PayPal," which is part of the eBay group, decided to stop providing payment services to gambling Web sites. A month earlier, Yahoo decided to stop carrying advertising for gambling sites, and the Internet communications firm Akamai decided to suspend use of its servers for the purpose of transmitting advertisements of gambling sites.
The current situation could determine the trends in the Internet gambling industry. It may even be that laws will be adopted that might lead to a sharp decline in revenue and income. In addition, the U.S. government and its justice system may succeed in causing industries that are tangential to online gambling, especially the payment industry, to withdraw from the sector or at least to significantly restrict it.
This pressure will also affect Aharon and Avi Shaked and Shai Ben-Yitzhak, who might be forced to cut down on their ownership shares. Nevertheless, even if such an eventuality comes to pass, they have had several solid years of aggressive and energetic activity that lines their pockets with tens of millions of dollars.
Sources close to Beilin stress that Shaked, as opposed to what one may imagine, is not the financial backer of the Geneva initiative. His contribution was his active participation in discussions that took place all over the world, and in organizational assistance, mainly by providing a venue for the many sessions that took place in his luxurious offices on the 28th floor of the Levinstein Tower.
There is still much uncertainty about the source of the funds expended on the Geneva initiative, although those who led the effort have announced that they will maintain complete transparency. For this reason, it is unclear if Shaked has already contributed funds or intends to do so in the future, especially for the purposes of advertising and publicity. Sources close to Beilin note that to date, the financial supporters of the effort are the Swiss, the Japanese and donors from abroad - funds allocated for the purpose of holding the meetings at sites around the world, including flights and hotels. The ceremony in Geneva, at which the accompanying letter to the Geneva Accord will be signed, which will apparently take place on December 10, will be financed by the Swiss government. A nonprofit association is to be established in the near future for the purpose of organizing the financial machinery. All contributions will be funneled to the association. One of the more significant outlays will be the imminent translation and printing of the draft of the Geneva Accord, in about five million copies, and their mailing to every household in Israel.