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On a Friday night a few weeks ago, the main building of the Shalem Center, in Jerusalem's upscale German Colony, was broken into. No money or expensive equipment was taken, but computer cables were ripped out and slashed, and the offices were vandalized. The computers were down for three days.

In the wake of the burglary, a complaint was filed with the police. However, for some reason, the Jerusalem District police did not get a report about the vandalism and slashed cables - only about the break-in. The investigators found no fingerprints or clues, and the police have no leads.

Two weeks ago, an indictment was handed down in the Jerusalem Magistrate's Court against the center's former chief financial officer, accountant Shaul Golan. The indictment cites six counts of falsifying corporate records, aggravated fraud and theft by a director, amounting to more than NIS 1.1 million of the center's funds.

A research facility identified with the Zionist right wing and with American neoconservatives, the Shalem Center was established as a nonprofit organization in 1994, with the aim of engaging in "Jewish thought." According to the center's Web site (www.shalem.org.il), its goal is nothing less than "strengthening the Jewish people and Israel by developing the ideas needed to sustain Judaism and a Jewish state."

Since its inception, the center has enjoyed funding of tens of millions of dollars, not least from donations by Jewish philanthropists such as Ronald Lauder, Sheldon Adelson and Zalman Bernstein. The center is located in two buildings and has a budget this year of $10 million, though fewer than 100 employees. Since its inception, it has also been under the centralistic control of a small group of people, who have known each other since their student days at Princeton University, headed by Dr. Daniel Polisar and Dr. Yoram Hazony. Polisar, the institution's president, is described as its operational and guiding arm. Hazony, a former confidant of Benjamin Netanyahu, preceded Polisar as president and is now provost.

Under their leadership, the center has recruited figures such as former chief of staff Moshe Ya'alon and former minister Natan Sharansky. A year and a half ago, the center established the Adelson Institute for Strategic Studies, which Sharansky heads and in which Ya'alon is a "distinguished fellow." Adelson's $4.5-million donation to the center stems from his unreserved support for Sharansky. The center is constantly gathering momentum and influence. It recently held a conference on "Democracy and Security" in Prague, at which U.S. President George W. Bush spoke.

Peculiar habits

With an annual salary that costs the center NIS 850,000 for each of them, buoyed by conferences and fat bank accounts, Hazony and Polisar have almost a completely free hand at the center. One employee describes Hazony as "a person with peculiar habits." For example, he once sent a memo to the staff, obliging them to use an identical font and to ensure a 45-degree angle when stapling pages together. Office equipment sent to him from the United States, for his use only, is stored in a special cabinet.

A woman who was a personal assistant to Hazony relates: "From each cafe there was a particular salad that had to be brought to him in a very specific way ... The amount of cream cheese on the bagel had to be exact: not too little and not too much. I brought him the coffee at record speed, because if it wasn't boiling, he wouldn't touch it."

A current employee relates: "One day, I was told: 'Drop everything, go urgently, take the prescription for Yoram, go to a drugstore and buy it fast, before Yoram gets upset.' I dropped everything ... and I ran. I didn't walk fast - I ran. I tell the pharmacist, 'This is urgent, just tell me how to apply it.' The pharmacist says: 'What kind of cat do you have?' I said: 'What are you talking about?' He says: 'This is an ointment for cat fungi. Does he have a fungus? What kind of cat is it? Use it twice a day.'"

Among the other chores performed for Hazony by employees of the Shalem Center were ordering pizza and looking for suitable schools for his children (Hazony has seven), taking care of the laundry, babysitting and moving things from his rented apartment to the villa that was purchased for him in Jerusalem's Ramot B neighborhood. An employee of the center also did the packing for Polisar ahead of his move to a villa that was bought for him.

As a rule, everything related to design in the center requires Hazony's prior examination and authorization. On one occasion, when he disliked a design detail in a new issue of Techelet, the center's quarterly - which has an English-language counterpart, Azure - he ordered all 5,000 copies reprinted.

One employee sees "an ethical problem" in the center's attitude toward money: "Everything is fancy, everything has to be the best. In a similar organization, but much larger, where I worked, we were taught to economize; to use both sides of the page. In Shalem it's as though money has no value. Yoram would say do it, no matter how much it costs."

Events organized at the center are not exactly the height of modesty; for each such event the center spends between $5,000 and $15,000. The circumcision ceremony for one of Polisar's sons was held there. Preparations for the bar-mitzvah party of another son (he has six children) were carried out at the center, though the party itself was held elsewhere.

Galvanizing event

Hazony, 46, was born in Rehovot and moved to the United States with his family at an early age. His father, an expert in robotic engineering and formerly active in a left-of-center youth movement, worked at Princeton. Hazony also attended the university, which became a prominent component of his identity and symbolized academic perfection for him (even though he did his doctoral studies at Rutgers). At Princeton he met Daniel Polisar and Joshua Weinstein, who would also become one of the founders of the Shalem Center and is now an associate fellow in its Institute for Philosophy, Politics and Religion.

One of the galvanizing events in Hazony's life was an encounter with the ultranationalist Rabbi Meir Kahane, in the fall of 1984. Seven years ago, Haaretz correspondent Akiva Eldar published excerpts from a eulogy Hazony wrote in 1990, after Kahane's assassination in New York. "We were mesmerized," Hazony wrote about the meeting with Kahane at Princeton. Most of his friends, he noted, had never before spoken with a Jewish "believer" and were amazed to discover that an Orthodox Jew could be an intelligent person, capable of defending his opinions against a group of Princeton students. They had all entertained an image of Judaism as something primitive. "We listened in astonishment, and finally in shame, when we began to realize that he was right."

Hazony knew, of course, that Kahane's racist party had been barred from running for the Knesset in the 1988 elections. He also added a demurrer, stating that he and the others were unable to reconcile the Judaism they had learned with Kahane's tendency toward violent solutions for problems, or with the crude presentation of his views. At the same time, Hazony made it clear that, "[We express] gratitude to someone who changed our lives, thrilled and entertained us, helped us grow up into strong, Jewish men and women. Many of us found other ways of doing what he asked."

The three friends became religious and challenged the approach of the veteran Jewish students' campus-based movement, Hillel, which in their perception was insufficiently Zionist and Jewish. At the end of the 1980s, Hazony and Polisar - who received his doctorate from Harvard - decided to immigrate to Israel with their young families (Hazony married Yael, an American-born convert to Judaism) and moved to Eli, a settlement in the northern West Bank. The two young scholars did not integrate into academic life in Israel. Hazony wrote articles and editorials for The Jerusalem Post. In 1991, the three friends from Princeton - Hazony, Polisar and Weinstein - founded the Shalem Center Association. Initial funding of a few thousand dollars was provided by Barry Klein, a businessman from the management and investments sphere, who was one of the founders of AIG's trading division.

In the beginning of the 1990s, in the wake of a recommendation by David Bar-Ilan, the then-editor of the Jerusalem Post, Netanyahu asked Hazony to assist him in research for his book "A Place Among the Nations." Thanks to his connections with Netanyahu, Hazony became a member of the Israeli delegation to the Madrid Peace Conference and spent a brief period alongside Netanyahu, which included helping out in his campaign for the Likud leadership in 1993. In 1995, Netanyahu published "Fighting Terrorism," which Hazony edited, but their paths subsequently parted, and it is said that "they can't stand each other."

The first significant donation to the Shalem Center came from Ronald Lauder, the owner of the cosmetics empire, who at the time was chairman of the Conference of Presidents of Major American Jewish Organizations. A confidant and patron of Netanyahu, Lauder met Hazony in the period in which he worked for Netanyahu, and is now chairman of the Shalem Center's foundation board.

Lauder's donation of a few hundred thousand dollars a year was not enough for the center to realize its vision and grow at the pace its founders desired. They turned to another American tycoon, Zalman Bernstein, who had established the Avi Chai Foundation. Bernstein, who immigrated to Israel and lived in Jerusalem until his death in 1999, became the major funder of the Shalem Center, through the Tikvah Fund he established, which in recent years has provided the center with more than $5 million a year. Although Lauder is still chairman, he does not attend the board's meetings, due to "schedule limitations," according to a spokesperson. The center's administrative building on Hatzfira Street in the German Colony belongs to Lauder - who leases it to the institution for $1 a year.

Family business

Initially, Hazony was president of the center and Polisar was research director. They were later joined by Dr. Michael Oren, a graduate of Princeton and Columbia, and more recently author of the best-sellers "Six Days of War," about the Six-Day War, and "Power, Faith and Fantasy," on U.S. involvement in the Middle East. Yishai Haetzni was until recently the center's executive director; his brother, attorney Nadav Haetzni, provides legal consultation services. David Hazony joined his older brother at the center two years after its founding. For the past three years he was the editor of the Azure quarterly, which is described as a journal of "ideas for the Jewish nation." He has also been working on his doctoral thesis (in Jewish philosophy) and writing a book about the Ten Commandments.

Following the outbreak of the Al-Aqsa Intifada, in October 2000, it was decided that the Hazony brothers and Polisar would no longer live across the Green Line, owing to the dangers involved in traveling back and forth to Jerusalem. The Tikvah Fund paid for rental apartments in the city's Arnona neighborhood, costing tens of thousands of shekels a year. The three then received a benefit worth millions of shekels when the foundation bought them three villas in the Ramot neighborhood. The fund chipped in to the tune of 90 percent of the cost, with the remaining 10 percent given as a loan.

About a month ago, David Hazony sent a message to the staff of Azure and its Hebrew version, Techelet: "After 12 years with the Shalem Center, and three years as editor-in-chief of Azure, I am leaving Shalem in order to pursue my research and other interests ..." In fact, it was decided that Hazony would leave because of "breach of trust": a relationship with a woman who was his subordinate at the center. The decision was authorized by the board. Under the arrangement that was worked out, David Hazony will have to vacate the Ramot villa within a year. Alternatively, the family can buy the Tikvah Fund's share in it for approximately NIS 2.5 million.

For the past five years, the Hazony family has had another representative at the top of the center's hierarchy: Yael Hazony, Yoram Hazony's wife, is chief editor of the center's publishing division, Shalem Press, which has an annual budget of about $1 million. Despite the size of the budget, an average of only four or five books are published each year.

One of the prominent works published by the center is a Hebrew translation of "The Federalist," the collection of articles by Alexander Hamilton, James Madison and John Jay. On the cover of the classic work is the name of the editor: Yael Hazony. However, Hazony, who has an undergraduate degree in Middle Eastern Studies, Arabic, and ancient and modern Hebrew, was not the book's only editor.

"I felt disgusted, I felt cheated," Dr. Shlomo Yotvat, an expert on American history and a lecturer at Israel's Open University, said last week. "I signed a contract and worked for a year on editing the book's scientific apparatus, and it was clear to me that I was the editor. During that year, no one talked to me, no one corrected me, no one asked even one question of clarification. I was paid the money I was promised, and then one day I receive a copy of the book and see that Yael Hazony is the editor, with my name listed as adviser on an inside page. Husband and wife have the right to protectionism if that's what they want, but if I had known that this would be the result I would never have agreed to the whole story. They found a patsy to do the dirty work and someone else gets the credit."

Atara Kliegman, the coordinator of the center's translations department, who was directly responsible for Yotvat's work, says: "They did him a great wrong and deprived him of credit." Yotvat says he was determined to sue the Shalem Center, "but I dropped the idea, because I have no financial resources and they have all the economic resources in the world."

'Nuclear war'

For the past three years, the Shalem Center has also been registered as a limited company, and most of its activities take place under that aegis, not as an association. Shaul Golan, who has now been indicted on embezzlement charges, was the center's chief financial officer for seven years. According to his confidants, he wanted to take over the institution because he felt it was being managed in a wretched, inefficient and wasteful manner. One of his takeover moves was an attempt to appoint a new board, which would then oust Polisar, Hazony and the executive director, Yishai Haetzni.

In place of the latter, Golan wanted to appoint Sarah Kramer, who had been the center's deputy executive director for a year. Kramer tried to introduce efficiency measures and was highly regarded by her co-workers, but like many others was fired. In a meeting she convened after her dismissal, with the participation of about 10 current and former employees of the center, Kramer tried to discover who was trustworthy and willing to take part in the move. Word of the meeting was leaked to the center's senior management. Management also received information from Arthur Fried, the board chairman of the Avi Chai Foundation, to the effect that Kramer had asked for his support, and through him that of Zalman Bernstein's widow, Mem Bernstein.

Hazony and Polisar, who were close to losing control of a company worth millions, started to keep a close eye on developments. Within a short time, they say, they discovered financial improprieties and glitches in the computer system. Hazony described the events as a "nuclear war" and mobilized huge resources to deal with the situation. Internal reviews, carried out, among others, by Barlev Investigative Auditing, raised the suspicion that Golan had embezzled center money. In addition, sources close to the senior management say that "Trojan Horse" programs were discovered in the center's computers, enabling infiltration of all the stored information, even the most personal and confidential.

"When they discovered that, they had all the locks in the main building changed overnight," an employee relates. "We were not allowed into the building. We were asked to take a polygraph [lie- detector] test. Armed guards were posted. Everyone's personal computer was taken, and we were told to report to the second building the next day. We were told that there was a problem and that we were now working in an emergency format. Private investigators came to the center, they changed computer passwords, checked the employees' e-mails, what not. It was totally disproportionate. We are a research institute, not the secret service. They lost it."

Employees were sent home, some for lengthy periods. Others continued to receive salaries for months after they concluded their work, but were prohibited from entering the premises or making contact with the employees. Former employees say that everyone who worked with Golan - "Shaul's troops," as they were called - was interrogated, even a few times; nearly all were fired.

"They fire someone, and that same day he has to collect his stuff, leave the building and never show up again. There was one person who was canned after the embezzlement affair, and Polisar and David Hazony accompanied him to the office to supervise as he packed his things. It was humiliating," says one source.

Finally, no one from the group affiliated with Golan remained. "It became an us-against-them thing," a former employee says. "They were full of suspicions about people, even if they had no information about them."

Two years passed before Golan was indicted. The indictment states that "during the years 2003-2005, the defendant falsified, and caused others to falsify, corporate records, [and] stole monies and assets belonging to corporations." He is charged, among other counts, with transferring funds of the center to the bank account of a childhood friend from Australia; with selling a car that belonged to the center and pocketing the money, in cash; and also with removing large amounts of money from the center's account without reporting this as required.

Golan's lawyer, Kobi Kamer, said in response: "I do not wish to respond to the counts in the indictment at this time, because I have not yet read the evidence. The Shalem Center is managed in a way that merits in-depth review and examination. According to Shaul Golan, these are false charges by a group of people who tried to remove him from the institution. Golan did not do anything that was not aboveboard."

Arthur Fried and Mem Bernstein, while declining to be part of the takeover plan of Shaul Golan and Sarah Kramer, resigned last year from the center's board. Their departure leaves it unclear whether the Tikvah Fund, the center's primary donor, will continue to support it as before. Sources at the center insist that both Fried and Bernstein remain ardent supporters of it and its activities.

The visionary

In recent years, the Shalem Center has been at pains to emphasize that its goal is to break traditional left-right patterns and focus on things Zionist as opposed to non-Zionist. For example, the center lobbied in the Knesset for the enactment of a law establishing a national memorial day for Theodor Herzl, "the founder of modern political Zionism." Prime Minister Ehud Olmert appointed a committee chaired by the center's president, Polisar, to be responsible for implementing the law's provisions. As a result of the center's prestige, it has attracted well-known academics such as Profs. Ruth Gavison, Yaron Ezrahi and Amnon Rubinstein, Dr. Fania Oz-Salzberger (daughter of writer Amos Oz) and the historian Dr. Eyal Naveh.

In his book, "The Jewish State," Hazony blames the Israeli intellectual elite for what he believes to be its role in minimizing the traditional Zionist narrative in the Israeli school system. Prof. Israel Bartal, dean of the Hebrew University's faculty of humanities who came under attack in the polemic, describes Hazony's work as "pseudo research" that is riddled with inaccuracies and basic misunderstandings of texts. When the two appeared together on a television news show, Bartal says, "I noticed that he was a very anxious man. A man on the verge of erupting. He seemed threatened even though ostensibly, I was the one under attack."

"From 1998 until 2002 I was a research fellow at the Shalem Center and was engaged in writing my book 'The Messianic Secret of Hasidism,'" Dr. Mor Altshuler, a scholar of Jewish thought, relates in a less bemused tone. "On at least one occasion, Dr. Yoram Hazony talked in my presence about the mental state of one of his relatives. Thus, I learned about the relative's illness and other horrifying details. Against my will, I was a witness to an uncontrollable outburst by Dr. Hazony, which leads me to doubt his judgment."

As his name suggests in Hebrew, Hazony is a visionary. His overweening ambition, which is now taking shape, is to establish a university in Jerusalem in which the various fields of knowledge, from philosophy to mathematics (including, for example, "The Lord of the Rings," one of his favorite books), will be interpreted from a conservative Jewish and Zionist perspective. "If my university is not established," he told a senior member of the Shalem Center not long ago, "Zionism will have no future, the Jewish people will have no future and, I dare to say, the West will have no future, either."

The center's response

In a statement responding to the article, the center said: "The attempt by Shaul Golan to take over the Shalem Center, acquire the center's donations and replace the officials in its corporations in a fraudulent, manipulative manner was not even close to successful, and was blocked early on. All the members of the foundation board remained close, involved and ardently supportive.

Naturally, when it became clear what Golan had fomented in terms of the center's facilities, funds and computers, exploiting the naivete of the directors, who never imagined he would act as he did - they took obligatory measures, which included refreshing working procedures and reorganizing personnel. It should be noted that at this time the center was in any case undergoing a transformation into an academic educational institution, which had implications for the personnel sphere.

The Shalem Center is a research institute. Accordingly, many employees are hired for research projects that are time-limited. Those who want to tarnish the center's reputation can thereby create an exaggerated picture of turnover. Beyond this, about half of the center's employees have worked there for three years or more.

Yael Hazony is the editor of "The Federalist." Indeed, Dr. Yotvat contributed to the editing of the book and was paid for his work. Due to an error, his name did not appear in the first edition, and this was corrected in the second edition, of 2004.

A meticulous regard for high standards is one of the trademarks of the Shalem Center, and this is one of the reasons for its excellent reputation. This is seen, among other places, in the very meticulous translation of books and in the research, which does not compromise on quality, even at the expense of time, and also in the aesthetic qualities of our products and facilities.

As the founder and leader of the center, Dr. Yoram Hazony is undoubtedly one of its pillars. The center's success is a reflection of his capabilities. Every person, certainly a social or business leader, has his own human distinctiveness. Dr. Hazony's behavior is no different from that of other entrepreneurs, managers or senior officials in Israel and elsewhere.

Yoram Hazony and Daniel Polisar view the Shalem Center as their life's work. It is definitely possible that on occasion, while preparing for a trip or in some other pressured situation, specific help is needed. In addition, it happens in every workplace that the employees' children arrive when they are sick or during long working hours, and the employees look after them. As for the moving, this involved only office equipment, computers and books which are in the home offices of Hazony and Polisar. Polisar held the circumcision ceremony for his son with the authorization and in coordination with the senior management, and with the knowledge of the board of trustees. He paid for the entire event, and all the employees of the center were invited to attend.

The salaries paid to Polisar and Hazony do not deviate from what is accepted in similar institutions, such as research institutions or universities. It should be noted that the salaries of the senior officials of the Shalem Center are authorized by the board of trustees. Generally speaking, the employees' salaries are significantly higher than is customary in the Israeli workplace."

David Hazony did not respond to a call from Haaretz by press time.