Former transportation minister MK Ephraim Sneh ?(Labor?) is scheduled this morning to present his version of what is shaping up to be one of the main headline grabbers in a special State Comptroller's Report in-the-making ? purchases made by Israel Railways over the past several years.
As reported in TheMarker a few months ago, the state comptroller is examining possible irregularities in business deals carried out by Israel Railways. Sneh and several senior Israel Railways officials have been implicated in the affair.
Two deals will receive particular attention in the upcoming report ? one involving the cancellation of an agreement to purchase tilting carriages, the second involving the purchase of second-hand carriages. The tilting carriage deal was canceled in September, 2003, about five months after the deal to buy used carriages was submitted to Railways management.
Trials were conducted in 1998 to determine the feasibility of tilting carriages for the local railway infrastructure and the amount of travel time that could be saved by using them due their higher speeds. Fiat was awarded the tender to supply the carriages. At the first stage, the Italian company was to provide four sets of carriages for $32.7 million. Fiat spent about $2.5 million preparing for its bid.
The steep curves of the Tel Aviv-Jerusalem railway route were a factor in choosing the tilting carriages, which can maintain high speeds through a curve due to internal springs and gyroscopic action.
Railways head Amos Uzani asked Israel Ports and Railways Authority ?(IPRA?) chief Gideon Shamir to approve a trial of tilting carriages manufactured by Adtranz, a German company, in December, 1997. A few months later, the trial was carried out. According to information obtained by TheMarker, no proper report of the trials was carried out.
The company carried out a trial in May, 1998 to determine the best type of train for steep and winding rail lines. The trial's findings were not submitted to the IPRA, which was responsible for the country's trains at the time. Nevertheless, in December, 1998, Uzani instructed the issue of a closed tender for the purchase of four sets of tilting carriages, including an option to purchase an additional 20 sets over the next decade. Three companies submitted bids: Fiat, Adtranz and Talgo, a Spanish company.
While experts expressed reservations about the need for a tilting train in Israel, the economic feasibility study concluded that negotiations should be continued with two of the three bidders, setting off a competition for the tender between Fiat and Talgo. The deadline for submitting bids was set for the beginning of February, 2000.
According to Railways documents, at the end of January, 2000, Uzani and several senior company officials traveled to a number of European countries to visit firms offering second-hand railway carriages in the framework of an RFI that had been issued at the time. According to the itinerary obtained by TheMarker, Uzani met in Italy with the CEO and chairman of Fiat at a restaurant in Florence. The delegation's visit to Italy included a test ride on Fiat's tilting train. A planned visit to Spain to try out Talgo's carriages was canceled.
The state comptroller is checking whether a few days before the visit to Italy, Fiat agency CEO Yaki Enoch told Uzani that a meeting had been arranged in Florence between Uzani and the senior Fiat officials. The issue is whether Uzani informed the other senior Railways officials about the meeting, and reported on it to them afterward. Uzani denies that he failed to inform his colleagues about the meeting.
In April, 2000, Railways announced that Fiat had won the tender, and negotiations with the company were completed at the end of the year. Fiat's professional representative in Israel at the time was Simcha Perelman, a friend of Uzani who later became his partner in a private consulting company. Their company provided services to Siemens, which this year was awarded the largest tender issued by Railways in the past several years for the sale of carriages that could run as high as 500 million euro.
The French company Alstom purchased Fiat Ferroviaria, the Italian company's railway division, in early 2001, and announced the acquisition to Israel in June. Alstom submitted in July, 2001 a new bid for the carriages that was 20 percent higher than Fiat's previously submitted bid. Railways discovered in August, 2001 that Talgo's bid was 10 percent lower than the Alstom bid, which triggered cancellation of the Fiat-Alstom deal in favor of the Spanish firm.
Individuals who were close to the tender process claimed that the true motivation for canceling the Fiat-Alstom deal was the company's refusal to pay kickbacks to people who were involved in awarding the bid.
At this stage, Uzani was replaced as Israel Railways CEO by Yossi Snir, an associate of Sneh's. Sneh became transportation minister in March, 2001, replacing Amnon Lipkin-Shahak. Fiat decided to fight back in an attempt to regain the tender. A week before beginning his new job, Sam Ulpiner, then-president of the Contractors' Association, contacted Snir, and invited him to a late-night meeting at his home with Enoch. The meeting took place in the basement of Ulpiner's home, during which Enoch explained to Snir why all involved parties had an interest in having Fiat provide the carriages to Israel.
It is believed that in February, 2002, Snir was invited to Sneh's home one evening. Michael Levy, chairman of El Al and Fiat's importer in Israel, was there to persuade Snir to purchase the carriages from Fiat. At the time, Levy was also a major donor in Sneh's bid to lead the Labor Party. Sneh was the person responsible for appointing Levy as El Al head.
Yossi Snir said in response that he had answered all of the state comptroller's questions. "The deal began near the end of my tenure as CEO of Railways," Snir said. "After all of the details of the deal were placed before me, I decided there was no reason to proceed with it, and that was my recommendation. After I left, the board approved the deal for reasons that are unclear to me."
Uzani denied any connection to the affair. He claims the deals occurred after he left Railways. He also denied that he did not report the Florence meeting, which he claims was part of the original itinerary.
Yaki Enoch was abroad and unavailable for comment.