Perils of Peru

Yossi Melman head
Yossi Melman
Send in e-mailSend in e-mail
Send in e-mailSend in e-mail
Yossi Melman head
Yossi Melman

Moshe Rothschild did not hide his concern this week. He is under investigation in three countries Peru, Panama and Switzerland on suspicion of corruption, paying bribes and illegal association with the aim of entering into conspiracy and violating the law. If convicted, he faces a possible 15 years in prison. Anxiety about the publication of this article gnawed at him all week. For the former kibbutz member and air force pilot, who became a millionaire thanks to dubious arms deals, avoidance of the media has become almost second nature. He very much wanted this article not to be published at all, or at least to be postponed "until after the holidays" referring to Rosh Hashanah and Sukkot, in October. He cited "personal reasons," which he refused to elaborate, for the request. So distraught was he that even suggested granting an interview to Haaretz if publication of the article was delayed for a month and a half.

Rothschild knows that the noose around him is tightening. Several of his aides testified against him and provided investigators with incriminating details, including tapes of conversations with him. Some of his former partners are under arrest or considered fugitives, like him. If he sets foot in Peru he will be arrested immediately; if he travels to othe countries in South America or Europe, he is liable to be taken into custody and then be extradited to Peru. As a result, he is afraid to leave Israel: There are very few countries he can enter safely.

Though it is unlikely that he will be arrested in Israel, he is concerned that any publicity here will have a devastating effect on his status and business. Following a request from a Peruvian court, Cornelia Cova, an examining magistrate in the canton of Zurich, Switzerland, ordered the bank accounts of Rothschild and the companies he owns or is connected with to be frozen. An account that was frozen in the Spanish bank BBVA in Zurich contained $6.5 million.

Earlier, the president of an anti-corruption court in Lima issued an international arrest warrant for Rothschild. The warrant was transferred to Interpol. A spokesman for the Israel Police said that the police have already received from the government of Peru "a request for information about Rothschild" and that "the request is being examined." Within that framework, the police have asked Peru for explanations about the substance of the suspicions against Rothschild.

These suspicions surfaced immediately after the fall of Peruvian President Alberto Fujimori, in 2000. In the four years that have gone by since then, additional facts have been unearthed by several commissions of inquiry of the Peruvian Congress and by investigations of the Peruvian judicial system. According to the material that has come to light, Rothschild is suspected of trading, brokering and being involved in arms deals in which MiG-29s, Sukhoi 25 fighter-bombers, Mi-17 and Mi-25 helicopters, and Antonov transport planes from Belarus were sold to the Peruvian air force and police. In addition, Rothschild is also said to have been involved in supplying spare parts for planes and advanced wiretapping equipment of Israeli manufacture.

These deals, which took place in the 1990s, were worth more than $500 million, thus probably making Rothschild Israel's biggest private arms dealer since the tycoon Shaul Eisenberg brokered arms transactions between Israel and China. The difference, though, is that whereas Eisenberg's mediation efforts lasted for about a decade, Rothschild pulled off his deals in a four-year period. Sources close to the investigation in Peru believe that Rothschild's profits from the deals totaled tens of millions of dollars. They discovered that he was allegedly a key figure in a network that was put together by Vladimiro Montesinos, then the head of the Peruvian security services and the president's right-hand man. Montesinos, who received a bribe from nearly everyone who concluded a large-scale deal with the government of Peru, smuggled his booty abroad and is suspected of having opened with the help of liaisons whom Rothschild knew bank accounts in Panama, Switzerland and elsewhere. In the meantime, several of his accounts have been frozen at the request of the Peruvian authorities.

Montesinos' fortune, which he made from the bribes he received, is estimated to be about $200 million. The investigators suspect that $60 million of the money in his accounts is from deals in which Moshe Rothschild was involved. Montesinos is now serving a nine-year sentence in Peru's most heavily guarded prison and is also being tried on other charges. Fujimori, the former president, is also suspected of having improved his bank accounts and stolen millions of dollars from state funds. He fled Peru and was given asylum in Japan. Fujimori is from a Japanese migrant family, and although Peru issued an international arrest warrant against him, Tokyo refuses to extradite him on the grounds that he is a Japanese citizen.

Montesinos' network included arms merchants, cabinet ministers (including the defense minister, Victor Malca, another fugitive, who is hiding in the United States and is wanted by Peru, and the economy minister, Jorge Camet, who is under house arrest) and senior army officers. According to the investigators, they conspired to defraud the state treasury. They purchased the planes cheaply, sold them at exorbitant prices and split the profits. Sources in the investigative team say that Moshe Rothschild was a central figure in the network and that he, along with aides and partners, set up a dense alignment of companies, some of them straw companies and fronts, which were registered in tax havens such as the Virgin Islands and the Bahamas. Through these companies, Rothschild allegedly transferred the bribe money to various bank accounts and invested his profits.

This is not the only bribery affair that is rocking Peru. Fujimori, Montesinos and other senior members of their government have been indicted on the basis of evidence in other cases as well. As Aryeh Dayan reported in Haaretz in March 2001, other Israelis as well as Americans and Peruvians of Jewish origin are involved in some of these affairs. They include arms dealer Zvi Sudit, businessman Rony Lerner, lawyer Mordechai Mincher (formerly a legal adviser to the Eisenberg Group), Ilan Weil and James Stone, an American Jew. In statements to the media they denied the suspicions against then, but behind the scenes they began to take action to negotiate with the investigative authorities. Sources close to the investigation told Haaretz that most of them have already concluded plea bargains and other legal arrangements with the Peruvian authorities, or are in advanced stages toward that end. Here, too, Moshe Rothschild is an exception.

Shades of Milo Minderbinder Moshe Rothschild was born 52 years ago in Kibbutz Gvaram in the western Negev. His mother, an educator, and his father, a public activist, still live in the kibbutz. As a youngster, he was given the pet name of "Pashosh" (warbler bird), because of his thin build, and to this day he is known as "Shoshi." During his glory days in Peru, when the doors of cabinet ministers and generals were open to him, he was dubbed "Senor (tilde over n) Shoshi."

His formative years were his youth in the kibbutz. Short and curly-haired, he was sociable and delightful, say people who knew him then. But, like many others of his generation who grew up in the kibbutz movement, seeds of a different kind were also planted in him. Kibbutz youngsters seemed to have everything. They lived protected lives. They were were educated to be achievers and imbued with self-confidence that sometimes became excessive. Yet they lived a deprived life, without money or private property. When they left the kibbutz, those deprivations rose to the surface and reshaped their personality. This is most strikingly seen in a fierce desire to obtain what had been denied them: money. They strove to make money as fast as possible and as much as possible.

In 1972, Shoshi was accepted to a pilot training course in the Israel Air Force. Just as the course ended, the Yom Kippur War erupted. The commanders refused to allow the inexperienced pilots to take part in the war, so the new pilots launched a "shaving strike." For four days they refused to shave, until finally the commanding officers cracked and let them have a taste of war, sending them on bombing runs on the Syrian front. Rothschild, who is fond of jeep outings, is still in touch with a few of the graduates of that air force course.

After the war he was assigned to the 201st Squadron of Phantom planes at Hatzor air base, and after a time became an instructor in the pilot training course there. "He was a good instructor, he had good hands," a former cadet says. He was considered a good, though not brilliant, pilot. However, by his early twenties he discovered that he possessed entrepreneurial skills. Scattered along the runways was scrap of various kinds, some of it left over from the British Mandate period. It wasn't a very pretty sight for the pilots as they took off and landed, but it didn't bother anyone other than Shoshi. He came up with an idea and put it to his superior officers: I will clean up the sides of the runways and remove all the junk that has accumulated there; in return, you will let me grow crops in the fields next to the runways in my spare time, and the harvest will be mine.

It sounds like something out of "Catch-22." But the base commanders agreed, without thinking twice about the ethics of a pilot making a little something on the side during his military service. Shoshi threw himself into the project. He recruited friends as well as trucks and tractors from the kibbutz, cleared away the scrap and worked the fields. The profits did not make him rich, but the affair taught him something about initiative and manipulation. "All in all, he was a positive guy," says a pilot who knew him in the squadron, "sociable and charming."

Fresh start in Peru In 1978, at the age of 26, Rothschild completed his service and went backpacking in South America. In Peru, he met a businessman named Baruch Ivcher, who had moved there from Israel in the 1960s. The Israeli community in Lima was small at the time you could count its members on the fingers of two hands. Rothschild returned to Israel a few months later but continued to correspond with Ivcher.

Back in Israel, he bought a few old train cars from Israel Rail, renovated them and made them his home. In the meantime he also married. (His wife, Anat Yerushalmi, was the owner of the Tel Aviv cafe and bookshop Musa.) He said that one day he would return to the kibbutz, but worked in various fields, including agriculture and home renovations, and sold mobile structures. He sold most of the latter this was the 1980s, when construction in the territories was intensive to West Bank settlements. In 1989, when he was already the father of three children, and failing to find what he was looking for in his work certainly not the riches he had hoped for he decided to try his luck in Peru.

Rothschild was hired to work in the mattress factory of his old friend Ivcher. There he also tried to develop a new form of paper towels, but failed. His greater failure, though, was in not maintaining the friendship with the Ivcher family. After about half a year he fell out with his benefactor and again found himself with nothing, but this time in a foreign country.

He earned a living from agriculture (exporting melons to Europe) and his wife taught Hebrew.

Things went on like this for about a year, until the big change. It was actually a double change: personal and political. In the spring of 1990, in the second round of the presidential elections, the unknown candidate Alberto Fujimori defeated Mario Vargas Llosa. The left-wing voters and the poor were fed up with the celebrated writer, who was the darling of the intellectuals and of international public opinion. Vargas Llosa, who in the past had been a leftist and a friend of Fidel Castro, had become an avowed advocate of the market economy, of rampant capitalism, who admired Margaret Thatcher, a kind of Peruvian Benjamin Netanyahu.

Fujimori promised democracy, better economic conditions and an uncompromising war against the left-wing underground organizations "Shining Path" and "Tupac Amaru."

He made good only on one promise. He succeeded in eradicating the left-wing underground groups. The Peruvian security forces captured Prof. Abimael Guzman, the leader of Shining Path, and in a daring raid liberated the hostages, most of them foreign diplomats, whom the Tupac Maru had seized in an Independence Day celebration at the Japanese embassy in Lima. These successes exacted a heavy price in the form of human rights violations, the killing of innocent people and the use of extremely brutal methods. Instead of a democracy, Fujimori established a tyranny. Instead of improving the economic conditions of the poor, who constitute the majority of the country's population, he created a corrupt and depraved government, in which thousands of cronies, led by the president, plundered the coffers of the impoverished country.

To entrench his regime, Fujimori enlisted the services of Vladimiro Montesinos, an army officer who in the 1970s was considered a CIA "asset" and was suspected of drug dealing. Montesinos was appointed chief of Peru's intelligence system. How Moshe Rothschild was able to get to the top echelons of the government is not known. He related that it was his good fortune that Israeli pilots were admired in Peru. He also related that he read professional literature about the war the Soviet Union had fought in Afghanistan.

Soviet helicopters and transport planes had sustained heavy losses in the war from shoulder-fired missiles. To overcome this, the Soviets installed a second engine on the planes. The Peruvian air force also suffered losses, mainly in the form of helicopters crashing because they could not attain the elevation of the Andes. Rothschild decided to teach them about the Soviet combat doctrine in Afghanistan, so they could draw the proper lessons.

That sounds like a good explanation, but it does not explain how a kibbutz pilot with no means and no connections was received by the chiefs of the air force and the police in order to present his ideas. Moreover, Peru was rife with more experienced arms merchants, such as Zvi Sudit, who for many years represented Israel Aircraft Industries and other military industries. It is more likely that Rothschild was aided by liaisons whom he succeeded in impressing and that they prepared the ground for his meetings with the right generals and cabinet ministers, those who were under the thumb of Montesinos.

Gradually, then, in the early 1990s, Rothschild launched his career as an arms dealer. In an interview with the daily Yedioth Ahronoth a few years ago, the Ivchers said they warned Rothschild not "to get mixed up with dirt." However, he ignored their advice. It was hard for him to resist the temptation to make easy money fast. It is also not known how he forged his connections in Belarus, which turned the former Soviet republic into the main supplier of the Peruvian air force.

For the Peruvian military, the deal for the planes came at the perfect time. In the second half of the 1980s, the Peruvian air force was devastated in a war against Ecuador, which had Israeli-made Kfir fighters. The Peruvians clearly needed new equipment but why did their generals and ministers need the mediation of an Israeli pilot with no business experience to speak of? According to the investigative commissions, this question has only one answer: they needed him to act as a straw man through whom they would be able to plunder the public treasury and walk off with the bribe money.

Men in the middle Angel Paez is the chief investigative reporter for the Peruvian paper La Republica and the right-hand man of the editor, Gustavo Gorriti. For the past four years, Paez has been investigating the corruption and bribery affairs, and he has accumulated a large number of documents. One of the most important of them (see photocopy) is testimony given by Luis Duthurburu Cubas, which points to Rothschild as Montesinos' liaison for the arms deals. Two other middlemen of Montesinos in the Rothschild deals are Victor Alberto Venero and Juan Valencia Rosas. Venero also supplied the investigators with additional evidence against Rothschild: an audiotape of a conversation between him and Rothschild about the arms deals and the money involved.

Here is how the system worked, according to the evidence that has been collected in Peru: Rothschild registered a company called Mobetek in Peru and hooked up with two of Peru's major businessmen and arms dealers, Enrique Benavides Morales and Claus Corpancho Kleinicke. (They are also fugitives from justice, being sought by the authorities for offenses similar to those of which Rothschild is suspected, and probably hiding in Italy or Germany, according to the information in the hands of the investigative authorities.) The two registered a company called W-21 Intertechnique. The investigators believe that Rothschild, while not officially one of the company's owners, was associated with it and was, as the journalist Paez puts it, the "moving spirit" behind its activity.

Yet another company that was connected with the deals was Treves Intora, which was also registered in a Caribbean tax haven. Moshe Rothschild was appointed its representative. Montesinos ordered Defense Minister Malca and Economy Minister Camet to sign contracts with these companies for the supply of helicopters, transport planes, fighters and bombers for the Peruvian air force. The documents turned up by the investigation show that Rothschild, Benavides, Duthurburu and Corpancho possessed signatory rights in Banco Exterior, a Panama bank. Since then the bank has changed ownership. It was acquired by the Spanish bank BBVA the bank in whose Swiss branch Rothschild's funds were frozen. Rothschild's situation is aggravated by the fact that after the planes were supplied, they were found to be in substandard condition and some of them had to be scrapped within a short time. One reason for this was Rothschild's difficulty in obtaining spare parts for them.

In addition to the planes and helicopters, Rothschild supplied the Peruvians with sophisticated wiretapping equipment, which the documents call "Octopus." Montesinos and his aides used the equipment to eavesdrop on political rivals, businessmen and journalists. The documents cite Israel Aircraft Industries (IAI) as being involved in the deal. Sources in the Israeli defense establishment confirmed that IAI sold such equipment to Peru, as did French and American firms, they say. Rothschild offered his services to IAI in other spheres, but he was turned down because "he asked for high commissions and we didn't like his working methods."