Olmert's Conduct in Leumi Case Odd but 'Not Criminal'

A day after the prosecution charged Ehud Olmert with a host of crimes in three separate affairs, it clarified why it isn't seeking to act against the former prime minister in the Bank Leumi case. Hard evidence just isn't there, the prosecution explained.

In late 2005, the state wanted to sell its controlling interest in the bank. While serving as acting finance minister at the time, Olmert allegedly acted to sway the results of the tender in favor of a group including his friend, an Australian businessman named Frank Lowy.

In December 2008, State Prosecutor Moshe Lador decided that the evidence did not suffice to charge Olmert with corruption in Leumi's privatization.

The prosecution's decision not to act reached the appeals court through Ometz, a nonprofit organization devoted to protecting the rule of law. Responding to Ometz's appeal, the prosecution yesterday explained that the evidence just didn't suffice to establish criminal intent.

Ultimately the state sold a 10% stake in Bank Leumi to the Cerberus-Gabriel Capital group and kept another 10%.

But beforehand, during the tender process to sell its 20% Leumi stake, the state wound up selling 6.5% of the bank's share capital to Deutsche Bank, and started moving on a deal to sell 10% more through the international banking giant Citibank. The intended buyers were a group called LFG, lead by the Lowy family of Australia and Nochi Dankner's IDB group. But the deal fell through when the Lowys pulled out.

When the deal through Citi collapsed, the state formulated another procedure for selling its remaining shares in Leumi. It would sell 10% of the bank's stock (half its stake) through a tender process. The winner would get an option to buy the other 10%, subject to obtaining the requisite permits. The Lowys at that point were still in the picture, just not through Citi.

The prosecution does say that during that process, Olmert met with with attorney Tamar Ben-David at the law offices of Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co, who represented Lowy's group. The prosecution indicates in its response to the Ometz appeal that on at least one occasion Olmert provided insider information to Ben-David.

But there isn't evidence that the Lowys abandoned the Citi deal following any promise by Olmert to "tailor" the sale of the controlling interest in Leumi to them. Nor is there evidence that they abandoned the transaction because of insider information Olmert may have provided.

There is no evidence that Olmert was biased toward the group in the first place, says the prosecution, or that he made any effort to deter other contenders.

Nor is there persuasive evidence that the Lowys pulled out because their diktats were ignored, says the prosecution.

Triple conflict of interest

Yet the prosecution also spells out in its response to the court yesterday that Olmert was gripped by not one, but three conflict of interests vis-a-vis the Lowys: his friendship with a potential investor, his relationship with Ben-David, and his family ties with the Grosses.

The group of investors included Frank Lowy, Mortimer Zuckerman, and Joseph Safra. The prosecution claims that Zuckerman and Lowy, with whom Olmert met while acting as a government official, were also his personal friends.

Even so, the prosecution wrote, "There is no evidence of a deep relationship of friendship or for any economic relationship with either of them. Nor is there any evidence of a special relationship of a closer relationship between Olmert and the two, compared with [Olmert's] relations with other investors who participated in the process, such as Bill Davidson."

Therefore, says the prosecution, no taint can be associated with Olmert's relationship with Lowy or Zuckerman.

Regarding Olmert's family relations, Olmert's contacts with the Lowy group were handled mainly through Ben-David. The daughter of firm founder Joseph Gross is married to Olmert's son. But Gross, says the prosecution, retired from the firm before Olmert took over as acting finance minister, though Gross continued to receive a share of the firm's profits. Olmert however denied knowing that Gross was still getting a cut of profit after his retirement.

Even if Olmert's arguments are dubious, says the prosecution - again there is no evidence that he was aware of Gross' continuing personal interest in the firm's success.

As for the personal friendship between Olmert, his wife Aliza and Ben-David: Their relationship had no economic angle, says the prosecution. Nor is there any evidence that Ben-David stood to personally gain if the Lowy group bought the Leumi stake from the state.

Olmert also met with representatives of other groups, points out the prosecution in its defense, including Ram Caspi, representing Nochi Dankner; Harvey Kruger, a VP at Lehman Brothers, which was working on behalf of Cerberus - one of the two hedge funds that ultimately did buy the stake from the state.

Olmert also met with Yaakov Neeman, representative of Cerberus and today justice minister. The fact that he held these meetings renders his conflict of interest regarding Ben-David more innocuous.

True, the process by which the interest in Bank Leumi was sold, under Olmert's rule, did not follow proper procedure, the prosecution seems to agree. Yet actual evidence of criminal behavior isn't there.