Israeli Probe Finds Austrian Billionaire Behind Illicit Money Transfer to Sharon Family

Investigation reveals Martin Schlaff is behind the $4.5m funneled to the former PM's family; millions more went to company believed to be controlled by Lieberman.

VIENNA - Austrian billionaire Martin Schlaff is behind the transfer of $4.5 million to the bank accounts of Gilad and Omri Sharon, an investigation conducted by Israel's national fraud squad has concluded.

The investigators are therefore recommending that Schlaff be indicted on bribery charges, and that Gilad and Omri, the sons of former prime minister Ariel Sharon, be charged with serving as conduits for a bribe.

Lior Mizrahi

(See full story in Wednesday's Rosh Hashanah supplement)

The investigation began in 2003, but was only recently concluded. Its findings have been sent to the head of the police's investigations department, Yoav Segalovich, and State Prosecutor Moshe Lador.

"This is one of the gravest corruption affairs investigated by the fraud squad," said Commander (ret. ) Nahum Levi, who headed the investigation. "It involved transfers of millions of dollars to the Sharon family. This was a particularly complex investigation because in it, an attempt was made to blur the source of the money via transfers from different countries of the world. Now, the file is supposed to go to the prosecution for an effort to translate the evidence in this grave case into an indictment."

For years, the Austrian authorities refused to let Israel depose Schlaff, claiming that the Israeli police lacked sufficient evidence to justify such a step. But Israeli officials suspected that another motive hid behind the official excuse: Schlaff has excellent connections with Austria's top political leaders.

"The request [to Austria] for legal cooperation took a very long time, compared to other places in the world," said attorney Irit Kahan, the former head of the international division of the State Prosecutor's Office. "And during the course of submitting the requests, there were a number of court decisions in Austria that made me wonder."

Only in 2006, after repeated requests, did the Austrians finally agree to let Israel depose Schlaff. But then, Schlaff began playing games with his interrogators. Viennese sources familiar with the tycoon's tactics said that one morning, for instance, the Israeli investigators showed up at Austrian police headquarters in Vienna and waited for hours for Schlaff to arrive. Then, at about noon, one of Schlaff's lawyers showed up and said his client would not be coming that day.

A Haaretz investigation into Schlaff's affairs also uncovered a long list of other Israeli public figures who benefited from his millions. For instance, Schlaff gave his friend Aryeh Deri hundreds of thousands of dollars to finance the former Shas chairman's defense against bribery charges, for which he was ultimately convicted.

In particular, Schlaff recruited a friend, Swiss lawyer Hans Baumgartner, in 2000 and financed his purchase of material relating to Yaakov Shmuelevitz, the state's key witness against Deri. This material served as the basis for Deri's unsuccessful bid to get the Supreme Court to grant him a retrial.

According to information obtained by Haaretz, Schlaff spent hundreds of thousands of dollars to buy material on Shmuelevitz in Switzerland.

In the 1990s, the Schlaff family also ran a New York-based nonprofit called the Jaslo Foundation, which gave money to various Israeli organizations. But the largest donation of all went to the Legal Defense Fund, which financed Deri's legal team.

Jaslo also gave $50,000 to help finance Ehud Olmert's successful defense against charges that, while serving as treasurer of the Likud party in 1988, he had been involved in a fictitious invoice scam. In reporting its activities to the American tax authorities, the foundation listed this donation as "support for Jewish causes."

The Haaretz investigation also obtained interesting testimony given by attorney Norbert Steger, a former vice chancellor of Austria, to a French court in April 2008. Steger was testifying about the years when he served as chairman of a Lichtenstein-based company that owned shares in the Oasis casino in Jericho, which opened in 1998, five years after the Oslo Accord was signed. Steger said that millions of dollars were taken from the company's account to create "a good atmosphere regarding the casino."

One name that appeared in Steger's testimony was Louise Weissglas, who received payments totaling $280,000 from the casino between August 2001 and March 2002, ostensibly for consulting services. Her husband, Dov Weissglas, was serving at the time as a legal adviser to the company that ran the casino. However, these payments were made before Weissglas began working in the Prime Minister's Office under Sharon.

Another name mentioned by Steger was Shimon Sheves, who served as director general of the Prime Minister's Office under prime minister Yitzhak Rabin. In November 2003 - at a time when the casino had already been shut down due to the second intifada - Sheves was paid $60,000.

A few months ago, Haaretz discovered, Israeli police investigators deposed some of Schlaff's employees in the context of their probe of Foreign Minister Avigdor Lieberman. This followed the discovery that in August 2001, the Robert Placzek lumber trade company, which is owned by Schlaff, had transferred $650,000 to a Cypriot company, Trasimeno Trading, which police suspect was controlled by Lieberman.

At the time, Lieberman was serving as national infrastructure minister in Sharon's government.

The employees told the investigators that the money was given to the Cypriot company to buy a sawmill in Ukraine.

Schlaff's Israeli attorney, Navot Telzur, responded that his client "has no intention of commenting on matters that, according to the paper, are being investigated by the police." Gilad Sharon's attorney, Micha Pettman, declined to comment.