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While serving as CEO of the Bank fur Arbeit und Wirtschaft AG (Bawag ), one of Austria's largest banks, Helmut Elsner used to be called "Rockefeller" because of his penchant for the good life. He had a collection of sports cars, a beautiful home in the south of France and he used to walk his dog around Vienna while puffing on an expensive cigar. He was considered the omnipotent man at Bawag, until about four years ago. The bank, controlled by one of the strongest labor unions in Austria, was founded in 1922 by the country's chancellor, Social Democrat Karl Renner, to help the proletariat obtain credit more easily.
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Elsner is one of Martin's Schlaff's best friends. The two have frequently flown together in a private plane to various destinations, including Israel, to keep an eye on their joint ventures, including the Oasis Casino in Jericho and the Bulgarian cell-phone giant Mobiltel.
In 2006 French police arrested Elsner in his French villa after he had fled Austria following developments at Bawag. An investigation into the collapse of the American brokerage firm Refco led to the Austrian bank, after it emerged that Refco had helped Bawag's CEO hide losses of some $1.4 billion. These losses resulted from failed investments of clients' money in hedge funds and other risky deals - including the Oasis Casino.
Bawag agreed to pay out about $690 million to avoid facing trial, after admitting its part in Refco's collapse; the labor union that controlled the bank was forced to sell its share in it. After his arrest, Elsner was ask to deposit a 1 million-euro guarantee in the hands of the French authorities. The person who agreed to pay that enormous sum was Martin Schlaff, who also underwrote the legal expenses incurred by Elsner, who was extradited to Austria.
Elsner was tried along with other top people at the bank and sentenced to nine and a half years in prison.
Vienna Federal Court judge Claudia Bandion-Ortner wrote in her verdict, in July 2008: "He [Elsner] gambled with the bank's money as though in a casino."
'Were bribes paid?'
In April 2008, attorney Norbert Steger appeared as a witness in Elsner's trial. Steger, the former Austrian vice chancellor, had lost his position as head of the extreme right-wing Freedom Party to Joerg Haider in 1986. From 1997 he served as chairman of the board of the CAP Holding company in Liechtenstein, which held shares in the Oasis Casino in Jericho. During his testimony, it emerged that Steger had been a trustee of the account from which funds had been drawn, some in cash, to pay fees to individuals in Israel and Switzerland who had helped establish the venture.
"Were bribes paid?" judge Bandion-Ortner asked Steger.
"Money was paid to legal consultants and also to those who created a good atmosphere surrounding the casino," replied Steger.
From the trusteeship account, various activities were funded - such as, for example, travel expenses of $54,000 for a trip by Palestinian leader Yasser Arafat to Vienna for a meeting with the Austrian chancellor. The total amount of travel expenses drawn from the account was $1.3 million. Other money was transferred to diamond businesses in Israel and New York.
Among the names that came up in the courtroom was that of Louise Weissglas, who between August 2001 and March 2002 received a number of payments, totaling $280,000, from the casino for "consulting services." (Her husband, Dov Weissglas, was serving at the time as the casino's legal adviser; this was before he began to work with the Prime Minister's Office ). The name of businessman Shimon Sheves was also mentioned in court: In November 2003, when the casino was not operating, he was paid $60,000.
When asked about the payments to Israeli consultants, Steger said: "It was necessary to create a sort of presence in Israel as a counterweight to the criticism of the casino on the part of the radical Shas party: It had demanded that the place be bombarded."
For his part, Schlaff gave his testimony as a witness in the Vienna court in October 2007. He claimed he had known nothing about Bawag's huge losses or about the scandalous way the debts stemming from failed investments had been hidden. "Had I known these things I would have switched banks," he claimed.
The prosecutor, Georg Krakow, confronted Schlaff with testimony of other witnesses about fees of hundred of thousands of dollars that had flowed into Schlaff's private companies, ostensibly as payment for facilitating monetary transfers between the Austrian bank and foundations in the United States.
In reply, Schlaff said the money that entered his companies' accounts was not his, but rather belonged to a friend in New York named Solomon Meyer, who was the one who had actually served as a go-between between Bawag and the U.S. funds. "I introduced Meyer to the bank and all he did was 'park' the money in those accounts on the advice of my tax adviser, Michael Hason. The money was intended for charity," he said.
The fact that Schlaff was only a witness and not a suspect in the complex Bawag affair raised the hackles of Austrian legislator Peter Pilz. In the past, Pilz had called for an investigation of the "triangle" that connected Schlaff, Bawag and leading Austrian politicians.
"The judge in the Bawag affair," says Pilz, "is today the minister of justice, the prosecutor in the case is now public prosecutor, and I have asked them several times why they aren't investigating Schlaff's involvement, why they aren't making progress on this."
In 2002 a group headed by Martin Schlaff bought the Bulgarian cell-phone company Mobiltel from tycoon Mikhail Chernoy. Shortly before the deal was struck, Chernoy was declared persona non grata in Bulgaria after suspicions were raised that he was a kingpin of Russian organized crime. Chernoy had to unload Mobiltel in a hurry. Big names in the world of Israeli business, such as Lev Leviev, Eliezer Fishman, Noni Mozes and Gad Zeevi, were interested in the asset at one stage or another, but Schlaff won out in the end. He purchased Mobiltel with two partners: Herbert Cordt, former chairman of Austria's Laenderbank, and Josef Taus, who had served as chairman of Austria's conservative People's Party.
The purchase of this huge company, subject to the caprices of the Bulgarian government, was a daring move on Schlaff's part. To make it happen, he enlisted the Bawag bank, which put at his and his partners' disposal a loan that financed most of the 768 million-euro acquisition.
Chernoy - currently on trial in Israel on charges that he attempted to purchase the Bezeq communications company fraudulently - remained friends with Schlaff after the Mobiltel acquisition. Chernoy says today that the fact that the Austrian businessman has decided not to travel any more to Israel is "one of Israel's greater losses. The way he is being treated [by the authorities] exceeds all limits. He is a person deserving of respect, a great businessman. I don't believe the accusations against him."
In 2005 Mobiltel was sold for 1.6 billion euros to the Austrian Telekom company, in which the state also holds shares. It was the largest foreign investment in the history of Austria. Schlaff and his partners, who held 63.9 percent of the company at the time, raked in a profit of hundreds of millions of euros. Critics of the deal had a hard time understanding why the state bought an asset for such a high price from someone who was effectively a go-between who stood to pocket a fat profit, rather than directly from the original owner of the company.
"The reason is simple: Telekom Austria feared that if they were to buy the company directly from Chernoy, this would be harmful to their image," says one Austrian economic journalist.
'A righteous man'
Mordechai "Moti" Finkelstein is snazzily dressed in a Ralph Lauren shirt, wears Prada shoes and a chunky Bulgari watch, drives a Mercedes 4X4 and lives today in a penthouse in north Tel Aviv. One of the Israelis closest to Martin Schlaff, he used to be the billionaire's chauffeur, but now represents his remaining business interests in Israel.
Finkelstein, 66, worked as a taxi driver until meeting Schlaff at the Tel Aviv Hilton in the 1980s. Schlaff, Chernoy and Avigdor Lieberman attended the wedding of Finkelstein's daughter some time ago, and Finkelstein still maintains good relations with Lieberman today.
"In every generation a righteous man arises," he tells Haaretz, "and the righteous man of our generation is called Martin Schlaff. I am prepared to do for him what I would not even do for my own children."
On January 1, 2006, after celebrating at a wild New Year's party, Finkelstein returned to his Tel Aviv home at 5 A.M. An hour later he heard thunderous knocks on the door. "We kept on sleeping. But the knocking was so loud," he recalls, "and when I got up and opened the door four 'gorillas' were standing there."
These were investigators from the Israel Police's national fraud squad, who asked Finkelstein to accompany them for questioning. "They told me I was suspected of transferring bribes to Israel's prime minister Ariel Sharon," he relates.
Finkelstein was under house arrest for 10 days, during which time he was offered the choice of turning state's witness against his benefactor, but he refused outright. Examination by the police of Finkelstein's bank accounts, and also others over which he had power of attorney, showed transactions involving millions of shekels. The investigators identified, for example, transfers of hundreds of millions of dollars between an account of Finkelstein's in Switzerland and one of Schlaff's companies.
Finkelstein refused to enlighten the investigators on the subject of the bank accounts. "It has no connection to the investigation into giving bribes to Ariel Sharon," he told them.
Ultimately, the police did not recommend indicting Finkelstein, and turned his file over to the Israel Tax Authority, which eventually hit him with a fine.
Finkelstein has told Haaretz he has a bank account in Switzerland to which the generous Schlaff sent a large sum as a gift. Today he says he is waiting impatiently for the moment the police officially admit they have no evidence against Schlaff.
"He never gave Sharon a single cent," asserts Finkelstein. "I am prepared to cut off both my hands if Martin gave Sharon a bribe. I once told him in connection with some matter, 'Have a word with Arik.' And he told me, 'Don't ever let that cross your lips again.' The State of Israel has lost him, and in a huge way."
In recent years, Finkelstein has been responsible for Schlaff's waning interests in Israel, among them his floating casino the Cancun, which remains anchored in the port of Eilat.
"No one wants to buy the ship, which is costing us thousands of dollars a month," complains Finkelstein. "Are you asking me if Martin regrets establishing a casino in Israel? Of course he regrets it. If it were possible to turn back the clock, he would not have gone into that business."
Finkelstein recalls that Schlaff made huge contributions to Israel during the years in which the country was close to his heart. Indeed, Schlaff contributed to a number of organizations, such as Sheba Medical Center, Tel Hashomer, the United Israel Appeal, the Jewish Agency and the Interdisciplinary Center in Herzliya, where there is a lecture hall in the name of Schlaff and his ex-wife Andrea. One of the billionaire's sons studied business management at the IDC, and his daughter, a young doctor, is interning at Tel Hashomer.
Even after he stopped flying to Israel, people here continued to approach Schlaff for donations to local organizations. Ehud Olmert, for example, asked him in 2004 to contribute to an organization for veterans of the Duvdevan special operations unit of the Israel Defense Forces. "Martin donated money to that association," confirms Finkelstein.
Gradually, though, since the Israel Police began to investigate Schlaff, his philanthropic activities in Israel have come to a complete standstill. In 2006, after the police raided his parents' home in Jerusalem and confiscated his brother James' laptop, Schlaff, in protest, even cut off the ties he had with the Israeli Embassy in Vienna.
"He is a redhead and he is furious at what the [Israeli] police are doing to him," relates one of his friends.
According to his associates, in recent years Schlaff has changed from a lover of Israel into someone who hates the country and its mentality. "After what the police did to him here, over the years he developed a loathing of Israelis," acknowledges one close friend in Israel.
Despite his alienation, Schlaff continues to take great interest in Israeli politics, as well as in developments involving the Palestinians. Friends say that, for example, he supports the idea of Israel talking with Hamas and even has access to movement leader Khaled Meshal.
Even after he had stopped traveling to Israel, on the eve of the 2005 withdrawal from the Gaza Strip, Schlaff apparently held talks to "soften up" the head of Egyptian intelligence, Omar Suleiman, while updating then-prime minister Sharon's bureau. "He acted to bring [Egyptian President Hosni] Mubarak and Sharon closer," says one of the former premier's associates.
In conversations with his friends in Israel, Schlaff has also expressed an interest in the criminal case against Avigdor Lieberman. According to testimony by Schlaff's associates, the hundreds of thousands of dollars that flowed from the Robert Placzek company (over which Schlaff and his brother James had control ) in 2001 to a Cypriot company, which police suspect was controlled by Lieberman at one time, was intended for purchase of a sawmill in Ukraine; in any event, at the time of the acquisition, however, Lieberman did not control the company. Information about this affair is currently sitting on the desks of Attorney General Yehuda Weinstein and State Prosecutor Moshe Lador.
Despite his self-imposed absence, Schlaff continues to maintain relations with his Israeli friends. Every year Finkelstein continues the tradition of sending floral arrangements on the holidays to Schlaff's friends, among them a number of senior politicians. Some of the latter have been flown to Vienna in recent years for Schlaff's various family events - among them Lieberman, Aryeh Deri, Gilad and Omri Sharon, Shimon Sheves and Haim Ramon.
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