Ehud Barak & Co.

New revelations about the business interests of the defense minister during his years as a private citizen - and what happened to the millions his companies earned.

Early in 2006. Citizen Gabi Ashkenazi, just recently discharged from the position of deputy chief of staff, entered the Millennium Tower on Ha'arbaa Street in Tel Aviv and marched to the elevator. Dressed sporty and elegantly, Ashkenazi went up to the 19th floor of the tower, where he had a meeting with an old acquaintance: former prime minister and now businessman Ehud Barak, who after his defeat by Ariel Sharon in the 2001 elections had painstakingly made his way across the political desert and accumulated capital in the jungle known as the business world.

The conversation took place in Barak's office, which was chock-full of wooden furniture. The general and the former chief of staff did not discuss security matters, terror or the Iranian nuclear program, but rather something much more down-to-earth: the possibility of business cooperation between them. The bursting bookshelves, the electronic piano in the next room, the special cigar storage space and the photos of Barak posing with world leaders was an appropriate backdrop for the former prime minister's meetings during that period, when he was involved in mediation and consultation for international transactions, mainly through the company he owned, Ehud Barak Ltd. Half a year passed, and Ashkenazi was appointed director general of the Defense Ministry. For his part, a year later Barak ran in the primaries for the Labor Party leadership, won, and in July 2007 was appointed defense minister in Ehud Olmert's government. With Barak's return to the public arena, the shares of Ehud Barak Ltd. were transferred to his three daughters, and the defense minister declared that they were not conducting any business activity in the firm. An investigation by Haaretz, which reveals new details about Barak's business dealings, shows that since Barak assumed his present position, over NIS 6.5 million from Israel and abroad have flowed into Ehud Barak Ltd. and its subsidiary. It also turns out that up until June 2007, when the new-old chairman of the Labor Party assumed his place at the Defense Ministry, Barak withdrew from his firm salaries totaling about NIS 3 million.

President, consultant, partner

Barak became a businessman in 2001, after his defeat by Ariel Sharon. His tenure as prime minister had been the shortest in Israeli history. He announced at the time that he would take a break from political life and feather his own nest. In the first months after his retirement, he kept busy on the lecture circuit for the Harry Walker Agency and looked for new ways of making money. In late 2001 he was appointed a special consultant in the EDS computer firm, and in 2002 he founded Ehud Barak Ltd.

An investigative article published in this magazine in May 2007 (by this writer and Gidi Weitz) revealed that until 2007, when Barak returned to political life, the firm's income was almost NIS 30 million, most of it from abroad. Barak also upgraded his lifestyle and moved with his wife, Nili Priel, to a spacious apartment the two purchased in Akirov Towers in Tel Aviv. The investigation revealed a long list of business transactions promoted by Barak and the businessmen with whom he was in contact.

For example, Barak traveled with Ofer Glazer to a meeting with King Abdullah of Jordan, in which they discussed a special patent for producing oil from oil shale, which Jordan has in abundance. Barak, together with Glazer and businessman David Dudai and Barak's associate Loni Rafaeli, initiated the construction of a chain of parking lots in Istanbul. Barak also tried his luck with diamond mogul Benny Steinmetz, a good friend of former prime minister Ehud Olmert, with whom he flew to Eastern Europe, among other places, to look into possibilities for various cooperative ventures, including real estate.

In addition, Barak was appointed to the position of "honorary president" in Gilat-Satcom, owned by Zvi Barenboim. He served as a member of the board of directors in the Tamir Fishman investment banks and venture capital fund; as an adviser to Canada Israel, which belongs to Assaf Tuchmeier and Barak Rosen; an adviser to the Swiss venture capital fund CMI and the venture capital fund Star Ventures, owned by businessman Meir Barel, and more.

It is interesting to discover now that several of these people, with whom Barak the businessmen worked, donated money to Barak the politician when he ran in the primaries against Ami Ayalon for the leadership of the Labor Party. Barak Rosen donated NIS 35,000; Mirit Tuchmeier (the wife of his partner Assaf) donated an identical sum; Meir Barel and his wife donated NIS 17,000 and Nathan Hetz, who held contacts with Barak for joint business ventures, donated NIS 36,000.

Two private citizens

Gabi Ashkenazi, who retired in mid-2005 from his last position in the Israel Defense Forces, also entered the business world and met with Barak early in 2006. In January 2006, Ashkenazi, together with Zeev Bronfeld, Ariel Malik and Kobi Livne, established the Innovetica Group Ltd. Two months later, they opened another firm, naming it Gabi Ashkenazi Ltd. (see box). Malik, a business entrepreneur and a partner in technological incubators, told Haaretz that "Ashkenazi was the driving force in Innovetica. Each of the other partners has additional businesses, and he was the dominant one." A businessman who was involved in Innovetica at the time and asked not to be named, said that the company had planned to put investors' money in start-up firms in the field of internal security: "Ashkenazi was supposed to contribute his knowledge in the security field."

What did Barak and Ashkenazi discuss at the meeting they held? Barak chose to ignore Haaretz's question, whereas Ashkenazi said, via the IDF spokesman, that they "discussed the possibility of business cooperation." One who is willing to shed light on the matter is the above-mentioned businessman, who speaks of "several ideas" for cooperation with Barak: "One idea, as we did at Innovetica, was to bring in Barak as a member, was rejected. There was also an idea of forming a public corporation in which Barak would be a director, and we would collect money and invest it. That is, money you take from investors, invest it in one company with the approval of 80 percent of the investors, and make sure to raise the value of the firm, to issue shares on the stock market and allow the investors to profit. We developed the idea, interested Ehud Barak, who had already heard and understood such things, and started talking to him."

During the same period, there was cooperation between Barak and the U.S. firm Acro, which had developed a method for identifying liquid explosives and which in February 2006 had started an Israeli subsidiary named Acrosec. Early in April 2006, Barak was appointed to the advisory board of the mother company, in return for shares that were allocated to him. The purpose of Barak's appointment, explains Yami Tarsi, one of the directors of Acrosec at the time, was "that there would be someone with a security record and enough global connections in the field in which the company was involved. Of course security connections were important."

Two of Ashkenazi's partners in Innovetica, Malik and Bronfeld (a businessman who invests mainly in biotechnology) were also involved in the establishment of Acrosec, which in its first months was a subtenant in the Innovetica offices on Jabotinsky Street in Ramat Gan. Malik and the director of Acrosec, Gad Aner confirmed the details, whereas Bronfield did not reply to our question on the subject. Tarsi adds that "there were contacts to try to merge activities" between Innovetica and Acrosec.

Activity in Innovetica stopped toward the end of 2006, a few months after Ashkenazi assumed the position of director general of the Defense Ministry and before his business cooperation with Barak began. Aner says that "the moment Gabi was appointed director general of the Defense Ministry the company stopped operating," and Ashkenazi's partners confirm that.

Did the two men who are now running Israel's defense establishment together report to anyone about the business contacts between them? Chief of Staff Ashkenazi believes that he was not obligated to do so. In a reply to Haaretz he said that "there is and was no legal obligation to report on this meeting, which took place between two private citizens and which did not give rise to any joint business activity."

However, an examination of the conflict of interest arrangement signed by Ashkenazi when he took up the position of director general of the Defense Ministry (an arrangement that continues to apply after his appointment as chief of staff) reveals that although his contacts with Barak were not mentioned in it, Ashkenazi did mention connections and meetings he held with businessmen, including some that ended without results.

It should also be noted that according to a General Staff order regarding "a prohibition against conflict of interest," a soldier who returns to regular service must fill out a form in which he mentions who employed him, what issues he handled and with whom he came into contact while a civilian. Ashkenazi did not fill out the form. The IDF spokesman explains that the "questionnaires" filled out by Ashkenazi when he became director general of the Defense Ministry "fulfill the basic requirement of the army instructions on this matter. This agreement was reached with the knowledge of the senior legal officials responsible for the matter and even was approved by the deputy attorney general. Under these circumstances, it is clear that the chief of staff met the requirements of the law and the instructions of the army."

And what about Barak? He chose not to provide direct answers to Haaretz's questions on this issue.

Family business

Barak's appointment as defense minister required him to part from his holdings in Ehud Barak Ltd. The firm's shares were divided equally among his three daughters, Yael, Michal and Anat. Listed as the director of the firm was attorney Doron Cohen, Barak's former brother-in-law and present confidant. According to the rules of the Asher Committee for preventing conflict of interest of ministers and deputy ministers, the transfer of a minister's company to his family is permitted only if they worked in the company during the year before he assumed the public position (or if he requested and received special permission). An examination by Haaretz and talks with people who worked with Barak during the period when he was an up-and-coming businessman indicate that his daughters were not involved in running his businesses. In response, Barak told Haaretz that the company was transferred to his daughters "as a gift."

This gift is worth quite a lot of money. Findings that reached Haaretz indicate that up to April 2008, about 10 months after Barak entered the Defense Ministry, over NIS 5 million was accumulated by Ehud Barak Ltd. Some of the money was transferred from companies with which Barak is known to have worked, such as Tamir Fishman and Escape Rescue Systems - a company that specializes in rescuing people trapped in tall buildings. However, most of the money was transferred from anonymous sources in Israel and abroad.

In April 2008, the flow of money to Ehud Barak Ltd. ceased. That month, Barak's wife, Nili Priel, founded Taurus Israel Financial Ventures. The company operated for only a few months and was closed after news of its existence was published and met with sharp public criticism. At present the company is in the process of disbanding voluntarily, but in the short time it operated it received NIS 140,000 from groups abroad. In an interview with this magazine about two weeks ago, State Comptroller Micha Lindenstrauss, who is investigating the matter, said that Barak informed him that his wife had returned the money to the investors. The comptroller remarked that "there was a correlation between some of those who donated to Barak and the investors in Taurus."

At this point, after the closing of Taurus, a new company became part of the money-channeling circle, Cardo Business Development. In June 2007, at the same time Barak was elected chairman of the Labor Party and appointed defense minister, Ehud Barak Ltd. became the partner holding 50 percent of the shares in both firms: Cardo, founded in 2004 and located in the office of attorney Cohen, who holds the rest of the shares and runs the company, and Essence International Parking Ltd., founded in 1995 and also run by Cohen.

According to information that reached Haaretz, there is no activity in Essence; it is in effect a shelf company (a company that is legally incorporated but not active). On the other hand, Cardo, which is registered as providing "business consultation" and which, until it became part of Ehud Barak Ltd, was also an inactive shelf company, received almost NIS 1.5 million between 2007 and December 2008, all from anonymous sources abroad. All in all, therefore, since Barak became defense minister, over NIS 6.5 million have been transferred to companies to which he is connected and which are now owned by his daughters and his former brother-in-law.

Attorney Doron Cohen: "As far as I know, Ehud Barak Ltd. is not active. Cardo is an active company."

What kind of business does it do?

"To date, Cardo has not been engaged in any activity connected to the State of Israel. Since Cardo is a private firm, it does not provide information about its activity, revenues and clients to the public."

According to the information we have, since Barak's appointment as defense minister millions of shekels have been received by Ehud Barak Ltd. from Israel and abroad. If the firm is not active, what is the source of the money?

"The source of all the money received by the firm is Ehud Barak's activity before entering the government. The portion of the income that was received by the firm after he entered the government, for his activity, as we mentioned, was reported to the authorities, as required."

The Asher Committee rules do not permit transferring a company to a minister's relatives, unless they worked there for a year previously.

"I'm not going to share the interpretation of the Asher Committee rules with you."

Barak would not agree to reveal who had transferred money to the companies and for what purpose. His office said only that "all the activities of Ehud Barak and the companies to which he is connected were handled exactly according to law. From the day of his appointment as a cabinet member, Minister Barak has maintained his rights and obligations with full transparency before all the relevant bodies."

The state comptroller makes sure that the ministers abide by the Asher Committee rules. His spokesman, Shlomo Raz, was asked whether Barak reported the receipt of this money. Raz said in reply that "the State Comptroller's Office, which favors maximum transparency, is committed to working according to the law and the rules. The rules for ministers in order to prevent conflict of interest state in article 11b: 'Unless specifically stated otherwise in these regulations, the state comptroller will maintain the secrecy of the ministers' declarations and will not reveal any detail without receiving the agreement of the affected minister.'"