How Lobbyists and Machers Came to Rule Israel

Investigators handling the Yisrael Beiteinu affair were amazed by the intolerable ease with which money was removed from the public coffers. When the smoke clears, the question will remain: How did a culture of secret envelopes take over the country?

Gidi Weitz
Gidi Weitz
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Yisrael Beiteinu's Lieberman, and Kirshenbaum.
Yisrael Beiteinu's Lieberman, and Kirshenbaum.Credit: Emil Salman
Gidi Weitz
Gidi Weitz

About three years ago one of the machers who was arrested last week in the Yisrael Beiteinu affair turned to a leading political figure in the Netanyahu government at the time. The macher knew that this political figure had a personal connection with an official of a government ministry that controls the budget.

“Your friend the official can sign a document that will transfer several million shekels to a nonprofit organization in the north of Israel that I represent,” began the macher. “Nu?” said the political figure, curious to learn more. “The official thinks that the NPO isn’t entitled to money. If you succeed in pressuring him to approve the budgetary transfer, you’ll get a quarter-million shekels (about $63,500) in cash from me.”

Those were the prices that macher charged: He skimmed for himself 20 percent to 30 percent of the total amount of government funds that he received for the group he represented. With that money he was able to grease the hands of other people along the way, and sometimes, according to suspicions, even managed to put some of the money back into the pockets of the senior politicians and civil servants.

In the incident described here, the political figure had the decency to reject the tempting offer, but the story illustrates how the system worked.

Moving money with ease

What most amazed the investigators and attorneys handling the Yisrael Beiteinu affair during the past year is the intolerable ease with which money was removed from the public coffers, to be used by fat cats and those close to the ministers’ bureaus.

Deputy Minister Faina Kirschenbaum and her colleagues, for example, would demand that the Finance Ministry earmark some coalition money for an innocent purpose: assistance to students in the Negev. In effect virtually only one group can meet the criteria of the party’s strongwoman: the Ayalim Association.

The talented Kirschenbaum knew how to find general and presumably attractive objectives, to enable the turnaround of coalition funds from the public coffers to organizations from which her friends could take commissions and be left with change, which would satisfy her as well, according to suspicions.

No effective guardians stood at the gate to stop her. “An MK and deputy minister makes a phone call to a treasury official, instructs him where to transfer money, and there is nobody who stops him or checks what’s going on here,” a source familiar with the details of the affair told Haaretz.

Up to the time of this writing, the scope of the system and the methods of operation are not entirely clear to those involved in the investigation. But one thing is clear to them: The lead actors in this story, other than the politicians, are the machers, key players on the seam line between government and those in need of its help.

Payments to a lobbyist

One detail that amazed those involved relates to the payment made by a Dead Sea regional council, and by the kibbutzim in its jurisdiction, to Yisrael Yehoshua, one of the lobbyists who obtained government funds for them: more than 100,000 shekels a month, in return for orderly tax invoices.

Yehoshua started out in the office of then-Jerusalem Mayor Ehud Olmert. In the first Netanyahu government Yehoshua was considered to have influence on the places of MKs on the party slate.

He felt at home in the offices of Olmert, Defense Secretary Yitzhak Mordechai, and especially in the Prime Minister’s Office, where his good friend Avigdor Lieberman was the director-general. Yehoshua was his confidant: He was the one, for example, who on one occasion made sure to bring in an expert late at night to check whether someone had concealed eavesdropping equipment in the office.

Even when Lieberman left the PMO and started his one-man party, he and Yehoshua remained close. When Lieberman was appointed transportation minister, for example, Yehoshua offered his services to an official of the government corporations subordinate to the minister.

“And what can you offer me?” asked the director-general. “Government connections with Lieberman and the Likud ministers,” replied Yehoshua in the same spirit. The asking price was thousands of dollars per month; that particular director-general refused. “I have excellent connections with Lieberman,” he replied to Yehoshua.

Others accepted the offer and hired the services of the lobbyist. In the past, two major tycoons hired the services of the clever Yehoshua. Nochi Dankner paid him for leveraging his government connections – for example in the battle the former tycoon waged to allow Israir Airlines to fly to New York. Yehoshua was connected during those years to someone with decisive influence: Tourism Minister Abraham Hirschson and his staff.

Tshuva and Leon

Yitzhak Tshuva was also assisted by Yehoshua during the tycoon’s attempt to overturn the conclusions of the Sheshinski Committee, which decided on royalty payments on the profits of the gas barons. Incidentally, the most serious opposition in the Knesset to the proposed sharing of profits between the public and the corporations were the members Yisrael Beiteinu. In the past Yehoshua had turned down offers to join the party when it was running for the Knesset. He preferred the shadows.

Another figure who profited from the twilight zone between big business and government, and also preferred to maintain a relatively low profile until about a year ago, is Moshe Leon – Lieberman’s ultimate confidant. But then Lieberman convinced the accountant from Givatayim to run for mayor of Jerusalem. One of the heads of Leon’s campaign staff was Yehoshua. Faina Kirschenbaum also helped Leon’s campaign, as did others who are now in detention cells. We can only imagine what would have happened had Jerusalem fallen into their hands.

The new affair exposes the dangerous role of the well-connected intermediaries. According to the evidentiary materials, Yisrael Beiteinu’s method was particularly primitive and ugly. The more elegant intermediaries have secret and sophisticated ways of achieving influence in the centers of government. In several election campaigns in recent years, for example, certain lobbyists financed the campaigns of several MKs, whether directly or indirectly. A few years ago one of them paid for an experienced media advertiser for the candidates. Another intermediary-lobbyist had his big-business clients contribute money to the candidate to pay for their campaigns.

Both cases illustrated an attempt to buy the MK, to use him afterwards as a puppet. In other cases MKs or regulators received a perk from the lobbyists: free professional advice, office services, surveys to examine their political status, a hint at a desirable job after they ended their Knesset careers. The intermediaries between big business and government are the main players in the new affair and the most dangerous sources of corruption.

Israel Electric Corp.

Yesterday morning another story of corruption erupted, this time among the executives of Israel Electric Corp. About a year ago, after a prolonged legal battle, a Swiss court permitted the transfer of information from a bank account belonging to one of the people whose worldwide bank accounts served as a waystation in the transfer of millions of dollars in bribes from the German firm Siemens AG, a multinational conglomerate, to former district court judge and IEC director Dan Cohen, who is now serving a prison sentence in Israel.

It is suspected that the bank accounts were also used to transfer money to other key figures in the IEC. When the report of the movement of money in the account arrived in Israel, a second chapter began in the IEC bribery affair. Six years ago it was already clear to those who had been bribed that they were living on borrowed time.

In December 2008 the U.S. Securities and Exchange Commission filed an indictment against Siemens. According to the indictment, the Germans paid $1.4 billion in bribes all over the world – in the same underhanded ways that the money was given to Cohen – mainly in developing countries, including Venezuela, Argentina, Bangladesh and Iraq.

The indictment indicates that in Israel alone Siemens paid a total of about $20 million in bribes. Dan Cohen received almost $4 million from Siemens (he was convicted of receiving one million euros in bribes). The other $16 million remained a mystery, until the details of the Swiss account arrived and the identity of those receiving the payments was revealed.

As in the Yisrael Beiteinu affair, in the IEC case important people are cooperating and providing definitive evidence and unassailable proof. The difference is that this affair transcends the borders of the country, and at least one safe stuffed with hundreds of thousands of dollars has been found in a European city. It belongs to one of those who held a senior position in the corporation.

The gloomy plot is based on at least three deals, all of them involving IEC purchases from Siemens, mainly turbines. In 2001 the IEC purchased three turbines from Siemens, for $370 million, and in 2002-2003 another two turbines for about $200 million.

Government corruption is never limited to a harsh blow to moral values; it also causes lethal damage to the state treasury. The last two turbines that were purchased lay wrapped in plastic and unused in IEC warehouses for 10 years.

Nobody needed the transaction at the time, except perhaps the people from Siemens and the IEC officials with the safes. A former director-general of the Infrastructure Ministry told Haaretz about a year ago that the cumulative damage from the stored turbines is estimated to be at least hundreds of millions of shekels of public funds.

Just as the Dan Cohen affair gave rise to the bribery case among IEC executives, the Yisrael Beiteinu affair has the potential to give rise to other stories of corruption. At the beginning of the overt investigation the police and the State Prosecutor’s Office counted 16 stories of criminal activity, and since then the number has skyrocketed. Someone familiar with the details told Haaretz that the picture that was known to the law-enforcement authorities about a week ago bears no resemblance to the shocking picture we are seeing now.

In a few weeks another abscess will probably burst – a corruption story that is more modest in dimension than the Yisrael Beiteinu and IEC affairs, but serious in itself – connected to one of the strongest entities in the country, which is also suspected of being mired in a culture of corruption.

After the smoke clears, we will have to ask ourselves how a culture of secret envelopes has taken over the country. “What you see is only the tip of the iceberg; they haven’t even begun to scrape off the first layer,” said someone with first-hand knowledge of this culture.

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