Boss of Israel's Major Defense Contractor Rafael Forced to Take Leave

Israeli defense establishment put pressure on CEO Yedidia Yaari, following three recent incidents at defense contractor that angered them.

Amos Harel
Amos Harel
Rafael CEO Yedidia Yaari
Rafael CEO Yedidia YaariCredit: Ofer Vaknin
Amos Harel
Amos Harel

The head of major military contractor Rafael Advanced Defense Systems suspended himself last week, following three recent incidents at the company. Yedidia Yaari took the unusual step following heavy pressure from top officials at the defense establishment.

Yaari has been at the helm of Rafael for 11 years. In April, he announced his intention to step down as CEO late this year, and the defense establishment had already begun looking for a successor. In the interim, however, the incidents that angered Defense Ministry brass led to Yaari’s surprising suspension before a new CEO was selected.

Although relations between military firms and the Defense Ministry are frequently marked by various kinds of friction and disagreement, the current case is exceptional in its severity.

The first occurrence that angered the ministry involved a country in Central Asia, where the military establishment learned that Rafael had been operating recently without obtaining a sales license from the ministry, as the law demands. At the same time, it was competing for business with another Israeli military contractor. There is particular sensitivity in this area due to efforts the ministry has been making to regulate competition among Israeli defense firms. The matter came to a head about two years ago, with the freezing of a major defense contract bidding process in Poland for the sale of unmanned aerial vehicles. The process was halted due to a prominent dispute between contractors.

In the second incident, a serious breach of information security was uncovered involving a Rafael staffer. The employee was serving in the reserves, in the teleprocessing division of the Israel Defense Forces. Defense sources told Haaretz there are suspicions that the employee downloaded hundreds of classified computer files to a Rafael laptop while on reserve duty, contrary to IDF directives. Defense Ministry officials also suspect that the senior security officer at Rafael knew about the alleged breach for several weeks before informing the defense establishment.

The third incident, which sources said was the last straw, occurred about two weeks ago at a naval warfare exhibition in Singapore. According to a number of foreign media reports, Singapore maintains extensive military contacts with Israel. The exhibition featured a pavilion for the Israeli Defense Ministry and Israeli defense firms. A ceremony was held at the exhibition with the participation of defense officials, including Defense Ministry director general Dan Harel. According to those present, Yaari – who was scheduled to deliver remarks on behalf of the Israeli defense industry – spoke in Hebrew and roundly criticized Defense Ministry policy with regard to ties with Singapore.

Defense Minister Ya’alon, who had been scheduled to pay a visit to Rafael last Monday, had been informed of the series of incidents. Top officials at the ministry applied major pressure on Yaari to suspend himself from office and threatened to cancel Ya’alon’s visit. Ultimately, Yaari called Ya’alon a day before the visit to inform him he had decided to suspend himself, and the visit proceeded as planned.

At this point, it is not clear when Yaari might return to work and whether the search for his successor will be accelerated. Ya’alon, meanwhile, has ordered a detailed internal ministry inquiry over the Singapore incident.

Yaari’s long tenure at Rafael had been considered very successful. A former naval commander, he took over as CEO in December 2004. The firm, which had been an auxiliary unit of the Defense Ministry, became a government-owned company in 2002. It has generated major profits and developed highly advanced equipment, including the Iron Dome anti-missile system. In 2013, Rafael reported sales of about $2 billion and a net profit of $101 million.

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