The Schlaff Saga / Money Flows Into the Sharon Family Accounts

Contact Gidi Weitz at investigations@haaretz.co.il

In December of 2000, Israel and the Palestinians were effectively in a state of war. Ehud Barak's coalition had lost its majority in the Knesset, and he announced his resignation as prime minister, calling for an election that was scheduled for February 6, 2001. Likud chairman Ariel Sharon ran against Barak.

By January, the terror attacks in the city centers had increased, the Israel Defense Forces had re-occupied the Palestinian cities, and a stormy election race was under way. In his first attempt to be elected prime minister, Sharon's image dominated the intersections of the country's roads. From time to time he held secret meetings with Martin Schlaff at the office of attorney Dov Weissglas on Lilienblum Street in Tel Aviv.

Two weeks before the polls opened, on January 25, Sharon's son Omri, attorney Weissglas and former Foreign Ministry director general Eitan Ben-Zur, who was serving as Sharon's diplomatic adviser, took off from Ben-Gurion International Airport. The destination: Vienna. From the airport the delegation was driven to Schlaff's home, where both their host and Mohammed Rashid, an adviser to Palestinian leader Yasser Arafat, awaited them.

After the hugs and handshakes, Schlaff invited the group to the table, where the guests were served a repast of delicacies. Some of the guests were single at the time, and the talk also veered to the topic of women. After dessert they got down to business.

"The conversation went on for three or four hours," recalls one of the participants. "Schlaff was very active in the conversation ... You could see he was serious buddies with Rashid. This was Schlaff's initiative from beginning to end. He organized everything."

The aim of the meeting, say people who were there, was to create a track for dialogue between Sharon and Arafat, in the hope of reaching a truce immediately after the elections. The word "casino" was not mentioned by those present during the course of the conversation, though presumably improved relations between the Palestinians and the Israelis would lead to the reopening of the Jericho gambling resort, with which Schlaff was associated.

"This was a morally and diplomatically screwed meeting," Barak commented angrily when the meeting became public. Later Barak's campaign would distribute a poster in which Schlaff is seen spinning a roulette wheel, representing the Israeli power structure. That part of the campaign, even though it was quickly shelved, caused a permanent breach in the relationship between Barak and Schlaff.

After Sharon's election, Schlaff continued to mediate meetings between Rashid and top Israeli political leaders. The most interesting of these took place that April at the King David Hotel, in Jerusalem. Participating in it, in addition to Ehud Olmert, then mayor of Jerusalem, were representatives of the new government, among them Sharon's close associate Dov Weissglas and Shas party chairman Eli Yishai. Rashid's tone had changed. He emphasized to the group that "possibly most of the blame falls on the Palestinians' shoulders." He asked to return to the negotiating table after the Palestinian Authority got the violence under control. Yishai and Olmert promised they would transmit the message to Sharon.

The security guards at Sharon's Sycamore Ranch were already familiar with Schlaff's shiny Jaguar, which often went in and out through the estate's gates. "Schlaff went there many times," relates Mordechai Finkelstein, who was Schlaff's driver at the time. On one occasion, when a suit had been filed against Sharon in Belgium by the Palestinians for his involvement in the Sabra and Chatila massacre during the 1982 Lebanon War, Schlaff offered to pay for a public relations firm to help the prime minister. The offer was turned down by Sharon's people. When Avigdor Lieberman resigned from Sharon's government, in March 2002, Schlaff urged him to reverse his decision, according to associates of Lieberman.

"Martin loved Arik Sharon with all his heart," says a person who knows Schlaff well. "Arik would do him honor ... He loved the sons a lot less, especially Gilad."

Gilad Sharon brought Schlaff into a real estate project in Canada. Schlaff transferred an advance of 5 percent to it, but in the end the deal did not go through.

Cancun capers

In 2002 a very large, luxurious ship with the name Cancun on its prow sailed into Eilat's harbor. Schlaff wanted to establish a floating casino outside Israel's territorial waters. For this venture, he used the services of two former directors general of the Prime Minister's Office (Moshe Leon and Shimon Sheves ); the CEO of the national lottery Mifal Hapayis (Yaakov Bardugo); attorney Shlomo Deri (Aryeh's brother ); former Mossad chief Dani Yatom, as security adviser; and Dov Weissglas, as legal counsel.

The mayor of Eilat at the time, Gabi Kadosh, who supported the plan, flew to Vienna that year for a meeting with the Australian billionaire, in which Moshe Leon also participated. Kadosh claims he was invited by Austrian municipal officials. Also recruited for implementing the project was the Sharon family's close associate Gamliel Hassin, an influential figure in the Likud central committee and at the Ashdod port, who used his connections to advance the project. Gilad Sharon was also involved in discussions of the floating casino with Schlaff, according to other participants.

At that time a number of illegal gambling ships were operating off of Eilat, the largest of which, the Royal Casino, belonged to Daniel Cohen, a local businessman. In 2002 Schlaff's people contacted and negotiated with Cohen; ultimately, a package of shares in the venture was promised to him in return for operating it. Cohen was supposed to provide the Cancun with "industrial quiet" vis-a-vis the other illegal gambling ships in the area.

"Schlaff was very worried by the illegal ships," relates a person who was involved in the venture. "He brought a security officer from Casinos Austria [who was to take care of] installing cameras there."

Cohen flew to Vienna for a visit with Schlaff, and also remained in constant contact with his people in Israel. That September, Cohen met with Casinos Austria people and other Schlaff representatives to finalize the agreement.

Early the next morning, about 250 police, led by the commander of the Southern District at the time, Moshe Karadi, raided the casino ships in Eilat and arrested 35 people. Among them was Daniel Cohen, who was defined as the "top of the pyramid."

Three years later, as part of a plea bargain, Cohen was convicted of various offenses, among them organizing illegal games, giving bribes and money laundering. He was sentenced to 17 months in prison. "A few hours after we closed with him," recalls Finkelstein, "he was arrested by the police."

Schlaff came to Eilat several times, met in Vienna with those involved in the Cancun venture, kept up-to-date with what was happening and asked one of his friends, a senior politician, to speak out publicly in support of the scheme. At a certain stage, when Schlaff sensed the venture was not making progress, he enlisted the assistance of Amnon Lipkin-Shahak, by then a former government minister, who organized a meeting for him with the governor of Aqaba, Jordan, with the aim of transferring the gaming ship to Aqaba. Lipkin-Shahak has confirmed this.

In 2003, then-attorney general Elyakim Rubinstein, who had been wholeheartedly opposed to the casino in Jericho, instructed the Transportation Ministry not to grant certificates of safety either to the gambling ship or to those who were to ferry gamblers to it from the shore, prior to receiving an opinion from a team he had appointed to look into the matter. Rubinstein thought the operation of a casino with a direct connection to the State of Israel should be prohibited. He justified his position as an attempt to prevent "criminality and corruption, ruination of families, money laundering and more." Schlaff's people still hoped Rubinstein's expected retirement from the position of attorney general (in 2004, he was appointed to the Supreme Court ) would enable them to operate the ship - but then the Cyril Kern affair erupted.

Money from Cyril Kern

Toward the end of 2001, in the wake of a ruling by the state comptroller that donations of such a magnitude were illegal, prime minister Sharon announced his intention to return $1.5 million to donors in the United States. The money had been given to Sharon in the context of the primary election for head of the Likud in 2001.

At the beginning of 2003, journalist Baruch Kra reported in Haaretz that the State Prosecutor's Office had applied to South Africa with a request to investigate a citizen named Cyril Kern on suspicion of having given a bribe to Sharon, after it emerged that he had transferred $1.5 million to the family's account.

Early the preceding year, Gilad Sharon had transferred $1.5 million from an account in his name at the Austrian bank Bawag to a bank account in Israel he held jointly with his brother, Omri. That same sum had been moved into Gilad's Austrian account a few days earlier from an account opened by Kern, a family friend, in that same Austrian bank. James Schlaff, Martin's brother, had helped both of them open the accounts.

In November and December 2002, approximately another $3 million flowed into Gilad and Omri Sharon's account - from the Getex company. According to evidence gathered in the lengthy investigation, a deal suspected of being fictitious had been agreed upon by all parties to serve as a cover for the transfer of the millions.

Getex and Jurimex

The $3 million that parachuted into Gilad and Omri Sharon's bank account toward the end of 2002 was transferred there in the context of a consultancy contract for development of kolkhozes (collective farms ) in Russia. Gilad Sharon was brought into the campaign to make the wilderness bloom in Russia by Getex, a large Russian-based exporter of seeds (peas, millet, wheat ) from Eastern Europe. Getex also has ties with Israeli firms involved in exporting wheat from Ukraine, for example. The company owns farms in Eastern Europe and is considered large and prominent in its field. It has its Vienna offices in the same building as Jurimex, which was behind the $1-million guarantee to the Yisrael Beiteinu party.

The chairman of Jurimex and one of the owners of Getex is Robert "Bobby" Nowikovsky, an Austrian businessman who has been close to Schlaff for many years. During their investigations of both the Lieberman and Sharon affairs, Israeli police discovered many money transfers from one of Schlaff's companies to one of Nowikovsky's.

In an Austrian court document that has come into Haaretz's possession, which details the Israel Police suspicions in the affair, there are hints of another link between Getex and Schlaff: A member of the board of trustees of the mother company of Getex and Jurimex is Michael Hason, an Austrian accountant and tax adviser.

"Hason is the go-between," says a businessman who knows Schlaff well. "Apart from [Schlaff's] brother James, he is considered the most significant person in Schlaff's business operation."

Hason was president of the Liechtenstein-registered CAP Holding, which holds shares in the Jericho casino for Schlaff and his partners. Hason in fact holds positions in all the companies to which Schlaff is connected: the Robert Placzek lumber trade company, various cell-phone firms, the private family foundation MS Privatstiftung, the Latvian oil company, of which Schlaff is a partner, and more. And several months ago, Schlaff appointed him deputy chairman of Sygma Bank, which he established in Liechtenstein.

Hason is also wanted by Israel for questioning in the investigation of the Sharon affair, and in his case, too, the Austrian authorities have refused the request from the Israeli police to be allowed to question him.

Kern had a company called Gebo, headquartered in the Caribbean. According to the Austrian court document that has been obtained by Haaretz, on September 30, 2001, the Getex and Gebo companies agreed Getex would help Gebo in the Russian kolkhoz project. Gebo's role, under the agreement, was to examine the feasibility of investments in those kolkhozes and prepare a business plan for the venture.

Three days earlier, on September 27, a memorandum was signed between Cyril Kern's Gebo and the Charington company, which had been opened in the Virgin Islands by Gilad Sharon. According to the memorandum, Gebo was supposed to hire the services of Gilad's firm in order to obtain from it know-how and administrative ability. Gilad was described in the document as an expert with experience in agriculture, and his part was to perform due diligence on the kolkhoz project for Gebo.At a certain point after the agreement was signed, Kern decided to cease his involvement in the venture, because of his advanced age. For his part, Gilad Sharon was paid about $3 million for his "rights" in the undertaking. The police say that Schlaff was the one responsible for transferring the money connected with this venture.

According to Austrian sources involved in the investigation, when the Israel Police questioned the CEO of Getex Austria, Thomas Kerner, the executive said he didn't know about the money that came into the hands of the younger Sharon. "He asked the investigators to contact Getex Russia, to find out what the large payments were for," relates a person in Austria who is familiar with the details.

Questioning of the Russian Getex chairman Vladimir Gljianov revealed that executives there had met Gilad Sharon only once, and that they too had no knowledge of the payments made to him.

According to the police, a total of $4.5 million flowed from Schlaff into the Sharon family's accounts: Of this sum, $1.5 million was to cover the reimbursement of American contributors, $1.5 million was returned from Gilad Sharon's account to Kern toward the end of 2002, and the final third remained in the Sharons' possession.

According to information in the possession of Haaretz, the money that was nominally repaid to Kern actually was then transferred to a company called Universal Finanz Holding AG, which is based in Liechtenstein. It is this company that a Bundestag report names as the "successor" of Schlaff firms that had earlier traded with East Germany. In recent years it has been dealing in various investments, among them a student loan venture.

The final "stop" in the process of loan repayment was another Liechtenstein-based firm called Galonia, controlled by attorney Konrad Ackerman, Schlaff's partner in the business in East Germany. The timing of the money transfers to the floating casino venture that Schlaff wanted to establish in Eilat raised among investigators the strong suspicion that the millions that Schlaff - according to the police - transferred to Sharon's family were bribes.

Omri Sharon, who was questioned under caution, directed the investigators to his brother Gilad, who consistently maintained his right to remain silent. A few months ago, James Schlaff was also summoned to give additional testimony in the affair when he came for a visit to Israel. The police investigation, however, has not succeeded in establishing that Sharon provided any help to the floating casino venture.