An Israeli Politician Backed the State Comptroller’s Candidacy. It Saved Him Millions

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Matanyahu Englman after being elected state comptroller, Jerusalem, July 1, 2019.
Matanyahu Englman after being elected state comptroller, Jerusalem, July 1, 2019. Credit: Emil Salman

Ever since he became state comptroller, Matanyahu Englman has been accused of repaying the man who got him elected to the job, Benjamin Netanyahu. A few weeks after entering office, Englman let the prime minister borrow millions of shekels for his legal defense from a friend, U.S. businessman Spencer Partrich, who was a witness in one of the three corruption cases against Netanyahu – the gifts-from-tycoons affair.

The fact that the Knesset chooses the comptroller – which means he has to muster support from many people who may be the subjects of his audits in the future – raises ethical questions. This was certainly true in Netanyahu’s case.

But it’s equally true in another case. Haaretz has learned that Englman imposed a minuscule fine on Zeev Elkin despite concluding that the environmental protection minister accepted more than 6 million shekels ($1.75 million) in illegal campaign contributions while running for Jerusalem mayor in 2018.

Elkin served as Netanyahu’s whip in mobilizing votes for Englman’s appointment, just as he did for the appointment of Englman’s predecessor, Joseph Shapira. He’s the one who persuaded both leaders of the right and Knesset members from the center-left bloc.

When the race began, Elkin gave Englman some useful advice: Meet with as many MKs as possible, because unmediated contact is your best weapon. Englman listened and met with dozens of MKs. He and Elkin would even update each other on the progress of their effort.

In 2018, Elkin ran for mayor of Jerusalem. He financed his campaign mainly through loans, with the help of businessmen who gave him loan guarantees worth 8 million shekels. Moshe Shvets, a Canadian businessman close to Chabad in Russia, guaranteed a 2-million-shekel loan. High-tech entrepreneur Yuri Zelvensky and businessman Alexander Malis guaranteed 1 million shekels each. Businessman Lev Kagno guaranteed 700,000 shekels, and a man named Temur Ben Yehuda guaranteed 360,000 shekels.

By law, after the election, the mayor and the parties elected to the city council receive state funding proportional to their showing at the ballot box. Elkin knew that to repay the donors who guaranteed his loans, he would have to win the mayoral race plus four city council seats. Instead, he lost in the first round, and his party won only two seats.

Prime Minister Benjamina Netanyahu with Zeev Elkin walking through the Mahane Yehuda market in Jerusalem, October 24, 2018Credit: Oren Ben Hakun

Unpleasant tally

Each Jerusalem city council seat is worth 1.35 million shekels in state funding, so Elkin’s party received 2.7 million shekels. Data obtained by Haaretz shows that his campaign spending totaled 9.4 million shekels. Thus he was left with a deficit of 6.7 million shekels ($1.96 million) that was covered by his wealthy supporters when their loan guarantees were called in.

After the election, Elkin met with all his guarantors and tried to explain what went wrong. Some didn’t hide their unhappiness with the squandering of their money. Elkin promised to try to repay the money, but the state funding and the few donations he received covered only 18 percent of the debt.

“People knew they were taking a risk,” Elkin told Haaretz. “But they didn’t think the risk was that big, and neither did I. It certainly wasn’t pleasant.”

He added that he gave the names of all his guarantors to the Environmental Protection Ministry’s legal adviser and decided not to get involved in any of their affairs in his capacity as minister. “This is a conflict of interests I’ll carry with me all my life,” he said.

Immediately after any municipal election, the state comptroller investigates whether the mayoral candidates and the parties adhered to the restrictions set by law. If not, he can penalize them by depriving them of up to 15 percent of their state funding.

One expert in the field said the size of the fine is determined by criteria such as the number of violations, the size of the illegal donations and the extent to which the spending cap was exceeded. The previous comptroller, Shapira, thought fines were too minor a sanction and sought to obtain the right to impose harsher punishments.

After the 2013 municipal election, Shapira stripped then-Mayor Nir Barkat of 13 percent of his state funding (around 400,000 shekels) because Barkat exceeded the spending cap. He was left with a 10-million-shekel deficit that he covered out of his own pocket.

The Hitorerut party, headed by Ofer Berkovitch, lost 15 percent of its state funding (around 470,000 shekels) that year, because it “did not include all its expenses in the financial report it submitted” and because the documentation it submitted on its contracts with service providers “was missing important details that could not be checked,” Shapira wrote.

When officials from the State Comptroller’s Office examined Elkin’s report, they discovered that he had exceeded the spending cap by 1.3 million shekels. Moreover, once the loan guarantees he received were called in, they became illegal donations. Finally, his party submitted its report very belatedly.

“These three violations should influence the size of the fine the comptroller imposes,” the expert in the field said.

After receiving the comptroller’s findings, Elkin asked to meet with Englman and members of his staff. He explained that he took a calculated risk during the election campaign because he made a deal with the ultra-Orthodox candidate, Yossi Daitch, that should have given Elkin a good chance to win.

Elkin’s associates said Daitch wanted to honor the deal by bowing out of the race and throwing his support to Elkin, but his patron, the rabbinical leader of the Gur Hasidic sect, dreamed one night that Daitch would win the election and forbade him to withdraw.

Englman was apparently convinced. He decided to deduct only 3 percent of Elkin’s state funding, or 80,000 shekels.

Lenient Englman

The State Comptroller’s Office declined to say what its professional staff thought of this decision. But a person familiar with the office’s work said they believed Englman was far too lenient with Elkin.

“The facts that a candidate exceeded the spending cap, accumulated an astronomical deficit and submitted his financial report very belatedly are all clear grounds for increasing the sanctions,” he said.

A senior official in the State Comptroller’s Office said Englman generally takes a more lenient approach than his predecessors. The comptroller “wanted additional parameters to be considered before imposing sanctions, which naturally led to reduced fines compared to previous comptrollers,” the official said.

Elkin, in contrast, believes Englman shouldn’t have fined him at all. He says that only a series of unexpected events deprived him of the victory that would have let him repay the loans.

“I can show that at every stage of the race, the money was supposed to be repaid,” he said. “But Daitch didn’t join me and Ofer Berkovitch gained momentum. He emptied my reservoir of votes, and also my coffers.”

The State Comptroller’s Office said in response: “Commenting on the report before it’s released is illegal, and it’s regrettable that there are those who comment on a draft of a report that has not yet been made public.”

“In any case, for years, it has been customary that the comptroller may annul funding based on a number of criteria. Comptroller Englman examined the implementation regarding the 2018 local elections and accordingly updated a course of action regarding all candidates for local councils.

“The law is explicitly stated and the High Court has referred to these laws in its decisions – that the state comptroller has a wide margin of authority to carry out policy. The policy in its entirety will be reflected in the published report.”

“We wish to stress that the law does not set any limits on the amount of guarantees that a party can receive for an election campaign. Under the rules ... guarantors report via the candidates, and these reports are published immediately on the comptroller’s website. [When appropriate], the guarantees are considered a donation and an investigation is conducted into whether it is a legal donation.”

“Hearings for candidates in local elections are held according to the law and decisions are made in accordance with the rules.

“It bears emphasizing that the comptroller completely rejects any allegation about using extraneous criteria. We would also point out that since taking office, Comptroller Englman has proved in a long list of decisions that he examines all aspects of a case of party funding based on the need to provide a constructive review, in accordance with the law, based on international standards and prior comptroller principles.

“In recent months the High Court has repeatedly rejected petitions that have tried to accuse the comptroller of extraneous considerations. The comptroller acts only according to the law and his reports shall be made public according to custom.”

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