Charges Recommended Against Two Netanyahu Associates in Sprawling Antitrust Case

The majority shareholder and CEO of Israel's biggest telecom firm and the man Netanyahu appointed to lead Israel's communication ministry may face criminal charges

FILE - In this Sept. 26, 2017 file photo, Israeli Prime Minister Benjamin Netanyahu listens to transportation minister Yisrael Katz during the weekly cabinet meeting at his office in Jerusalem. (Gali Tibbon, Pool via AP, File)
Gali Tibbon/AP

A sprawling anti-trust investigation involving Israel's biggest telecom firm and two men considered close to Prime Minister Benjamin Netanyahu took its first steps towards indictments on Monday.

The Israel Securities Authority has finished its criminal investigation into Bezeq, the country’s dominant telecommunications company, and has passed its conclusions regarding the so-called Case 4000 affair onto the Tel Aviv District prosecutor’s office. The securities authority recommended charging Bezeq controlling shareholder Shaul Elovitch, his son Or Elovitch and Bezeq CEO Stella Handler.

>> Analysis: Netanyahu’s associates are being investigated left and right, and he knows nothing? <<

The case against Shaul Elovitch
Eyal Toueg

The authority also recommended that charges be filed against Bezeq corporate secretary Linor Yochelman; the CEO of Bezeq’s Yes satellite television subsidiary, Ron Ayalon; Yes chief financial officer Micky Neiman; and the director general of the Communications Ministry, Shlomo Filber.

Both Filber and Elovitch are considered close to Netanyahu. Netanyahu once described Elovitch as a “personal friend for 20 years." After a Haaretz exposé, Netanyahu was prohibited from having anything to do with Elovitch’s business dealings due to fears of possible conflict of interest in his capacity as communication minister. Oversight of Bezeq-related affairs were left to the Filber, a Netanyahu confidant and former head of the Likud Party Central Committee, appointed to his post by the premiere.

The investigation became public in June following an undercover probe into suspicions of corporate reporting offenses, fraud, corporate breach of trust and obstruction of justice. Several days after senior Bezeq officials including Elovitch were questioned, the court imposed a gag order on the entire case, except for occasional court minutes that were released from hearings extending suspects’ detentions.

The investigation focuses on three main issues. The first is Bezeq’s acquisition of Yes and the corporate governance that led to approval of the billion-shekel purchase ($285 million at current rates). The second issue is the acquisition by Yes of satellite services from Space-Communications as part of a long-term transaction extending through 2028. The third is the professional relationship between the Communications Ministry and Bezeq, including alleged leaks of working papers by Filber to Bezeq and allegations that Filber concealed the leaks from the professional staff at his ministry.

Shaul Elovitch
Eyal Toueg

The criminal probe follows a special report published by the State Comptroller Joseph Shapira into the Communication Ministry’s alleged laxity in its regulatory oversight of Bezeq while Netanyahu also held the Communications Ministry portfolio. A gag order on that aspect of the case was lifted when the file was transferred to the state prosecutor’s officer.

The fraud suspicions in the case relate to Bezeq’s purchase of Yes and suspicions at the securities authority that Elovitch illegally received 170 million shekels as part of the transaction. Elovitch had been slated to receive the sum as part of the acquisition, contingent on Yes’s financial results. The securities authority suspects that company executives methodically manipulated the books in order to enable Elovitch to receive the sum.

Regarding the Space-Communications transaction, the authority suspects that Bezeq officials including Yochelman leaked material to Elovitch from an independent committee at Bezeq that was examining transactions between Bezeq and Yes and Bezeq and Space-Communications. Elovitch is the controlling shareholder at Spacecom as well as at Bezeq. In connection with the transactions, Bezeq committed to pay Elovitch a total of 2 billion shekels. The investigation also indicated that the Elovitch and his associates alllegedly instructed those carrying out the leaks on how to direct the committee’s discussions.

FILE PHOTO: Shlomo Filber
Emil Salman

The case involving the Communications Ministry involves suspicions of ongoing and systematic fraud by Filber and Bezeq employees, who allegedly advanced Bezeq’s interests while hiding their actions from regulatory and legal staff at the Communications Ministry and other ministries. This allegedly included the systematic transfer of classified documents, internal position papers and inter-ministerial communications to Bezeq employees who would then allegedly edit and rewrite them in keeping with the company’s interests.

Elovitch’s lawyers said in response that no offenses had been committed. They called for patience now that the case had been passed on to the prosecutor’s office.

Filber’s lawyers responded that an announcement from the securities authority had cleared Filber of any suspicions of personal responsibility in the case, and that it had not found any instances of decisions made by Filber that were illegal or that ran counter to advancing Israel’s communications sector. They added that he has no connection with the financial aspects of the Bezeq probe. Regarding the passing of working papers onto Bezeq, his lawyers stated that this showed the security’s authority’s lack of understanding of how government ministries work.

Indirect ties to Netanyahu

While Netanyahu is not under any suspicion in the case, his name comes up in it repeatedly. All the issues under investigation relate to events that occurred while Netanyahu was communications minister in addition to prime minister. Filber has also been a close Netanyahu confident for years and was appointed ministry director general by Netanyahu himself.

Lawyers representing Bezeq controlling shareholder Shaul Elovitch (center) attends hearing at Tel Aviv Magistrates Court, July 2017.
Eyal Toueg

The decisions that the Communications Ministry made regarding Bezeq had repercussions involving hundreds of millions of shekels, including Filber’s alleged attempt to approve the Bezeq-Yes buyout with timing that would enable Elovitch to receive the 170 million shekels now at the center of the probe.

Some observers suspect that Filber’s motivation in helping Elovitch may stem either from the controlling shareholder’s friendship with Netanyahu or from an unspoken agreement to show lenience with Bezeq in exchange for positive coverage of Netanyahu from the Walla news portal, which Elovitch also owns.

The comptroller’s report noted Netanyahu’s relationship with Elovitch and suggested that Netanyahu had tried to downplay it when taking the communications portfolio. The report noted that the prime minister had not noted the friendship on an official conflict of interest form.

Walla’s positive coverage of the Netanyahus has also been documented, including a 2015 expose by Haaretz’s Gidi Weitz, who found that the nature of the coverage was attributed to “orders from above.” The exact details were not disclosed.