Under Pressure and Embarrassed, Milchan Refused Requests for Luxury Gifts From Netanyahu and His Wife

Milchan told police he initially did not see the gifts to Netanyahu and his wife as tantamount to bribes, but as requests gradually increased he felt they had gone too far

Israeli Prime Minister Benjamin Netanyahu chairs the weekly cabinet meeting at the Prime Minister's office in Jerusalem, Sunday, April 15, 2018
Gali Tibbon/AP

Businessman Arnon Milchan refused Prime Minister Benjamin Netanyahu’s requests for luxury items for himself and his wife on several occasions, causing tension between him and Netanyahu, new testimony shows.

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“You’re humiliating her by making her ask you. Listen, Hadas, it’s not an apartment. Explain to Arnon that if it’s not an apartment, it’s OK to give it. You’re joining the forces against us,” Netanyahu told Hadas Klein, Milchan’s personal assistant, at the beginning of 2016, after Milchan declined a request for gifts by the Netanyahus. At the time of this conversation, the police were already investigating the case.

Milchan told the police that at first he saw the gifts to the prime minister and his wife as no big deal and it never occurred to him that they were tantamount to bribes. But toward the end of 2013, the scope of the requests gradually increased and Milchan felt that some them had gone too far. Despite this, he said that for the most part, he continued to provide the couple with what they asked for because he didn’t “feel comfortable” refusing, sources close to the investigation said.

However, testimony show that despite what he said, Milchan refused quite a few of their demands. The police believe that Milchan was bothered by the couple’s exaggerated requests not because of the high cost of the items but because he was receiving things in exchange and feared that the increasing extent of the gifts would get him into trouble with the law.

The police doubt Milchan’s claim that he agreed to the Netanyahus’ requests because he wasn’t comfortable saying no, and believe he wanted to preserve the give-and-take relationship with the prime minister. A law enforcement source said this assumption is corroborated by evidence that Milchan himself linked supplying the gifts to the rewards he received. Milchan flatly denies this connection.

Haaretz obtained other testimony indicating that the Netanyahus exerted pressure on Milchan and Klein. In November 2015, for example, Sara asked for two expensive ring-and-necklace sets as a birthday gift. Milchan and Klein didn’t say no, but thought the gift cost too much.

Israeli-American movie producer Arnon Milchan and then Finance Minister Benjamin Netanyahu in Jerusalem on March 28, 2005
David Silverman/Getty Image/ ד

Sources said Klein testified that she and Milchan had put off buying the gift for close to a year, and wanted to hear from the prime minister himself that there was nothing wrong with buying it for him. This resulted in several angry telephone calls from Sara, which raised the tensions in the relationship. Finally Netanyahu met Milchan in the latter’s home in Beit Yanai in central Israel and told him there was nothing wrong with purchasing the jewelry for his wife.

After Sara called Klein and told her that “Arnon has given the green light,” Klein bought only one jewelry set. “We wanted him [Netanyahu] to have some peace of mind [from Sara],” Milchan said during his interrogation.

On another occasion Sara demanded that a construction inspector who worked with Milchan attend a meeting about renovations that were needed because of a leak at the Netanyahus’ private residence in Caesarea. Milchan had refused, telling the police he thought it was improper for an inspector to take part in meetings with public employees.

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According to the testimony, this infuriated Sara, who shouted at Klein over the telephone. Finally Netanyahu called Klein and said, “She’s being slaughtered by the media. Understand her. You’re our friends, you must understand that it’s permissible.” But Milchan stood his ground.

During this period Milchan hesitated to purchase items that the Netanyahus requested, whose value was estimated at tens of thousands of shekels. But while he avoided some requests and rejected others, he nonetheless continued to provide them a steady supply of cigars and champagne, for a total cost of hundreds of thousands of shekels. He then enlisted his partner, James Packer, to share the cost of the gifts.

Klein gave the police dates and quotes reflecting the Netanyahus’ relations with Milchan. “Sara said several times that to help Bibi and her was to help Israel, after everything that Bibi sacrifices for the country,” she said, referring to Netanyahu by his nickname. “Bibi knew of the process – that Sara calls and gets bottles - and he too was OK with it,” Klein said.

Netanyahu with Israel Police Chief Roni Alsheikh at a ceremony in November 2017
Gil Eliahu

The cigars-and-champagne case now being examined by the State Prosecutor’s Office first centered on a suspicion of breach of trust. Milchan was at first interviewed by the police as a witness. Later, when it was suspected that he received rewards in exchange for the gifts, he was questioned as a suspect.

Two months ago the police recommended indicting both the prime minister and Milchan for bribery. Channel 10 reported recently that the prosecution believes Netanyahu should be charged with breach of trust.

Some attorneys in the prosecution objected to questioning Milchan as a suspect. As Gidi Weitz reported in Haaretz, Attorney General Avichai Mendelblit was also of this opinion. As of now, the prosecution is inclined not to indict Milchan for bribery.

However, senior police officers in charge of the case as well as Police Commissioner Roni Alsheich believe Milchan should be charged with bribery. This stems from the moment it transpired that Netanyahu had advanced Milchan’s interests and helped him secure his visa to the United States. The police chiefs have held fast to this stand, even after police jurists raised doubts as to being able to prove the offense.

“You can’t have your cake and eat it too, both give gifts and say there was no bribery,” a senior police officer said. “If there’s a business interest and active steps on one side, and gifts on the other – you’ve got an offense.”

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One of the rewards Milchan was allegedly supposed to receive was the so-called Milchan law, which would have given him large tax breaks. Former Finance Minister and Yesh Atid leader Yair Lapid, who testified on the matter, said he had first objected to the bill but asked his staff to look into it under pressure from Netanyahu.

“Going to the officials was an attempt at footdragging and evasion,” Lapid said, according to a source.

Right-wing politicians said Lapid’s testimony cannot be relied on since he is Netanyahu’s political rival, and called to investigate Lapid over his ties with Milchan.

The police believe Lapid’s statement is reliable, but see it as part of all the evidence against Netanyahu, which includes several testimonies corroborating Netanyahu’s attempts to enact the legislation that would benefit Milchan. Police sources say Lapid was not suspected of acting to help Milchan for ulterior motives.

“The holidays have just ended and the biased leaks against Prime Minister Netanyahu and his wife have burst forth again,” Netanyahu’s office said. “Does anyone really believe the timing, right after the prosecution was reportedly inclined not to adopt the police’s recommendations [to indict Netanyahu for the cigars-and-champagne case], is coincidental? The report is full of inaccuracies, contradictions and lies.”

Milchan’s lawyer Boaz Ben Zur commented: “There’s one truth and no other – there is no ‘bribery.’ An attempt to portray the relations between the prime minister and Milchan as a series of giving perks for rewards is not compatible with the simple reality: gifts given with no interests and no expectation of reward.”

Following the publication of this article, representatives for Netanyahu said: "Not only are the statements in the article purportedly made by the prime minister totally unfounded, we also learned of them, and of other unfounded details, from a request by Haaretz newspaper and from the article that was published. That says it all."