State Watchdog Did Not Tell Permits Committee Netanyahu Appealed to Him for Loan

State Comptroller Joseph Shapira told the prime minister that he would approve a 2 million dollar loan from an American millionaire if it was at market rates and if he could prove there is no conflict of interest

Netanyahu speaks at the Cyber Week Conference at Tel Aviv University, June 26, 2019.
Avishag Shaar-Yashuv

State Comptroller Joseph Shapira did not tell his office's permits committee that Prime Minister Benjamin Netanyahu appealed directly to him to approve a loan from an American tycoon to finance his legal fees in an attempt to circumvent them.

The prime minister argued that taking the money from businessman Spencer Partrich would not constitute a conflict of interest, but taking a loan from an Israeli bank would.  

Netanyahu wrote to Shapira, asking him to let the prime minister accept a loan of two million shekels ($560,000) from Partrich at market rates. This move would allow him to bypass the permits committee, which has already refused to let the prime minister to receive donations from businessmen to fund his legal defense in three criminal cases against him. But Shapira failed to inform the committee of the loan request, to the frustration of many in the comptroller's office.

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Members of Shapira's office did ask Attorney General Avichai Mendelblit what information they would need in order to approve the loan request. Mendelblit replied that he needs information about any business ties between Partrich and Israel, as such affiliations may represent a conflict of interest.

Mendelblit does not intend to deal with the central question of whether the comptroller's office was supposed to transfer the request to the permits committee, but rather to address the question of a conflict of interest between Netanyahu and Partrich. That is to say, if the attorney general were to receive the information he asked for and confirms that there is no conflict of interest, it would pave the way for Netanyahu to receive millions of shekels in loans, and no one would be able to regulate it.

“It’s unclear why Netanyahu doesn’t ask for a bank loan,” a source involved in the issue said two weeks ago. “There’s a serious fear that the comptroller will try to pull a fast one before he leaves and give the prime minister what he wants.”

But Netanyahu evidently anticipated this objection. He told the comptroller that given a prime minister’s power to make decisions affecting the Israeli banking system, a bank loan would be more problematic than a loan from Partrich, who has no business ties to Israel.

Partrich, who owns several companies, has known Netanyahu for about 20 years. In 2016, he bought a half-interest in the Jerusalem home of the prime minister's late parents from Netanyahu’s brother Iddo, effectively becoming a business partner to Netanyahu, who owns the other half.

A 2011 investigative report by journalist Raviv Drucker found that Partrich frequently financed plane tickets and lodging for overseas trips by Netanyahu and his family between 1999 and 2009, when Netanyahu was not prime minister. When he was questioned as a witness in a case involving illicit gifts the prime minister received from businessmen, Partrich told the police he had bought suits for Netanyahu. The case, known as Case 1000, is one of three in which Mendelblit plans to indict the prime minister.

Over a year ago, Netanyahu asked the permits committee in Shapira’s office to allow him to receive millions of shekels in donations from two men – Partrich and his cousin Nathan Milikowsky – to fund his legal expenses. The committee rejected the request, saying it was inappropriate for tycoons to fund Netanyahu’s legal expenses in cases that involve illicit gifts from tycoons. It subsequently rejected his appeal, and ordered him to repay $300,000 he had already received from Milikowsky in legal funds.

Netanyahu then petitioned the High Court of Justice, which ruled that the committee should reconsider, but that the prime minister would have to provide it with any information it requested. Netanyahu opted not to provide the information, which included extensive details about his own financial assets, so the committee turned him down for the third time, last week.

Anticipating that rejection, Netanyahu circumvented the permits committee and asked Shapira two weeks ago to approve the loan from Partrich.

Some officials in the State Comptroller’s Office said that this request, too, should be referred to the permits committee for approval, as requesting a loan from a tycoon could also create a conflict of interest. One of those officials, according to sources in the office, was the State Comptroller's Office’s legal advisor, Prof. Yoram Rabin. Other sources said Rabin’s opinion was merely that the committee must be informed of the request.

Either way, Shapira never informed the committee. Instead, he wrote to Netanyahu’s lawyer that he would approve the loan on two conditions – if Mendelblit confirmed that a loan from Partrich would create no conflict of interest, and if Netanyahu provided proof that the loan was at market rates.

But one source involved in the issue told Haaretz that those conditions are meaningless, as “the comptroller does not and never will have the ability to ensure that the loan was given at market rates.” Moreover, he said, the comptroller has no ability to supervise the loan’s propriety, or to force Netanyahu to repay the $300,000 from Milikowsky.

“The comptroller had two options – to refer the request to the permits committee or tell Netanyahu, ‘You want to borrow millions? Go to the bank,’” this source argued. “But in his last days on the job, Shapira has returned to his point of departure – helping top government officials.”