“If the police find that Netanyahu, or others on his behalf, tried to remove the clause from the Economic Arrangements Law that cancels the exemption from reporting foreign income, maybe another smoking gun will tie the gifts that Arnon Milchan gave Netanyahu to what Netanyahu was supposed to give Milchan in return.”
That’s what Haaretz wrote in February 2018 about the police investigation on the cigars and Champagne received by Prime Minister Benjamin Netanyahu from billionaire Arnon Milchan. At the time the police were still only putting out feelers, and Netanyahu began espousing his famous statement “there will be nothing because there is nothing,” adding that you’re allowed to receive gifts from friends.
Exactly one year later, this past February, the tax scandal became the main bullet in one part of Attorney General Avichai Mendelblit’s draft indictment against Netanyahu amid suspicions of fraud and breach of trust, after a bribery charge was dropped at the last moment.
In the draft, the attorney general wrote to Netanyahu, “In 2013, Milchan approached you with a request that you promote regulations to enable an extension of the exemption granted to returning residents from reporting and paying income tax for assets and income outside Israel.”
Milchan has benefited from the status of a returning Israeli since 2009, so he has received his tax exemption for 10 years. Seeking to extend this for another decade, he and his attorney Pinhas Rubin approached then-Finance Minister Yair Lapid, who refused.
“At about the same time, Milchan approached you, in the context of your position, and requested your intervention for promoting his request,” Mendelblit wrote. “You then turned to Lapid and brought up the subject in two meetings with him in your role as prime minister. During those meetings you expressed your support for extending the exemption.”
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This helps reveal the depth of Milchan’s crony capitalism in Israel, not only with Netanyahu and not only in the present. Mendelblit’s draft indictment says Milchan has had a “relationship with various links” to Netanyahu at least since 1999.
But for Milchan, Netanyahu is only the latest prime minister whom he has befriended, including Ehud Olmert, Ariel Sharon and Shimon Peres, as well as generations of top defense officials and foreign political leaders from Iran, South Africa and Canada.
Of course, these days Israelis are focusing on Netanyahu, who is trying to change the law and the role of the Supreme Court in order to receive immunity from an indictment. But the Milchan case makes clear that the story isn’t Netanyahu but the tycoons and their relationship with generations of Israeli prime ministers. In other words, how and why does Milchan, like other billionaires before and after him, manage to turn Israeli officials into his partners in business, influence and social status?
For Milchan, Netanyahu is only the latest prime minister whom he has befriended, including Ehud Olmert, Ariel Sharon and Shimon Peres, as well as generations of top defense officials and foreign political leaders
These ties always take place behind closed doors and are rarely exposed to the public, but from time to time we can get a glimpse of the relationship between the latest tycoon and the latest prime minister. Sometimes it turns out that the prime minister is working for the tycoon, at least part of the time, as in the case of Milchan and Netanyahu.
The following is Mendelblit’s description of the relationship between the two, once again from the draft indictment in the lavish-gifts case against Netanyahu; Milchan was also having problems with securing a new U.S. visa.
“On one of the many occasions when Milchan requested that you act to help him on the matter of the visa, he arrived at the prime minister’s residence and waited for you there. When you arrived at the residence with your then-chief of staff Ari Harow, Milchan informed you that he had brought boxes of cigars for you and a case of Champagne for your wife, and asked that you contact Secretary of State John Kerry about his visa problem,” Mendelblit wrote.
“You acceded to Milchan’s request and spoke on the subject to then-Secretary of State Kerry, both at a meeting and in a phone conversation. During 2014, and after Milchan’s request of you and your request of Kerry, Milchan’s visa was extended for a prolonged period of 10 years.”
So yes, Milchan went to Netanyahu’s home, waited for him at the door, and when Netanyahu arrived, demanded that he, then and there, contact the U.S. secretary of state to arrange a private matter, a visa. And that’s exactly what Netanyahu did. And yes, as usual, Milchan, brought cigars and Champagne.
Arms dealer extraordinaire
The list of Milchan’s films makes him one of the greatest Hollywood machers of recent decades; he has been the producer or co-producer of dozens of films including “Pretty Woman,” “Fight Club,” “Once Upon a Time in America” and recently “Bohemian Rhapsody.”
But the Rehovot-born mogul made his real money elsewhere: in deals for arms including planes, missiles and gear for making nuclear bombs in which Israel, and later other countries, were parties. To make films there’s no need for crony capitalism, but to succeed in the arms business, government connections are obligatory.
Milchan says he prefers to avoid the spotlight, as befits an arms dealer, but that’s not accurate. In 2011 he helped write his own biography, “Confidential: The Life of Secret Agent Turned Hollywood Tycoon,” by Meir Doron and Joseph Gelman. He provides amazing details about his activities, even explaining how he received the Israeli military censor’s permission to publish various tidbits.
The book, part of which was written in the first person, describes his life as a secret agent who became a Hollywood tycoon. It begins by quoting Milchan, who says he would prefer that nobody wrote a book about him. But then he reveals a great deal. The two authors say Milchan confirmed most of the book’s details, and though Milchan chose not to confirm or deny some of the chatter on his defense businesses, the authors say they checked with other sources.
The late Shimon Peres, a former prime minister who was president from 2007 to 2014, is one of those sources. Speaking to the writers from the President’s Residence in Jerusalem, he said he was the one who recruited Milchan for covert activities.
Peres said Milchan provided a level of creativity that contributed a great deal to Israel. He said that when he was at the Defense Ministry, Milchan was involved in a large number of defense acquisitions and intelligence operations. (Peres was defense minister from 1974 to 1977 and from 1995 to 1996, and previously served as deputy defense minister.)
Milchan was born in 1944 to a family whose roots, he claims, go back to Rashi, the 11th-century biblical commentator, and even to King David. According to his biography, Rehovot is a town bustling with defense activity, including middle-range ballistic-missile installations, a squadron at the Tel Nof air force base nearby, and a facility for producing heavy water – all of which Milchan helped establish.
According to the book, in 1953 the Milchans moved to north Tel Aviv, where they became part of the Tel Aviv elite. The young Arnon joined the Maccabi Tel Aviv youth soccer team, but it turned out he was nearsighted, so instead of soccer he was sent to a boys’ school in the south of England, until he returned for military service in a foreign relations unit. After his discharge he studied chemistry in Switzerland as part of his preparations for joining the family business.
When he was 21 his father died, and Milchan began managing the family business. Early in his career he used that business to import and export equipment for Israel’s nuclear industry, missiles, planes and lots of other gear, which for some reason Israel preferred to buy through him rather than directly – while he received commissions and fees for many of the transactions.
Milchan immediately identified the importance of political connections for success in business. The book describes how he became the friend of the king of Tel Aviv nightlife at the time, Rafi Shauli, how he became a partygoer, and how he established his first business ties at Shauli’s nightclub Mandy’s, mainly his connection with Peres, who was deputy defense minister at the time.
Early in his career, Milchan used his business to import and export equipment for Israel’s nuclear industry, missiles, planes and other gear, which for some reason Israel preferred to buy through him rather than directly
According to Milchan, Peres told him about the plan to establish the Rafi party headed by David Ben-Gurion, and Milchan, with money from the family business, donated $3,000 to launch the party, doing so indirectly via a bank guarantee.
That’s how, more than 50 years ago, Milchan began providing money and gifts, and showing politicians a good time, starting with Ben-Gurion and Peres. Tycoons Alfred Akirov and Rami Ungar, who this year gave Kahol Lavan chief Benny Gantz, millions of shekels in a bank guarantee, didn’t invent a thing. The money, of course, was never returned, Milchan says in the book.
Weapons to Iran and South Africa
Then, as today, Milchan didn’t suffice with passive donations or gifts to politicians, but got involved in politics itself. After Rafi was established, he worked to get Moshe Dayan, the storied general who was considered a key electoral asset, to join the party by arranging a meeting between Dayan and Peres only days before the 1965 election. A half century later, Milchan made an almost identical move for Netanyahu when he arranged a secret meeting at his home with Isaac Herzog in an effort to get the Zionist Union party to join the governing coalition. In between, Milchan sponsored Shlomo Lahat’s campaign for Tel Aviv mayor and Peres’ run for president.
Milchan’s real breakthrough, according to the book, involved the Dimona nuclear reactor. Milchan was an agent of the Bureau of Scientific Relations (known by its Hebrew acronym Lekem), an Israeli spy agency that was operated by the Defense Ministry between 1957 and 1986. According to the book, when the bureau sought to buy sensitive equipment to develop the reactor and build nuclear bombs, Milchan was one of the people it approached.
The book tells how Milchan’s arms business grew, and how many of his deals went through his chemical company, sometimes without being reported by or officially funded by the state, even though the state was the purchaser. Back when France was a major weapons supplier to Israel, Milchan was the one who bought Super Frelon and Alouette helicopters, after the executives of the French manufacturer, Aerospatiale, were impressed by his connections with Dayan and Peres.
Later, Milchan developed relationships with American manufacturers, buying things like Hawk missiles, helicopters, Tau antitank missiles and Dragon missiles. Every time an Israeli soldier fired such a missile, Milchan got a commission. The scope of these deals, even in today’s terms, was enormous; funds came at first from the defense budget, and after the Yom Kippur War, also from U.S. military aid.
Milchan didn’t only procure weapons for Israel; at every opportunity he expanded his business to other countries. Before the 1979 Islamic Revolution, Milchan sold American weapons systems and equipment to Iran, after Israel Aerospace Industries founder Al Schwimmer and Yaakov Nimrodi, the Israeli army’s first attaché in Tehran, opened doors for him.
From Milchan’s stories it isn’t quite clear how much of a role he played and how much of a role others played in the Iranian deals, but Milchan played a key role in making connections with American arms makers, using the methods he always excelled in – entertainment, good food and wine, women and gifts for the executives’ wives. Milchan tells how he helped a representative of an American weapons manufacturer get a good deal on diamonds for his wife.
Once Iran was lost in 1979, it was South Africa’s turn. Peres, this time with Yitzhak Rabin, integrated Milchan into efforts to get closer to the apartheid regime – and Milchan captivated the leaders there. In the book, the tycoon claims that he wasn’t even aware about apartheid, saying he was young and innocent.
Thus Israel, directly and through Milchan, sold South Africa all kinds of weapons systems, receiving money and uranium in return, while the rest of the world imposed an embargo. According to foreign reports, in September 1979 Israel conducted a nuclear test in the Indian Ocean some 1,500 miles off South Africa.
Milchan didn’t only procure weapons for Israel; at every opportunity he expanded his business to other countries
The book doesn’t stop heaping superlatives on its star. One chapter opens with a 2008 quote from journalist Amnon Abramovich that Milchan was the Chuck Norris of Lekem. Other chapters tell the story of the company Milco through which, according to the book, Israel bought equipment for nuclear bombs from the United States and which got into trouble with Washington for brokering the sale of sophisticated triggers for nuclear weapons to Israel without the securing of an American export license.
Another chapter tells of a visit by Milchan to the Dimona reactor and includes detailed descriptions of its various divisions and their roles – from the production of the nuclear raw material to the assembly of bombs, the book says. Milchan quickly calculated that Israel could make one nuclear bomb every two and a half weeks, or about 20 bombs a year, the book adds.
It’s easy to understand the authors’ eagerness to dazzle readers, but less clear is the eagerness of Milchan, the secret agent who doesn’t like to be talked about, to supply them with such nuggets.
Olmert and ‘Pretty Woman’
Between Milchan’s relationships with Peres and Ben-Gurion from 50 years ago to his ties with Netanyahu and the acts attributed to him in the lavish-gifts case, the mogul was friendly with a long list of prime ministers, defense ministers and other Israel politicians. It was Milchan who introduced Ehud Olmert, then still Jerusalem mayor, to Hollywood executives, among them then-Disney President Michael Eisner and the cofounder of DreamWorks, Jeffrey Katzenberg. According to Milchan, it was Olmert who suggested that the name of a movie Milchan screened for him starring Richard Gere and Julia Roberts be changed to “Pretty Woman.”
Milchan is also friendly with Lapid, the journalist-cum-politician. Milchan knew Lapid’s father, journalist and later Justice Minister Tommy Lapid, and was interviewed by Yair when he was still a journalist. After that Milchan invited Lapid to Hollywood to help him set up a television division. Lapid accepted the invitation and flew to Los Angeles. Milchan says he was the one who persuaded the younger Lapid to enter politics; in an interview with the television show “Uvda” in 2013, he said Lapid had consulted with him and he told Lapid to go for it.
Other people who Milchan charmed and showed a good time include the wealthy heiress and media personality Judy Shalom Nir Mozes, the wife of former finance minister, foreign minister and deputy prime minister Silvan Shalom; Avigdor Lieberman, whose refusal to form a coalition with Netanyahu this spring has led to a new election, and former ministers Tzipi Livni and Isaac Herzog. All of them are familiar with Milchan’s living rooms – the one in Los Angeles and the one in Moshav Beit Yanai facing the sea between Tel Aviv and Haifa.
Milchan is also the one who introduced the Netanyahu family to James Packer, the Australian billionaire who was Milchan’s partner in a Hollywood production company. Packer also stars in Mendelblit’s draft indictment for the lavish-gifts case.
“In 2013 Milchan introduced you to Packer, and ... Packer gave you benefits continually and on a substantial scale,” Mendelblit writes to Netanyahu, later adding that benefits were provided “by you and your family, taking benefits independently from Packer’s home.”
Netanyahu helped Packer buy a villa next to his in Caesarea, and then, according to testimony, “the Netanyahu family demanded that there be free passage between the villas. The Shin Bet security service vehemently opposed this. The Netanyahu family asked for and got a key from Packer.” The draft indictment adds that “in Packer’s absence, family members would independently ‘shave off’ items from the house.”
Tycoons with expertise in relationships with politicians often add another facet to their influence – media acquisitions. In Israel, Milchan bought 24 percent of Channel 10 in 2005, a deal in which he lost some $50 million, according to some estimates. In 2015 he was involved in the effort to merge Channels 12 and 13.
These deals ended up in the Netanyahu draft indictment. Regarding Channel 10, the draft indictment says, “Over the years you never avoided dealing with issues connected to Channel 10, even though you knew Milchan held shares in it. Thus, for example, in 2009 Milchan spoke to you, as prime minister, about the possibility of advancing a bill that would cap the commissions advertising agencies charge media outlets. During the conversation you told Milchan you would follow through.”
Regarding the merger between Channels 12 and 13, the draft indictment says: “Milchan, who considered buying shares in [TV production company] Reshet, wanted the merger so that the transaction would be worthwhile. You agreed to his request immediately, summoned the Communications Ministry director general late at night, and instructed him to help Milchan, after which you worked to advance the deal.”
According to the draft indictment, Netanyahu received gifts and benefits from Milchan and Packer, and in two separate cases, from tycoons Arnon Mozes and Shaul Elovitch. In return, he helped them with actions worth billions to them, all of which came out of or threatened to come out of the public’s pockets, the indictment says.
Milchan’s case isn’t just the story of a charismatic man who knew how to link politicians to arms deals while separately succeeding as a movie producer. It’s the story of all the tycoons, their relationships and control over politicians; it’s about the rules of economics and the public purse.
The list is long: Marc Rich enlisted Shimon Peres and Ehud Barak in oil and defense deals for Israel, to the point where the two lobbied Bill Clinton to grant Rich a pardon. Haim Saban works in similar ways, as have Nochi Dankner, Yitzhak Tshuva, and Eliezer Fishman – all of them were or still are close to politicians, have recruited to their companies former top bureaucrats and regulators at incredible salaries, and have held media properties. Both Akirov and Ungar have given Gantz bank guarantees, and worked for and donated to other politicians and parties.
They all have the same formula, and it’s pretty simple: To make money you have to get close to politicians through donations, gifts and anything that gets you to your goal. These politicians will grant you franchises, open doors for you, change regulations and help reduce competition.
This has nothing to do with political positions or ambitions; all tycoons work the same way with politicians from across the ideological spectrum. In Israeli terms, Milchan was merely among the first and most successful users of the formula, and he took it all the way.