Revealed: How Israel's Submarine Scandal Was Buried

As early as 2009, an inquiry was held into possible corruption in Israel's bid to buy submarines from Germany. The secret probe, triggered by an anonymous whistle-blower, took testimony from high-ranking officials about signs of bribery – but the powers-that-be covered it up

Israeli agent Miki Ganor, Attorney General Avichai Mendelblit, former IDF chief and current Foreign Minister Gabi Ashkenazi, former Malmab head Amir Kain and former Israel Navy Commander Eliezer Marom.
Israeli agent Miki Ganor, Attorney General Avichai Mendelblit, former IDF chief and current Foreign Minister Gabi Ashkenazi, former Malmab head Amir Kain and former Israel Navy Commander Eliezer MaromCredit: JDC-Israel Institute for Leadership and Governance, Ofer Vaknin, Moti Milrod, Daniel Bar-On
Gidi Weitz
Gidi Weitz

Every criminal affair has a seminal moment, a kind of opening salvo for the unsavory plot. It’s the moment when the interests of the protagonists intersect, a moment after which there is no turning back.

The affair of Israel’s purchase of submarines and patrol boats from Germany, known as Case 3000, had a moment like that. According to the state prosecution, it took place in 2009, in two meetings, held in the bureau of the finance minister at the time, Yuval Steinitz, and in the office of the then-commander of the navy, Vice Admiral Eliezer Marom. Marom was in the forefront of a group that wanted to replace the Israeli agent of the German shipbuilder ThyssenKrupp, the middleman between Israel and Germany in the submarine deal. For years that role had been played by Brig. Gen. (res.) Yeshayahu “Shaike” Bareket. Marom and his group wanted to replace Bareket with businessman Miki Ganor.

Bareket was a senior intelligence officer in the Israel Air force and former Israel Defense Forces’ attaché in Bonn. Against the background of the ties he forged with Germany’s leaders, he had acted as the broker in Israeli-German submarine deals for two decades. Ganor was mainly involved in real estate at time, in the European market. Why was it so urgent for the Israeli group to influence the choice of a broker in the talks with Germany? What led them to “parachute” an entrepreneur from the private market into the job?

According to Israel’s State Prosecutors Office, the answer is clear: As an agent, Ganor would make a killing of millions. The lobbying on his behalf didn’t derive from charitable motives. Ganor was allegedly required to repay the move with bribe money.

Looking back, it’s hard not to imagine what would have happened if someone had intervened at that stage and blocked Ganor’s peculiar appointment. In that case, perhaps, there would have been no submarines affair. If the security authorities had asked themselves about Ganor and probed the unusual lobbying on his behalf – the chain of criminal activity could have been broken.

It now turns out that someone did intervene. And that the authorities did ask questions. And that they even investigated. Yet in the end, they whitewashed or ignored what they found.

Warning from an anonymous source

Toward the end of 2009, an unsigned letter arrived in the office of the Defense Ministry’s ombudsman. “We in the corps are very uncomfortable with the behavior of the commander of the navy,” the anonymous writer stated. “Vice Admiral Marom organized a meeting with the finance minister. The meeting was attended by a businessman [Ganor] who is well acquainted with the finance minister, as he paid for office space for his use in the [Likud party] primary. He is acting as the shipbuilder’s representative, but at the same time also as the [navy] commander’s representative and friend. Is this proper? What’s behind this?”

That wasn’t the only letter. Two more letters followed, both also anonymous. They showed a keen grasp of what was going on behind the scenes: the planning of a bribery deal involving senior Israeli figures. Ganor was intended to be its executor.

Marom and Ganor knew each other from the period they served together in the navy. It was no more than a basic acquaintanceship, but in 2009 the relations between them warmed up. According to the prosecution, Marom was approached at that time by another navy veteran, Rear Admiral (res.) Avriel Bar Yosef. According to the state prosecution, Bar Yosef, who coordinated the activity of the Knesset’s Foreign Affairs and Defense Committee at the time, mentioned Ganor’s possible appointment to Marom, who acceded and set up a meeting between Ganor and the general manager of the German shipyard, Walter Freitag.

Ganor flew to Germany, but Freitag told him that the corporation already had a representative in Israel. Unfazed, the intended broker asked to remain behind with Freitag for a private conversation. Not long after that meeting, when Freitag visited Israel, the operation to replace Bareket was already in high gear. Marom took advantage of the visit to press aggressively for Ganor. He invited Ganor to an official meeting that he gave for the Thyssenkrupp executive with the top brass of the Israel Navy, as well as to a meeting with Freitag that Marom held in his office. It was aimed at showing the German guest that Ganor had the support of the navy commander.

Freitag apparently got the message. Within a few weeks, the Germans launched negotiations with Ganor and finally appointed him their representative. That job would ultimately enrich him by more than 10 million euros – and, it’s suspected, not only him. According to the state prosecution, in 2014, Ganor began the transfer of more than a half-million shekels (about $130,000, in 2014) to Marom, in installments. The seeds that had been planted five years earlier were beginning to bear fruit.

From letter to secret investigation

Submarines being built for the Israel Navy in the ThyssenKrupp shipyard in Kiel, Germany, in 2013. Credit: CARSTEN REHDER / AFP

Back to 2009. The anonymous letter warning about the connection between Marom and Ganor didn’t remain in the ombudsman’s office. It was forwarded to the Defense Ministry Security Authority, known by the Hebrew acronym Malmab – the secretive body charged with ensuring that nothing is amiss in the ministry, the military industries and bodies associated with Israel’s Atomic Energy Commission. Malmab provides these units with physical security, information security and protection against cyberattacks, and instigates investigations into instances of possible corruption and leaks of classified material. Malmab’s staff are empowered to conduct criminal investigations. The suspects might be arms merchants, but by the same token they might be senior civil servants.

The director of Malmab at the time was Amir Kain, a confidant of Gabi Ashkenazi, then the IDF chief of staff (and today foreign minister). Prior to his appointment as army chief, when Ashkenazi served as director general of the Defense Ministry, Kain was his personal aide. When the Harpaz affair (involving a feud between Ashkenazi and Ehud Barak, then defense minister) erupted in 2010, Kain was questioned on suspicion that he had given information to Ashkenazi about the Shin Bet security service’s intention to track down individuals who leaked details from deliberations about the Iranian nuclear project. The case against Kain was closed.

When the first letter landed on Kain’s desk, he updated the Military Police Criminal Investigation Division. In response, the latter asked Malmab to conduct a preliminary examination of the material, in order to decide whether there was anything in the allegations that would necessitate an investigation of Vice Admiral Marom. Kain entrusted the inquiry to a senior member of Malmab’s investigations unit, Noah Nadler. The code name chosen for the inquiry was “Yellow Submarine.”

While Nadler was gathering information, Kain received another anonymous letter, which reiterated most of the allegations concerning Ganor and Marom in the first letter, while supplementing the warnings with a few bombshell comments: “There’s a feeling that this connection of Mr. Ganor, a rich man who deals in real estate and spends a lot of time with the navy commander, is dubious, and both of them know why… To every question that any of us ask the navy commander, [about] who this person is and what’s going on, he responds sharply and threateningly. The navy is dear to us, and it’s worth looking into what’s behind the facts.”

At this point, something unusual happened: Instead of forwarding the new letter to the Military Police Criminal Investigation Division and to Malmab’s Nadler, Kain forwarded it to Chief of Staff Ashkenazi. Ashkenazi had appointed Marom commander of the navy, and the two enjoyed good relations. Earlier that year, Marom had been spotted in a Tel Aviv strip club and had gotten into trouble by providing apparently inaccurate information about what he did and how long he spent there. Female MKs and women’s organizations demanded he be removed from his position, but the chief of staff decided to make do with a notation in his personal file.

When Kain forwarded the second letter to Ashkenazi, he added the following remark: “Gabi, this is a copy for you. I didn’t forward this letter [to Military Police Investigations]. Only the earlier one. It’s my understanding that the Military Police updated the military advocate general [Maj. Gen. Avichai Mendelblit, today the attorney general]. I arranged with the investigators for them not to send anything to MPI before they see me (and I, you)… Keep or destroy this at your discretion. Amir.”

According to the letter of the anonymous whistle-blower, ‘There’s a feeling that this connection of Mr. Ganor, a rich man who deals in real estate and spends a lot of time with the navy commander, is dubious, and both of them know why...’

Ashkenazi responded by writing in his own hand: “Amir, in my opinion, an open meeting… and organizing a meeting for the finance minister, is not a problematic act.” The commander of the navy, which is the client in the submarines deal, is pressing to appoint as middleman a real estate entrepreneur, who will rake in millions on the deal, and the chief of staff doesn’t see a basis for looking into the matter?

Kain understood well that it would be best if as few people as possible saw Ashkenazi’s reply. When he gave the letter to his secretary for filing, he asked her to blur any traces of the chief of staff. “Gabi Ashkenazi’s comment should not be scanned. To be kept in the investigations memoranda file.”

Clear message from procurement

In the meantime, Nadler, from Malmab’s investigations department, met with three individuals: the head of the Defense Ministry’s procurement directorate, Aharon Marmarush; his deputy, Yossi Amir; and the ousted representative of the German shipyard, Shaike Bareket. Amir made it clear to the investigator that big money was involved. He related that Israel’s political leadership was seriously considering the purchase in the near future of submarines at a cost of billions of shekels. “We only learned now about Ganor’s appointment,” Amir admitted to Nadler. “It is not an official position and it’s possible to live without it. There is no need for it.”

Here he touched on the very heart of the submarines affair: the fact that between the governments there was a broker who was pocketing fat commissions and who, it was alleged, may have corrupted officers and officials along the way.

Marmarush told Nadler that in his view, Bareket’s ouster and Ganor’s appointment were evidence of “someone’s vested interest.” Nadler asked whether Ganor could have been appointed as the agent for the German corporation without the support of the navy commander or some other figure of influence. “The formal answer is yes, and the practical one is no,” Marmarush replied.

In the informal part of the conversation, Marmarush and Amir shared with Nadler the suspicions they harbored. “We’re talking about a project worth more than one billion euros, and there’s a rumor that the agent is getting one percent of the deal’s value. It can’t be ruled out that moneys from that sum were promised to certain figures who support Ganor’s appointment.” Moreover, the two told Nadler, “the navy commander will be concluding his term in one to two years, and support for the right person can advance his personal affairs.” That was only speculation, but of a sort that must be examined.

Miki Ganor in court.Credit: Tomer Appelbaum

In his meeting with the ousted middleman, Bareket, Malmab investigator Nadler heard about his network of connections in Israel, Germany and the United States. Bareket told him how he had become a broker in defense transactions following a request from the ministry’s procurement directorate back in 1985. Nadler asked Bareket whether he had worked under contract during this period and had been paid for his services. Nadler noted later that Bareket “responded angrily that he is not ready to talk about that and that he is not obligated to make a report.”

Bareket told Nadler that Vice Admiral Marom had broken off ties with him one day, with no explanation. He described the dinner that was held for Freitag, the German shipyard executive, at which the latter was introduced to Ganor. Bareket, who was also at the dinner, had asked Ganor about his relations with navy personnel. Ganor, he said, replied simply that he was a friend of the navy commander. After the dinner, Marom accompanied Freitag and Ganor to a bar.

The following day Bareket had met with Freitag and heard from him about the evening with Ganor and Marom. According to Bareket, Freitag related that Ganor had made it clear to him unequivocally that if he were not appointed as the new Israeli agent, there would be no project with the shipyard, because the navy commander would not work with any other broker. To round things off, Bareket maintained that a source – whom he refused to name – told him, “For sure, Chayni [Marom’s nickname] will get a lot of money.”

Unauthorized mediator

At this stage, it appeared that the material collected warranted an expansion of the examination. It was almost obligatory. Senior officials from the Defense Ministry Procurement Directorate had warned about the possibility that Marom was out to pad his post-navy life, Bareket had supplied explosive testimony, and there was also something else: Malmab’s Nadler discovered that neither Bareket nor Ganor had a permit from the Defense Ministry to act as agents – something that should have raised suspicions especially with respect to the real estate man who had suddenly popped up. After all, Malmab’s principal task is to ensure that sensitive information does not fall into the hand of unauthorized individuals. Ganor was an unauthorized individual.

But the warning lights didn’t flash, and the inquiry was concluded. “It’s scandalous,” said a former senior official from Malmab, who was apprised of the details.

No one took testimony from Marom and Ganor. Not about the ties between them, not about the actions Maron undertook on Ganor’s behalf – nor about the fact that Ganor was privy to security secrets without a permit.

Nadler signed off with a feeble bottom line. He stated that on the basis of the material he had collected during his examination of the events – just three testimonies – there was no evidence justifying a more formal investigation. At the same time, he added, “On the face of it, there is something amiss about the way things were handled, and the possibility exists that behind the overt actions lurk intentions and facts that at this stage have not yet been revealed.” He recommended sending the materials on to the commander of the Military Police’s investigations unit, who “will decide and act on the matter as required.” Kain, however, forwarded the findings of the examination to Ashkenazi, as he’d promised.

In a properly run world, Malmab would have deepened the probe, and afterward the chief of staff and the military advocate general, Mendelblit, would have pushed the Military Police to get to the very bottom of the matter. “Ashkenazi should have called Mendelblit and ordered him to send in the Military Police, full steam ahead, in order to verify or refute suspicions,” the head of the investigations unit in Malmab, Gadi Waterman, said afterward. “If they didn’t do that, then the chief of staff and the military advocate general should be hanged from a tree.” He added that it is inconceivable that Mendelblit didn’t know, and if by chance he didn’t know, that is “the screw-up of screw-ups.”

In fact, the Military Police never launched any such investigation. Despite the information in the hands of the defense establishment, no one took testimony from Marom and Ganor. Not about the ties between them, not about the actions Maron undertook on Ganor’s behalf – nor about the fact that Ganor was privy to security secrets without a permit.

In the meantime, the persistent letter writer sent another anonymous missive, this time to the state comptroller. In it he again noted the unacceptable connection between Marom and Ganor. “It didn’t happen in the Third World, it happened here, among us,” he wrote. “I served for many years in the navy, in missile boat units and at headquarters. Not long ago I got a phone call from a person I didn’t know. His name is Miki Ganor. He offered me work at a tempting salary… He claimed to have established a company for security matters, for which he needed people like me. ‘You see that the Germans appointed me their representative here, this is an opportunity for you. No one will lose and the state also benefits.’ I thanked him and added that I had previous commitments. It turns out that my friends are very uneasy about what is happening in the navy in this matter, and that the money involved has an important role in the way this Ganor was appointed. The state is important to us. The behavior of the navy commander is exploitation of the power of authority and borders on the expression ‘hon-shilton’ [capital (influencing) government]!”

Instead of looking into the issue himself, the state comptroller passed the letter along into the wrong hands – those of Malmab head Kain. Long weeks passed without a response. The state comptroller asked for an update and Kain finally replied, “Even though this is an anonymous complaint, I asked Malmab’s investigations unit to conduct a preliminary examination to see if there is any substance to it. From the results of the preliminary investigation no evidence was found to raise suspicion of a criminal offense that would justify an investigation. Because the person involved is the commander of a major arm [of the IDF], I decided to forward the letter to the chief of staff for his perusal, and for him to handle it according to his judgment. I also updated the director general of the Defense Ministry about my decision.”

In May 2010, indeed, Kain met with Defense Ministry director general Udi Shani. In the meeting Kain effectively submitted to Shani the death certificate of the “Yellow Submarine” investigation. According to the summation of the discussion between the two senior officials, Kain explained to the director general that “the chief of staff was apprised of the findings. The chief of staff dealt with the matter and spoke with the commander of the navy, and from his point of view the subject is closed.” Kain himself added that he “[doesn’t] intend to deal with the subject anymore.”

Gabi Ashkenazi.Credit: Tomer Appelbaum

Ashkenazi’s amnesia attack

It was another seven years before the submarines affair resurfaced. When Lahav 433, the Israel Police’s anticorruption unit, launched an investigation into the suspicion that bribes had been paid in connection with the purchase of submarines from the German shipyard, both Ganor and Marom were among those detained for questioning. Ganor decided to turn state’s evidence. He related the steps Marom had taken to promote his appointment as the Israeli representative of ThyssenKrupp, and how he had paid him a bribe in return. Ganor then retracted his agreement with the state prosecution. A judicial source observed recently that Ganor’s turnabout had caused evidentiary difficulties in the bribery case against Marom, and that it was too early to say whether the investigation would result in an indictment.

From the investigators’ point of view, it appeared that there was more than a grain of truth in the information contained in the anonymous letters. The meetings in the office of the navy commander and in the bureau of Finance Minister Steinitz were indeed meant to showcase Ganor’s network of connections to the Germans. Marom’s activity on Ganor’s behalf were intensive. After Marom retired, he received hundreds of thousands of shekels from Ganor. Ganor also apparently donated to Steinitz’s Likud primary campaign in 2012, through fictitious third parties.

During their investigation, the police took testimony from cabinet ministers and senior figures in the defense establishment. Kain, the Malmab director who left his post in 2015, was summoned for a brief interrogation and stated that he didn’t remember the examination of the process by which Bareket was replaced. Ashkenazi’s turn came in July 2017. The former chief of staff testified that he had spoken with Marom several times ahead of the start of the investigation, had reassured him that all would be well and hoped that “the truth will come to light.” Asked by the investigators what he knew about Ganor’s appointment in 2009, the man who is today Israel’s foreign minister suffered an attack of amnesia.

Ashkenazi was asked whether he was aware of the relations between Marom and Ganor. He replied that he didn’t remember. Asked about the replacement of Bareket, he replied that he “did not know a thing about the subject.” When told that the evidentiary material indicated that Marom was involved in getting the agent replaced, Ashkenazi stuck to the same line: “I don’t recall that I knew.” He told the investigators that if they had different information, they were invited to refresh his memory.

“At a certain stage, the cards were revealed to him,” a knowledgeable source told Haaretz. But even when shown the anonymous complaint, Ashkenazi replied that he didn’t remember, and the same when he was reminded that Malmab had launched an inquiry and referred the subject to him for handling. “If it had reached me,” he told the investigators, “I would have referred it to the navy commander. It’s possible that in this case, too, I referred it to him for his response, which I found satisfactory.”

When asked it if it was customary for the chief of staff to intervene in examining complaints against senior officers, Ashkenazi replied that Malmab is an independent body, and in any event he doesn’t recall that he intervened. He also professed not remembering that the Malmab director was in touch with him about the subject and sent him the findings of the examination. As a rule, Ashkenazi observed to the investigators, anonymous letters are a common tool for settling personal accounts.

The investigators wondered whether the chief of staff had known that the Marom was in possession of the contract between Ganor and ThyssenKrupp, including details of the commission the middleman would receive. Ashkenazi replied in the negative. The investigators wanted to know whether involvement of this sort by an IDF officer in procurement processes was customary. “No,” the former chief of staff said, “the IDF should not intervene in the appointment of agents. It’s precisely for that reason that the civilian system – the Defense Ministry – was established.”

At the beginning of 2019, Ashkenazi joined the leadership of the Kahol Lavan party. At the time, so-called Case 3000 was a weapon in the hands of the party’s leaders against Netanyahu. Ashkenazi, who as chief of staff in 2011 had opposed the acquisition of a sixth submarine for Israel’s fleet, spearheaded the campaign. Like party leader Benny Gantz, he too undertook to establish, immediately after the election, a state commission of inquiry to examine the submarines affair.

“Submarines are the holy of holies of Israel’s security,” he reiterated on more than one occasion.

If he had acted determinedly in real time, and pushed the gatekeepers to get to the root of the matter, this affair would have been dead in the water, a decade ago.

Responses

A spokesperson for Gabi Ashkenazi stated: “The minister previously provided the various investigative bodies with an account concerning the affair of the naval craft, during which he was also asked about the comportment of the commander of the navy at the time and Malmab’s findings in the wake of the anonymous letters. Minister Ashkenazi does not recall any complaint that arose concerning the issue of the changing of the [ThyssenKrupp] agents.”

Amir Kain declined to comment.

Haim Sasson, former head of Military Police Criminal Investigation Division, didn’t remember the anonymous complaints, but said that in cases of such criticism being leveled against senior officers, they are supposed to be brought to the attention of the military advocate general.

The spokesperson of the Justice Ministry stated that to the best of Avichai Mendelblit’s recollection, the subject did not arrive on his desk.

Eliezer Marom denies the suspicions against him, maintaining that he received money from Miki Ganor for consultation services – legitimately. From his perspective, he worked for Ganor’s appointment as ThyssenKrupp’s representative in Israel for reasons of state, because Ganor had been a navy man, the commander of a missile boat and an engineer.