Reports on the police investigation into suspicions of graft by Prime Minister Benjamin Netanyahu have focused on stories of lavish gifts of cigars, pink champagne and Mariah Carey concert tickets. A Haaretz investigation, however, reveals that the two main players in the probe – billionaires Arnon Milchan and James Packer, who allegedly showered Netanyahu and his family with these expensive gifts – were linked to a global security firm run by former top Israeli security and intelligence experts.
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Haaretz has found that Milchan and Packer were involved in a global security firm called Blue Sky International. They also attempted to recruit the current Mossad chief for a new cybersecurity operation.
Blue Sky International, established by Milchan at the end of 2008, operated on the Switzerland-Israel-India-Australia axis until it ceased operations. Certain aspects of BSI’s activities came up during the ongoing police investigation into the Netanyahu affair.
When current Mossad chief Yossi Cohen was head of Israel’s National Security Council under Netanyahu, and before his appointment as Mossad director by Netanyahu in December 2015, there were initial contacts with him about becoming a partner of Milchan and Packer in a cyber company. Nothing came of this, apparently due to Cohen’s appointment as Mossad chief.
Milchan and Packer are the two main players named in the Netanyahu graft investigation. Netanyahu has recently been questioned about expensive cigars and champagne he and his wife reportedly received from Milchan, an Israeli-born Hollywood producer who wrote a book about his past dealings with Israel's security and intelligence apparatus. It was also reported that Netanyahu spoke to U.S. Secretary of State John John Kerry on behalf of Milchan three times in order to help Milchan receive a 10-year visa to the United States.
Netanyahu has also been asked by police about his close ties to Packer, an Australian billionaire who, according to reports, has financed trips abroad and hotel stays for Netanyahu’s oldest son, Yair. Mossad chief Cohen is also involved in the Netanyahu affair for gifts Packer allegedly gave him as well. Cohen is being investigated by Israel’s Civil Service Commission on suspicions that he received free tickets from Packer to a Mariah Carey concert worth thousands of shekels.
Packer seeks to become an Israeli resident, which could lead to tax benefits. According to Haaretz’s investigation, Packer, one of Australia’s richest men, also has business interests in Israel. He is one of the principal investors in a venture capital firm called Square Peg, which has invested in a number of Israeli startups and has a branch in Israel.
BSI’s global reach
BSI was established by Milchan after the November 2008 terror attacks against hotels and tourist centers in Mumbai, India, that claimed the lives of over 170 people and injured hundreds. Part of its activity was revealed three years later in an article in the Israeli business daily Calcalist.
Milchan, due to his many connections, was the main door opener for BSI, but the day-to-day director of the company was his Israeli business manager, accountant Ze’ev Feldman. BSI employed former defense officials as well as Dan Dagan, the son of the then-Mossad chief Meir Dagan.
Evidence obtained by Haaretz about the security firm BSI describes a very close relationship between Netanyahu and Milchan. This was reflected in what one source described as a “more than direct line” to the prime minister. “He would pull him out from anywhere, at any time, on any occasion.”
At least twice, according to knowledgeable sources, the prime minister was called out of meetings in order to answer phone calls from Milchan.
The company’s principal client in its early years was the Taj hotel chain belonging to Indian businessman Ratan Tata, who knew Milchan from the show business industry. In its first years BSI worked to upgrade the chain’s security and provided services like training, guidance and surveys. Later it also worked with other firms in the Tata Group.
At a certain point the company began to provide services to Packer’s businesses in Australia in information security, information gathering and consulting. The Australian press reported in the past that Packer invested $15 million in the company.
In an August 2015 article in the Australian newspaper The Age, Packer is quoted as saying that the investment with Milchan would provide “more holistic” service in software and consulting.
According to the article, Packer said that as opposed to the casinos he owned, the cybersecurity company would not require huge capital investments, and that its added value was its good relations with Israel and its leaders. Information obtained by Haaretz indicates that among other things, the investment involved the recruitment of Cohen for a new company to be started in partnership with Milchan and Packer. In the end Cohen was appointed Mossad chief, the company wasn’t established, BSI closed and Packer’s investment was returned.
BSI operated simultaneously from Israel and offices in Geneva. According to the company website, which is no longer active, “BSI is a world leader in security solutions that provide comprehensive protection for your organization. We specialize in turn-key projects, as well as a full range of security services precisely tailored to meet the needs in your company.”
From Hollywood to D.C.
The ties between Milchan and Packer are strong and go back several decades.
Packer is the son of the legendary late Australian tycoon Kerry Packer, who for years held a major stake in Milchan’s movie production company New Regency. The two men have partnered in show business ventures most recently when Packer’s RatPac helped Milchan’s New Regency Productions finance the Leonardo DiCaprio film “The Revenant.”
Packer is also a business partner of Steven Mnuchin, U.S. President-elect Donald Trump’s choice for treasury secretary. It was Milchan who reportedly introduced Packer to Mnuchin. That meeting led to the merger of their two production companies into RatPac-Dune Entertainment.
Milchan, for his part, invested in the fashion firm of Packer’s ex-wife and was the one who introduced Packer to Netanyahu. In June 2015 Packer visited Israel with the executives of Square Peg together with dozens of other businessmen. At the time Packer told the newspaper The Australian: “The trip has strongly reinforced my view of the investment opportunities and incredible tech ecosystem in Israel.”
The ties between Netanyahu and Milchan are also long-standing. According to an article published in 2000 in the Los Angeles Magazine, during Netanyahu’s first visit to the United States as prime minister, after the 1996 election, Milchan was able to bring Netanyahu to a special screening of the movie he released that year, “A Time to Kill.”
“Even for a social magician like Milchan, the evening paid a handsome dual dividend cementing a relationship with Israel’s new leader while garnering a fresh dollop of buzz for his film,” the magazine wrote.
Another central figure in this net of relationships is Feldman, the chairman of BSI. Feldman, a former deputy head of the Israel Tax Authority, is Milchan’s representative on the board of Israel’s Channel 10 (the Hollywood mogul owns just under 10 percent of the shares in the commercial station).
Feldman is said to have assisted in the process by which Milchan made Israel his permanent residence in order to take advantage of major tax benefits. These benefits – sometimes referred to as the “Milchan Law” – were created to encourage wealthy Jews with assets abroad like Milchan to relocate to Israel. They include a tax break of 10 years on foreign-sourced income as well as a 10-year waiver on tax reporting.
According to media reports, Packer has been very interested in obtaining Israeli citizenship or permanent-resident status in the country so that he, like his business partner Milchan, can take advantage of these tax benefits. Unlike Milchan, however, Packer is neither Israeli-born nor Jewish, which makes it more difficult for him to qualify. According to Israeli media reports, Packer has enlisted the help of Feldman in his quest to become eligible for the tax benefits, hiring him as an accountant.
Internal documents of the Panamanian law firm Mossack Fonseca, which were made available in the Panama Papers leak, Milchan's son, Yariv, and accountant Feldman were directors of a corporation registered in the Bahamas, a tax haven.
Most of those who were involved in BSI’s activities refused to speak to Haaretz. Feldman said he is prevented from discussing its activity. Aviv Fishbain, who managed BSI operations, also refused to reply to questions, and the same was true of CEO Jacques Eshel-Azuelos and other employees.
Dan Dagan confirmed that he had worked for the company. He refused to say exactly what his job was, but said that the fact that his father was the Mossad head at the time is a coincidence. Regarding Milchan’s relationship with Netanyahu, he said: “He can probably contact [him] whenever he wants. But did he ever contact him in order to promote the company? Absolutely not.”
Mossad chief Cohen declined to comment for this article.
Allison Kaplan Sommer contributed to this report.