In the Money |

NIS 500m Change Hands in the Dark

A dust-up in the Knesset Finance Committee involving Labor MK Stav Shaffir provides possible clues into allegedly illegal conduct of Yisrael Beiteinu officials.

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MK Stav Shafir (Labor) being removed from the committee room after requesting explanations on defense budget transfers.
MK Stav Shafir (Labor) being removed from the committee room after requesting explanations on defense budget transfers.Credit: Emil Salman

Shortly before the investigation against the heads of Yisrael Beiteinu was announced a week ago, an uproar arose during a meeting of the Knesset’s Finance Committee. Once again, MK Stav Shaffir of Labor was its cause. She directed half of her criticism against Finance Committee Chairman Nissan Slomiansky of Habayit Hayehudi, and the other half against the representatives of the Finance Ministry’s Budget Department.

This time the reason for the uproar was the many end-of-year transfers of funds in the budget. These are problematic in any case, but this time they are especially sensitive: it’s election season.

The suspicion by opposition Knesset members that the government was using the end-of-year transfers to buy political votes was seemingly confirmed by the unusual request to approve the transfer of 13 million shekels ($3.3 million) for constructing a visitors’ center in the Barkan industrial zone, located in the West Bank.

Shaffir accused Slomiansky, in her undiplomatic manner, of having lied when he said the attorney general had approved the transfer in the election season. (Slomiansky admitted later that he had been mistaken, and apologized.) She accused Slomiansky of transferring the money “to help your friends in the party primary.” Judge Salim Joubran, chairman of the Central Elections Committee, stopped the move later and demanded that Slomiansky and Prime Minister Benjamin Netanyahu answer for it personally.

Shutting the door to corruption?

Although the affair of the fund transfer for the Barkan visitors’ center, as far as anyone knows, has nothing to do with the investigations against Yisrael Beiteinu, the strong likelihood is that this is a lead in the case. The money that was supposed to be transferred to the visitors’ center raises suspicions regarding coalition funds – and it seems coalition funds play a major role in the allegations against the senior members of Yisrael Beiteinu.

Still, there is one problem. There are not supposed to be coalition funds anymore, at least not in the form of an individual transfer to a specific organization. The doorway to corruption that such funds represented was not supposed to exist anymore. Incidentally, Finance Ministry officials claim that the transfer to Barkan is not a coalition-based transfer, but rather money whose transfer the Tourism Ministry (which is controlled by Yisrael Beiteinu) had requested as part of ordinary budgeting.

Finance Ministry officials take pride in at least partially closing the doorway of the coalition agreements this year in the wake of the historic decision of former Finance Minister Yair Lapid to approve the coalition funds. Lapid chose to “clean up” the coalition funds by making them an official part of the state budget under the government’s decision to approve the 2015 budget. In this way, supposedly, the coalition funds were supposed to become transparent, visible and open to public criticism.

But the claim that budgetary transparency made the coalition funds legitimate does not hold water. The government decision – one of dozens of decisions made on the eve of the budget’s approval – is hidden under the misleading title of “reinforcement for the government ministries.”

Anyone who reads that decision will find a series of budgetary allocations that were adopted as part of an agreement between the parties of the coalition – for example, 25 million shekels on activities related to shmita, the agricultural sabbatical year, and religious services; 25 million shekels for strengthening Jewish identity; 30 million shekels for West Bank settlement local authorities; 125 million shekels for projects having to do with Zionism and other fields; and 40 million shekels for strengthening local government, to name a few.

The decision contains, in total, transfers amounting to 530 million shekels, allocated along quite general lines that do not make it clear to which government activities they refer. The decision contains no mention of the party that requested the budget line or the ministry that is supposed to receive the transfer. In other words, the decision as a whole hides more than it reveals. There is no real public transparency here. And without transparency, the breach of the coalition funds looks like a stumbling block placed before a blind person. According to police suspicions, the blind ones – the high-ranking officials of Yisrael Beiteinu – stumbled over it bigtime.

No transparency

In addition, no explanation is provided into how coalition funds are determined, whether they have any framework (they do not), and how they are allocated among parties. These amounts of money are set in negotiations among the parties, according to their good will and their ability to negotiate – and with no public transparency whatsoever.

The only limitation is that of the state budget – all funds that are allocated in the budget to coalition lines will have to find a financial source in the budget. The little that is known to have been done to regulate the matter has been to prohibit the coalition funds from being destined to a specific address. Coalition money may be given to a specific area, but not to a particular business.

Yes, the Haredi parties can direct coalition funds to religious schools. In such a case, the budget will be referred to the Education Ministry, whose support committee will allocate the money for the various religious schools according to the ministry’s conventional tests of support. This is different from the situation in which the money is allocated to a specific yeshiva from the start – such allocations are forbidden.

The purpose of this rule, which is a lesson from the Deri affair, is to avoid providing an incitement to bribe the elected official. If the money goes to all the yeshivas but not to a specific one, no yeshiva has any incentive to bribe the minister for that purpose. Still, the allegations regarding senior officials of Yisrael Beiteinu demonstrate that this rule has likely not been kept, and the case of the visitors’ center in Barkan (if it really has to do with coalition funds; that is being examined) strengthens this allegation.

Flaws in the Finance Ministry’s work

The issue of coalition funds is now being examined by the state, which is trying to understand whether the phenomenon still exists and, if so, how. A major component of the lack of clarity stems from flawed work by the Finance Ministry, which does not bother to provide clear information about the coalition’s budgetary transfers.

If the transfer of funds to Barkan is really part of the coalition agreement, then the Finance Ministry has no alternative but to approve it in the Knesset. The little that the Finance Ministry has done is to make sure to bring these budget lines for the specific approval of the Finance Committee so that the careful eye of a clever Knesset member, such as Shaffir, can go over those lines with a fine-tooth comb and maybe get them removed.

But that is really all that the Finance Ministry does. Statistics about the amounts of coalition funds and the way they are used are not published in a transparent manner (even if there is advance knowledge that the heading “Reinforcements for government ministries” really refers to coalition agreements). Actually, when the the Finance Ministry does not bring the coalition budget lines for the Finance Committee’s approval, it does not state clearly that these are the budget lines at issue.

This is a serious failure because the Yisrael Beiteinu affair sharpened the suspicion that the coalition funds were an extremely problematic breach. While the Finance Ministry cannot avoid transferring the funds – the government is the one that decided that they should exist – it can still direct attention to them so that Knesset members on the Finance Committee will be more aware, and mostly so that the government’s system of checks and balances can examine the issue much more carefully.

The 13 million shekels transferred to Barkan are less suspect if they were an ordinary budget allocation of the Tourism Ministry, and more suspect if they were coalition funds – the sort that can be linked with specific parties and specific elected officials. Let us bear in mind that the focus of the suspicions in the Yisrael Beiteinu affair was the ability of certain politicians to divert budgetary funds to non-profit groups or specific organizations, which gave these specific groups an incentive to bribe those politicians. The lack of transparency of the coalition funds and their direct link to specific parties makes them just as vulnerable to this kind of failure, with its invitation to bribery.

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