Six Senior Israeli Power Company Officials Indicted for Taking Bribes From Siemens

German firm agrees to pay $43m penalty to have charges dropped for its role in affair.

Yasmin Gueta
Jasmin Gueta
A Siemens building in Germany.
A Siemens building in Germany. Credit: AP
Yasmin Gueta
Jasmin Gueta

Six former managers of the Israel Electric Corporation were indicted on Monday after being accused of taking tens of millions of shekels in bribes to help Germany company Siemens win contracts with the state-owned utility.

Meanwhile, State Prosecutor Shai Nitzan agreed to drop charges of securities violations against Siemens, in exchange for the firm paying a penalty of 160 million shekels ($42.7 million) and appointing an independent monitor to ensure that the company doesn’t engage in unethical practices in Israel in the future.

The six men were charged with bribery, money laundering, fraud and breach of trust. The indictment by the Tel Aviv prosecutor said the money had been moved abroad to conceal it and asked the court to foreclose on 14 million shekels of assets belonging to the accused.

The indictees included Yakov (Yasha) Hain, who was a senior vice president for engineering projects until he stepped down last year; and David Kohn, who served as vice president for generation and transmission and as head of IEC’s tenders committee until 2004.

The other four are Yona Schweitzer, a former head of engineering planning; Tzvi Eyal, a former manager in the utility’s planning division; Haim Brenner, a former manager in charge of engineering planning; and David Elmakais, a former planning manager.

“Between these parties and Siemens and Siemens Israel, relations of give and take were created in which Siemens systematically paid bribes to Israel Electric officeholders so they would use their positions to favor and advance the interests of Siemens in IEC,” the indictment stated.

The indictment is part of a worldwide bribery scandal involving Siemens, Europe’s largest engineering firm. According to an indictment filed against Siemens in the United States, the company paid $1.4 billion in bribes to facilitate global deals.

In Israel, the investigation was launched secretly in 2009, involving investigators from the Israel Securities Authority. The bribes were allegedly given to rig an IEC tender for power station turbines during the years 1999-2005, when the utility awarded Siemens contracts worth more than 540 million euros ($622 million at the current exchange rate).

Dan Cohen, a former judge who was the initial focus of the investigation, was sentenced to six years’ imprisonment in 2014 and fined 10 million shekels for accepting bribes, fraud and breach of trust while serving as an IEC director. Cohen had cleared the way to award Siemens a $232-million contract for two electrical turbines with a competitive bidding process.

The probe expanded to Oren Aharonson, who was head of Siemens Israel’s energy and industry division and later a deputy CEO, together with his brother-in-law, Shlomo Daniel, and Yitzhak Hirsch, another Siemens Israel manager. The three agreed to turn state’s evidence and will be testifying against the accused at the trial.

Siemens admitted to paying $20 million in bribes, but ISA investigators only succeeded in tracing $6 million of that. Moreover, investigators believe that Aharonson, Daniel and Hirsch each paid additional bribes. Daniel was co-owner of a Hong Kong company that prosecutors said served as a conduit for the alleged bribes.

Siemens said Monday it would continue to operate and invest in Israel, and added that it would give up half the countertrade commitments it is owed by Israel. Attorney Israel Leshem, who represented Siemens in the case, termed the settlement “balanced and proper under the circumstances.”

Gilad Barone and Simon Yaniv, who represent Brenner, said they had only received the indictment on Monday and hadn’t been able to study it. However, they added that at a preliminary hearing, prosecutors had failed to address “serious legal and factual questions” relating to the accusations.

Sassi Gez and Adi Barkay, Elmakais’ lawyers, said their client shouldn’t have been indicted, while Kohn’s attorney, Ofer Bartal, took issue with the facts laid out in the indictment.

Gilad Cohen, representing Hain, declined to comment and others weren’t immediately available.

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