An Israeli Media Tamed to Serve Big Business Will Grovel to Politicians, Too

The story that Benjamin Netanyahu is trying to stifle the media sells well, but the reporters should take a better look in the mirror.

Guy Rolnik
Guy Rolnik
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Benjamin Netanyahu and reporters in the stairwell of the Mengistu home in Ashkelon, July 10, 2015.
Benjamin Netanyahu and reporters in the stairwell of the Mengistu home in Ashkelon, July 10, 2015.Credit: Ilan Assayag
Guy Rolnik
Guy Rolnik

May 2009: Haaretz’s Yoram Gabison writes about corruption involving Bank Hapoalim Chairman Danny Dankner. The bank had paid $25 million to a fund called RP for agreeing to waive its option to buy a piece of Turkey’s Bank Pozitif, which Hapoalim was acquiring.

Dankner neglects to report that RP does business with Elran, a company controlled by Dankner and his relatives. Various Hapoalim executives are involved in this story; the press and TV news largely ignore it.

Winter 2009: The global financial crisis reaches Israel and hits the banks. The governor of the Bank of Israel at the time, Stanley Fischer, demands that Bank Hapoalim fire Dankner over irregularities and corruption. Hapoalim owner Shari Arison and the board stand by their man. So does most of the business press, which, if it attacked anybody, attacked Fischer.

September 2010: Bank Hapoalim CEO Zion Kenan marries off his son. Most of Hapoalim’s biggest borrowers, who together owe Hapoalim tens of billions of shekels, attend the wedding. So do the editors, owners and managers of most of Israel’s newspapers and TV news channels.

According to calculations by TheMarker, people at the wedding control about 1.2 trillion shekels ($312 billion) in the public’s money about half the public’s savings. Yet few journalists raise an eyebrow at the presence of leading media people at a private party thrown by the CEO of Israel’s biggest bank. It’s a bank involved in corruption scandals that should be subject to strict regulation.

Winter 2011: Kenan is held for questioning and released to house arrest. Kenan is suspected of bypassing proper procedure to approve a 14-million-shekel loan for Dankner, who was chairman of Hapoalim when he borrowed the money and who, it was clear by then, would have difficulty repaying the loan.

Kenan okayed the loan based on a false statement of wealth by Dankner. The possibility that Kenan didn’t realize the statement was false seems unlikely given that the main asset Dankner reported was stock in a company going bankrupt (Elran). The police recommend charging Kenan but the prosecution closes the case for lack of evidence and gives its findings to the Bank of Israel. The central bank does not confirm whether it looked into the matter.

Summer 2011: Nochi Dankner, the biggest borrower in Israel (and cousin of Danny Dankner) marries off his daughter. The cream of the banking community arrives; the owners and editors of most newspapers dance cheek by jowl, one big happy family. Outside the social-justice protest rages but the revelers rhumba on, confident the flames of protest will never reach them.

September 2011: TheMarker reveals the true debts of the IDB Group and its leader, Nochi Dankner, to Bank Hapoalim. It’s almost 10 billion shekels, and the bank’s credit department is worried sick. IDB threatens to sue TheMarker, saying that the “questions you asked us are based on a crude, false and apparently deliberate collation of lies, half-truths and partial numbers, and present a warped, false picture. The only source for information you purport to rely on in your request is confidential banking information.”

October 2012: Danny Dankner is charged in the RP-Pozitif case. It’s the first time the chairman of an Israeli bank is charged with criminal actions. A year later he’s found guilty and sentenced to eight months in prison and a 1-million-shekel fine.

In a plea bargain the prosecution waives the corruption charge in exchange for Dankner’s confession that he got Hapoalim to buy shares in Bank Pozitif from a businessman named Halit Cingillioglu. There was no disclosure that Cingillioglu had meanwhile arranged a 5-million-euro loan, with zero guarantees, for Danny Dankner. Part of that loan reached a bank account belonging to Nochi and Orly Dankner at Bank Hapoalim to repay a loan Nochi had given his cousin.

July 2013: Haaretz’s Gidi Weitz and Yoram Gabison publish an exposé on corruption and irregularities at Bank Hapoalim, centering on a Bank of Israel report about loans Kenan approved for a number of entities including the Maariv news group. The media largely ignores it.

Danny Dankner and Shari Arison.Credit: Moti Kimche

August 2014: TheMarker’s Sharon Shpurer reports about corruption and irregularities at Bank Hapoalim going back a decade. Most of the media ignores it. Months later, high-profile journalist Ilana Dayan interviews Bank Leumi’s new CEO, Rakefet Russak-Aminoach, and asks, for the first time ever on Israeli TV, whether there's a “club” of bankers and tycoons who use the public’s money as if it were their own.

Prime Minister Benjamin Netanyahu admits to TheMarker that there are borrowers in Israel who take giant loans from the banks based on belonging to that “club.”

July-August 2016: Nochi Dankner is found guilty of stock manipulation. The prosecution demands five years.

Banks Hapoalim and Leumi join a motion to foreclose on assets owned by businessman Eliezer Fishman, who owns a controlling stake in the business newspaper Globes and a substantial stake in Yedioth Ahronoth. The motions reveal that Fishman has been carrying about 5 billion shekels in loans hidden from public scrutiny.

Banks Hapoalim and Leumi has been rolling the loans over even though they aren’t performing. After the debts have been rolled over for a decade, it turns out that the collateral covers only about a quarter or fifth of the debt, with the shareholders and customers left to pick up the pieces.

November 2016: Dayan reports that Bank Hapoalim paid millions of shekels to a female employee who complains that Kenan, the former CEO, molested her. The next day it turns out that top people at Hapoalim knew about the issue for weeks before Kenan resigned, ostensibly linked to the government’s efforts to curb the pay of top executives.

The grasping tycoons

This time line isn’t designed to persuade people that Hapoalim is corrupt, that Israeli banking is too concentrated or that the banks have indulged in crony capitalism by giving sweetheart loans to borrowers with political clout due to their size or because they own newspapers and control big advertising budgets. Most people seem to realize this already.

The purpose is to provide a different point of view, a more optimistic one maybe, about processes in the Israeli media, mainly since the social-justice protests of 2011.

Netanyahu’s aggressive attack on the public broadcasting corporation that's due to replace the Israel Broadcasting Authority has been cast by the opposition and the media as nothing short of tyranny. But Netanyahu is no Vladimir Putin or Recep Tayyip Erdogan. The main Israeli media has always served the powers that be; until 20 years ago it served the government, then we had a decade of it serving big business.

Bank Hapoalim and the IDB Group are the ultimate example. Together they ruled over 400 billion shekels belonging to the public, sometimes routing funds to cronies while denying opportunities to enemies. They had the biggest advertising budgets and, directly or indirectly, funded most of Israel’s newspapers and TV channels. The boot of the tycoons and bankers was always on the neck of most Israeli media outlets; some willingly cooperated.

The media agenda in those years, focusing on politics, served the big banks Hapoalim and Leumi and the tycoons. The main beneficiaries were the tycoons, who bought state-owned companies at bargain prices and won government franchises and tenders, as well as interest groups in the private and public sectors. The tycoons robbed consumers and pensioners; tax militias robbed taxpayers. In the meantime, the media yammered on about left and right.

Stanley Fischer, former governor of the Bank of IsraelCredit: Tomer Appelbaum

Bank Hapoalim, with annual revenues of 15 billion shekels, has no problem cutting a 4-million-shekel check to an employee who could embarrass the CEO. This is chump change given that Hapoalim is a monopoly protected for decades by the Bank of Israel and Finance Ministry.

Did Hapoalim’s main shareholder, Arison, not know what was happening? In 2009 and 2010, the height of the looting at the bank, when the management and board were serving themselves and certain big borrowers, Arison defended them and accused critics of McCarthyism, including Fischer, the Bank of Israel governor.

But after Danny Dankner was sent to prison, Arison admitted that she had been wrong. But no one was eager to rub in her mistake.

Hapoalim and Leumi’s boot rests on the necks of most businesses in Israel. Over the past decade, these banks have also made loans to the big political parties and, again, to the owners of newspapers and television channels. The banks also supply credit to many professionals like accountants, lawyers and economists.

The method used by Hapoalim’s Kenan, Chairman Yair Seroussi and the banks’ watchdogs to quiet the woman who complained about sexual harassment is nothing new. The banks have managed to suppress most of their corruption scandals and improprieties, from lending billions to tycoons, systematically abetting tax fraud in the United States, indulging in conflicts of interest on their boards, and paying scandalously high salaries to thousands of managers.

It’s the curse of their size and of economic concentration. In any economy where a handful of managers control hundreds of billions of shekels, a corrupt culture will ensue in which for them anything is possible. Quashing sexual harassment complaints is part of the culture at institutions that control hundreds of billions of shekels. The tremendous concentration of economic power in the hands of a few renders the institutions of corporate governance void.

Judge Ofer Grosskopf described the phenomenon beautifully in a ruling a year ago. In that case, he approved a class-action motion against Discount Investments over its acquisition of the Maariv news group, which had been operating deep in the red for years. More than a quarter billion shekels was poured in over two years and not a single director at Discount Investments rose up, Grosskopf wrote. The firm controlled by Nochi Dankner’s IDB Group “volunteered” to finance Maariv after Bank Hapoalim had also lent money to the company, not covered by collateral.

The media business has been in a crisis for a decade. The internet destroyed its business model. But that isn’t relevant, because 12 years ago the Israeli media was at the height of its strength and profitability. And what did it use its resources on? Did it investigate corruption and ties between big money and government?

No. Most of the media belonged to the club. Remember, for most of the 1990s, Hapoalim, Leumi and a bunch of monopolies owned Channel 2. Its rival Channel 10 was financed in its first years by the billionaire Yossi Maiman, who also owned a gas pipeline whose sole customer was the government. The Noni Mozes-Eliezer Fishman group, which relied on bank loans, was part of that group, and Maariv’s publisher Ofer Nimrodi was convicted twice of crimes. That was the state of our media.

Tocqueville & Co.

Today the Israeli media is under intense financial strain and is also under a mounting threat from the prime minister on one side and powerful business elements on the other. But the norms are starting to change. Journalists don’t show up at every tycoon’s ball anymore, or dance at politicians’ weddings.

The media agenda no longer serves only those in power. Ask Kenan, the Dankners (when Danny Dankner gets out of jail) and energy baron Yitzhak Tshuva. And ask Netanyahu, too. His intriguing against the media boomerangs right back at him.

If you have the impression that most newspapers serve Netanyahu today, you’ve forgotten the days of Ehud Olmert and before him Ariel Sharon, when few media outfits explored corruption. Netanyahu has casino tycoon Sheldon Adelson; Olmert had the Yedioth group’s Noni Mozes. The main difference is that today it’s all out in the open.

Israel’s political system, as in most democracies, always has a governing coalition and an opposition. There are constantly zero-sum battles between political centers of power, and dirt always comes out. Certain people have a great interest in the dirt coming out.

But in private business, it always pays for the centers of power to cooperate against the public or regulators pursuing reforms. The media will therefore usually prefer not to confront economic centers of power.

The fear that newspapers that pass into the hands of the prime minister’s associates, or tycoons needing convenient regulation, will start serving their interests is warranted. After all, some of those now lamenting the state of the media applauded when the Dankners took over Maariv five years ago.

Each explained that it’s for the good of democracy. They couldn’t seem to grasp the conflict of interest between a newspaper that’s supposed to report without fear and prejudice on the powers that be, while that newspaper is owned by a business pyramid that controls hundreds of billions of shekels of the people’s money. Meanwhile, the majority of that pyramid’s businesses are subject to government regulation.

There are two scenarios for the future of the Israeli media. An increasingly popular one is the Erdoganization or Putinizaton of the media. Adelson and other tycoons linked to Netanyahu would buy other newspapers, and in the meantime he’d tame the TV networks using the regulatory agencies.

The other scenario is that new or existing tycoons would buy the papers in cooperation with politicians battling Netanyahu. The only difference is that the political-economic structure would be called “centrist” instead of “right-wing.”

Could there be a third scenario in which some media outlets remain independent of politics system or big business?

Thomas Jefferson once said that if he had to choose between “a government without newspapers or newspapers without a government, I should not hesitate a moment to prefer the latter.”

Newspaper Publisher Joseph Pulitzer said: “There is not a crime, there is not a dodge, there is not a trick, there is not a swindle, there is not a vice which does not live by secrecy. Get these things out in the open, describe them, attack them, ridicule them in the press, and sooner or later public opinion will sweep them away.”

Supreme Court Justice Louis Brandeis said sunlight is the best disinfectant; Alexis de Tocqueville said that without a free press, modern society cannot exist.

The list of intellectuals, philosophers and leaders who understood that without an independent press democracy cannot exist is long. The reporters are now telling themselves that the people have lost their faith in them because of Netanyahu or the internet. They should look deeper.

The main threat to the media, more than Netanyahu and collapsing business models, is its very culture and ethics: whether it serves the powers that be or stands up to them. Reporters who served tycoons and bankers will quickly serve aggressive politicians and launch crusades against reporters trying to expose them.

Owners of newspapers and TV channels that did deals with tycoons won’t hesitate to do the same deals with the government. Today it’s Netanyahu and Adelson; tomorrow another tycoon with another bank could show up with another newspaper, another TV channel and another politician.

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