It had been less than a month since police raided the offices of Housing & Construction and arrested several past and present senior executives on suspicion of paying bribes to government employees in Africa. A new case surfaced this week, involving strikingly similar allegations.
Three senior Israel Shipyards officials were detained by the police and the Israeli Tax Authority Sunday for questioning as criminal suspects. They are suspected of bribing African officials to advance defense contracts worth tens of millions of dollars, police said. On Tuesday, a prominent businessman with links to the company was questioned. His name was not released. The Israel Shipyards case apparently relates to its sale, around 10 years ago, of two Shaldag patrol boats to the Nigerian navy.
The Gold Bond Group, a publicly traded company that owns 25% of the shipbuilder, reported Tuesday that the police placed restrictions on certain Israel Shipyards bank accounts. Gold Bond also disclosed that one of the people arrested Sunday was Vice President for Marketing, Oded Breier, who was released to house arrest. Breier’s lawyers said he denies all wrongdoing.
Bribing a foreign official is a relatively new crime in Israel, added to the criminal code in 2008 as part of Israel’s accession to the Organization for Economic Cooperation and Development and the United Nations Convention against Corruption. The change made bribing a foreign official the equivalent of bribing an Israeli one, carrying a prison sentence of up to seven years.
The last several months have seen a sharp rise in arrests in Israel over foreign bribery allegations. In the case of Housing & Construction, there are other allegations as well. The suspects include former CEO Ofer Kotler, whose lawyer has said his client denies all allegations.
From their investigation, conducted in conjunction with Swiss law enforcement, Israeli police suspect Housing & Construction paid bribes to facilitate projects in Africa worth hundreds of millions of dollars. The investigation is based in part on a lawsuit by a former finance director at a Kenyan subsidiary who claims he was treated unfairly after disclosing serious acts of corruption by company figures over a period of years.
Yaron Lipshes, who defended Teva Pharmaceutical Industries against bribery allegations in Russia and Ukraine, says the current wave of bribery investigations has a significant effect on the conduct of Israeli companies doing business abroad. Lipshes also represents suspects in pending investigations.
“The steps being carried out by law enforcement authorities in this context may be understandable, and there are those who would say it is admirable, but you need to remember that this involves the most significant industrial activity being carried out by Israel companies, which could disappear altogether.”
Lipshes said the recent investigations have shone a spotlight on the illegality of paying bribes to foreign government officials, but he added that even though the practice has been illegal under Israeli law since 2008, it is only recently that it has been enforced.
“This intensive enforcement naturally creates many fears among the companies and business people active abroad, particularly in the Third World,” Lipshes said. “These investigations are trying to undermine a practice of many years that is widespread in these countries, and in many cases it’s impossible to do business there without it.”
“Take, for example, the accepted work practice of using the services of an agent or intermediary who receives a bonus for projects that he brings to the company. In many countries in Africa, it’s simply impossible to work without such an agent who in most cases is close to government officials,” Lipshes said. With the new Israeli law, the actions of such an intermediary who doesn’t pay bribes to government officials but simply provides access to decision makers in government and who receives a bonus if the business plan is consummated as a result, could also be construed as a bribe, he added.
“The result of the intensive enforcement that we are witnessing will be that Israeli companies will in fact put a stop to these practices, but since non-Western companies will continue to do so and because government officials in Third World countries will continue to demand bribes, bribery will continue and will be carried out by non-Western countries, who will get the new projects and will drive the Israeli firms out of all of these [Third World] countries,” Lipshes warned. “Banning the payment of bribes to government officials is an admirable step, but in practice, companies from other countries will rush to grab this market share and will push the Israeli countries out of Africa.”
One of the most high-profile cases involving alleged wrongdoing by Israelis in Africa is the case of Beny Steinmetz, who was initially arrested in 2016 on suspicion of paying tens of millions of dollars in bribes to senior officials in Guinea.
The police allege that Steinmetz made huge sums — $5 billion as a result of the purported bribes. In his defense, Steinitz says that there was a conspiracy against him. At a hearing last year in Rishon Letzion Magistrate’s Court, he pledged to cooperate with the investigation and said: “There is a conspiracy here against us consisting of a president of a corrupt country,” Steinmetz said.
Steinmetz’s company BSG Resources has accused the Hungarian-born financier George Soros and groups he helps fund of propagating “untrue” corruption allegations and paying Guinean officials to strip it of mining rights. BSGR and Steinmetz have denied wrongdoing. In November an Israeli court ruled that Steinmetz could leave the country but could not travel to Africa or all but six countries in Europe. Steinmetz’s companies filed a defamation suit against Soros which Soros sought to have dismissed.
With reporting from Reuters.