Israel’s police and securities regulators recommended Sunday that Shari Arison, Israel’s richest woman, be indicted in an investigation into alleged bribery of African officials to boost profits from contracts for the company Housing & Construction.
Arison, whose net worth TheMarker estimated last year at $5.5 billion, was controlling shareholder of the company until she sold it last August.
The police and the Israel Securities Authority believe they have sufficient evidence against Arison, the company and a host of senior Housing & Construction executives including comptroller Ruby Lazarov, former CEO Ofer Kotler and Efrat Peled, the CEO of Arison Investments and an Arison confidante.
The indictment would be for bribery of a foreign public servant, an offense that has been enforced in Israel only in the last two years, as well as false registration of corporate documents, conspiracy to commit a crime, obstruction of justice, money laundering and misreporting on official documents.
The police and securities authority said the file would be forwarded to the State Prosecutor's Office's department for taxation and economics for a final decision.
Sunday's news marks a dramatic development in the ongoing investigation into suspicions that Housing & Construction – one of Israel’s biggest infrastructure-construction companies – made illegal payments to officials in Africa, especially Kenya. The police say the payments were made by a Swiss subsidiary, SBI International Holdings, mainly between 2008 and 2016.
Investigators have questioned some 50 suspects and collected testimony from 34 witnesses. In addition, Keyna’s Ethics and Anti-Corruption Commission has questioned 19 Kenyan officials.
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The Israel Security Authority says it revealed payments in the tens of millions of shekels by Housing & Construction to Kenyan officials that led to contracts worth hundreds of millions of shekels.
Arison, an heir to the Carnival Cruise Line fortune, is estimated to be worth over 20 billion shekels ($5.5 billion), but she has been divesting her Israeli business empire, which includes Bank Hapoalim, the country’s biggest lender.
The bank is under investigation by U.S. authorities on suspicion of helping American clients evade taxes, forcing it to set aside 500 million shekels for expected penalties and legal costs.
Last August, Arison sold her controlling stake in the firm to American-Israeli businessman Naty Saidoff for 1.1 billion shekels; Saidoff is reorienting the company’s overseas operations to the American market. On Sunday, Housing & Construction shares ended down 1.55% at 8.90 shekels.
The Housing & Construction investigation became public in February 2018 with a series of arrests and interrogations of senior company officials. The second stage of the investigation began in July 2018 and was accompanied by another wave of arrests.
The suspicions were raised by a lawsuit filed by Shay Skop, a former financial officer for Housing & Construction in Kenya. In the suit, Skop claimed that the firm had withheld his salary and harassed him after he had exposed years of corruption by managers.
Skop’s lawsuit revealed the existence of a notebook kept by Benjamin Arbit, the company’s manager for East Africa, who has also been questioned. The notebook allegedly documents bribes to senior officials in African countries.
When Skop tried to report the bribery to Lazarov, the latter allegedly told him that bribery was the way the company got things done in countries like Nigeria, Uganda, Guatemala and previously Ivory Coast. According to the suit, Lazarov insisted that the bribes were known to senior company officials, including the board of directors’ control committee, and that Skop should simply turn a blind eye.
The claims by senior Housing & Construction officials that in certain countries they had no choice but to pay bribes are an accurate depiction of reality. Many businessmen operating in developing countries say this is the case, especially in infrastructure and construction, which involves agreements with governments.
Until 2008, Israeli companies openly bribed officials in developing countries. Not only did they pay bribes, they asked for receipts from the recipients and submitted them to the Israel Tax Authority to claim deductible expenses.
All this stopped in 2008, when an amendment to the Penal Code forbade the bribing of foreign public officials, and with a Supreme Court ruling that confirmed a change in tax authority policy rejecting attempts to claim such bribes as expenses.
The police and securities authority said Sunday they had seized 420 million shekels of assets in connection with the case. Investigators have been criticized by defense attorneys for moving so quickly to seize property, which they say often leaves clients without an income to live or cover their legal costs.