Submarines, Cigars and Sleaze: Is Israel Really All That Corrupt?

Don’t take the intense media coverage of the investigations at face value. There is corruption, but less than the headlines would have you believe

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Benjamin Netanyahu climbs out after a visit inside the Rahav, the fifth submarine in the fleet, after it arrived in Haifa port January 12, 2016
Benjamin Netanyahu climbs out of the Rahav submarine after it arrived in Haifa port January 12, 2016Credit: REUTERS/Baz Ratner

If you’re looking for a poster-boy for the seeming depth of corruption in Israel, ex-banker David Granot is your man.

When telecoms tycoon Shaul Elovitch was forced to step down as chairman of the Bezeq phone company in June amid investigation by the Israel Securities Authority, Granot was tapped to act as his temporary replacement. Then on Monday, Granot himself was detained for questioning in connection with a wholly different probe - into alleged money laundering and fraud by the billionaire Beny Steinmetz.

It seems like everybody who is anybody is under investigation. The prime minister is directly implicated in two probes: cigar and champagne gifts, and dubious dealing with Arnon Mozes, publisher of the Yedioth news group. His close associates are involved in others: the "submarines affair" and alleged sweetheart dealing by the Communications Ministry’s with Bezeq.

On other fronts, the leaders of the Yisrael Beiteinu party are ensnared in an investigation into alleged bribery, fraud, money-laundering and tax offenses. At the Israel Aerospace Industries, union officials, executives and a director are being questioned about fixing contracts for suppliers, and the probe has extended to include Labor and Social Services Minister Haim Katz. Interior Minister Arye Dery, who served time 17 years ago for corruption, is being grilled by police over real estate transactions.

Of Israel’s ex-prime ministers, Ehud Olmert served time for bribery and fraud, while Ariel Sharon and Ehud Barak both found themselves in police crosshairs at various times (nothing was proven). And those are only some of the big names that got media attention. Further down the corruption ladder, there’s plenty going on in local government, the religious establishment and smaller businesses, like Telit (an "internet of things" company whose CEO, Oozi Cats, was recently revealed to have been “fugitive defendant” from a U.S. fraud indictment going back 25 years ago).

What to make of all this? Dr. Pangloss would no doubt look at the investigations as proof that the system works, because the corrupt face the law and media notoriety. The opposite view is that we’re only seeing only a small fraction of the rottenness, and that corruption is as one Haaretz commentator put it, a “lucrative industry.”

Behind closed doors

Opinion polls show that a lot of Israelis, not just Likud voters, think the cases against Netanyahu are politically motivated. Certainly, Bibi wants you to think that. The politics, however, isn’t the leftist-media cabal he railed against last week. Rather, it’s the media’s thirst for clickable stories and officials’ anxiousness not to appear as pushovers.

It’s hard to know how bad corruption is, because corruption is a lot like sex – it’s done behind closed doors, and the people engaged it will inevitably lie if asked about what they do or don’t do. The best objective measure is from the German NGO Transparency International, which measures perceptions of corruption around the world: perceptions, because TI says it’s impossible to know the real extent of corruption (which makes them more intellectually honest than, say, Alfred Kinsey).

Israel’s Corruption Perception Index score has actually improved over the last four years despite the atmosphere of Sodom and Gomorrah in high places. Still, in 2016 we were ranked 28th in the world, behind every Western European country except Portugal and Italy, and behind a few developing countries as well.

Yet, at the risk of sounding overly Panglossian, I would say Israel doesn’t have an especially bad corruption problem.

The multi-billion-dollar submarines affair, if proven to be true, is certainly a big one. Bibi’s deal with Yedioth's Arnon Mozes, to trade favorable newspaper coverage for legislation the publisher sought to hurt his competition, is a nasty abuse of the public trust.

But then the scale of malfeasance drops precipitously. The accusations against Elovitch involve hundreds of millions of shekels, those against IAI involve even less and then they fall down to the level of cigars and champagne and stolen garden furniture.

But the fact is that Israeli corruption is nothing on the scale of, say, Brazil, where illicit deals between the state-owned oil company Petrobras and builder Odebrecht involved tens of millions of dollars in kickbacks and more than 80 politicians and businesspeople. Or Italy’s Clean Hands investigation in the 1990s, which involved as many as 5,000 public figures and indictments against more than half of the members of parliament. The bribes paid every year by companies bidding for large government contracts were alleged to have reached $4 billion.

Massive corruption has deleterious economic impact, which anyone visiting the Mafia-ridden south of Italy can easily see. Government money disappears into unfulfilled contracts, trust in public officials is so low that the black market is a way of life and ordinary business is stifled.

Israel seems to be more like Northern Italy or even China: Corruption is prevalent, but it doesn’t seem to deter private business. Government services are provided and infrastructure gets built. You don’t see half-completed bridges and missing contractors.

If anything threatens to undermine business and government in Israel, it is overly zealous pursuit of corruption. It doesn’t just lower the level of trust in government, but in the judiciary and media as well. And far from making officials more honest, it can paralyze them for fear that their every move is subject to scrutiny that presumes the worst. We should be more worried about that than Bibi’s cigars and champagne.