The Money Trail

Avigdor Lieberman has done very well for himself since his rise to political power, judging by records of his foreign bank accounts, which the police now have in hand. However, by law, as an MK or minister, he is forbidden from engaging in business activities or becoming embroiled in a conflict of interest. This week he denied any wrongdoing.

At the beginning of 2006, a few months before the Knesset elections, Attorney General Menachem Mazuz received a package of documents related to cabinet minister Avigdor Lieberman. The documents consisted of records concerning a private account and companies that Lieberman had set up and which were managed from the Cyprus Popular Bank in Limassol. The records covered 2001, when Lieberman served as a Knesset member and as national infrastructure minister in the government of Ariel Sharon. In November 2001, the documents were sent from the offices of Cyprus attorney Andreas Neocleous, the manager of one of the companies, to Lieberman's lawyer, Yoav Many. In a letter to Many, Daniella Mourtzis, head of the companies management department at the Cyprus law firm, noted that she was sending him "reports for our mutual client." Not one report, relating to a private account, but many.

One of the reports showed the movements in the account of a company called Mountain View Assets. In May 2001, the company received $500,000 from MCG Holding, which belongs to the Russian oligarch and businessman Mikhail Chernoy. Israeli attorney Jacob Weinroth, who represents Chernoy, said this week that the money was transferred by his client as part of a "wine deal," and explained: "The person who got Chernoy involved was a Bulgarian lawyer. He introduced Chernoy to businessmen who carried out a series of transactions involving wine with Lieberman. Lieberman was not a cabinet minister at the time."

When reminded that Lieberman was a minister at the time the money was transferred, Weinroth sounded surprise, and said: "The money was transferred when he was a minister?!"

By October 2001, the account was almost totally emptied out, with most of the money in it being transferred to Lieberman confidants and recorded as loans or payments on loans. Gershan Trestman, an activist in Yisrael Beiteinu, the political party Lieberman founded, and the minister's neighbor in the West Bank settlement of Nokdim, received $320,000. Ronit Guy, the partner of Lior Tenenbaum, a central figure in Lieberman's dealings in a company called Nativ el Hamizrach (literally, Path to the East), received $85,000. Their names would come up again in connection with other accounts that were sent to Lieberman's lawyer.

On March 22, 2001, shortly after his appointment as national infrastructure minister, Lieberman transferred $60,000 to Tenenbaum from his private account. Concurrently, during 2001, Tenenbaum received about $44,000 from Trasimeno, the "reincarnation" of Nativ el Hamizrach Cyprus, a company which was established by Lieberman and owned at the time by the firm of attorney Neocleous. At the beginning of May, Guy received $10,000 from Trasimeno. On May 28, Trestman deposited $270,000 in the company's account, and a week later withdrew $210,000.

The name of another confidant, Igor Snaider, who was Lieberman's chauffeur and became involved in his business dealings in Eastern Europe, appears in connection with three accounts. He received $400 from Lieberman's private account, which was recorded as a loan; $15,000 from Mountain View Assets, for transportation and office equipment services; and $12,215 was transferred to him from Trasimeno.

On May 4, 2001, a month after Lieberman entered the government, $1,725 was transferred from his private account to a company called Onyx Trust Services. That company belongs to the Swiss-based Onyx Group, which establishes international companies and deals in tax planning.

Neocleous' office in Cyprus received fees from all the accounts mentioned thus far - from Lieberman's private one, as well as the Trasimeno and Mountain View Assets accounts - in amounts ranging from $600 to $4,000. Yoav Many, Lieberman's confidant and lawyer, and also the legal adviser of Yisrael Beiteinu, received about $7,000 from Trasimeno in the period covered by the reports, for traveling expenses.

Barred from business

All this time, Lieberman was a cabinet minister and an MK. As such - under the Knesset members' immunity law, and according to regulations stipulated by the Asher Committee concerning value added tax (VAT) - he was barred from engaging in business activities and from being in a situation involving a conflict of interest (see box).

Why did Lieberman transfer $60,000 to Tenenbaum from his private account? Why did he pay $1,700 to a Swiss firm that specializes in setting up companies and tax havens? What was the nature of his involvement in the "wine deal" with Chernoy? How is Lieberman connected to Mountain View Assets, and why did the company's bank account empty out on behalf of his associates Trestman, Snaider and Guy?

In April 2001, just a month before this so-called wine deal, the media reported that a secret investigation was under way against Chernoy, on suspicion that he had purchased Bezeq, the huge Israeli telecommunications company, illegally. The investigation produced an indictment. Lieberman expressed support for his good friend, asserting that "his only crime is that he succeeded in his life," and declaring that he placed more trust in Chernoy "than in the integrity of all the heads of the [police] investigative departments together." In a query to the public security minister, Lieberman asked how much money had been spent on the Chernoy investigation.

The scope of the ties that existed between Lieberman and Chernoy could be gauged from an affidavit submitted to the court by a member of the Eilat municipal council, Oleg Chernomoretz. Chernomoretz claimed that the police investigators "told me in no uncertain terms that they had a photograph of Mr. Chernoy and Lieberman that was taken in January 2000 in a restaurant called the Last Refuge in Eilat, on the day the minister and the ambassador of Moldavia in Israel met with the president of Moldavia and his family, who had come to Eilat for a visit." Chernoy also sold Lieberman an armored jeep for his wife to use on the way from their home in the settlement to Jerusalem.

At that time, Lieberman asked prime minister Sharon to order "an urgent and comprehensive clarification into the attempt by the police to use an undercover agent against me, and perhaps other measures as well, apparently at its own doing, without authorization." During the investigation, when Chernoy's passport was taken from him, his lawyers suggested to Lieberman that he vouch for Chernoy's return to Israel.

A few weeks after the Knesset elections, when the probe by the police National Fraud Investigation Unit (NFIU) had just begun, Lieberman demanded the public security portfolio in the coalition negotiations. Prime Minister Ehud Olmert asked the attorney general for an opinion concerning Lieberman's possible appointment to that post, and was told by Mazuz that he would have to forgo it, because the police had received "new material" revealing suspicions against Lieberman in the sphere of "probity."

In November 2006, the Justice Ministry asked the Cypriot authorities to take a deposition in regard to the accounts that have been mentioned here. In the past few months, NFIU officers went abroad to take depositions from various witnesses in the case, and in the wake of the findings Mazuz authorized the police to question Lieberman under caution.

Last Sunday, Lieberman was interrogated at NFIU headquarters in Bat Yam on suspicion that he received illegal donations from Austrian businessman Martin Schlaff via fictitious bank accounts in Cyprus. Lieberman allegedly did not report the donations, as the law requires. Lieberman is also suspected of laundering money through confidants and of advancing his business interests while serving as an MK and as a cabinet minister.

Lieberman himself preferred not to comment on the suspicions against him or on the questions that have arisen from this Haaretz investigation (see box).

A Volvo and cigars

To understand how Lieberman's confidants became part of the companies he established, and how the complicated web of relations between his people and the various accounts was created, we have to go back to late 1997, when Lieberman resigned as director general of the Prime Minister's Office and first went into business. It was then that Lieberman established Nativ el Hamizrach Israel, an international trading company that was to operate in Eastern Europe and focus its activity abroad.

"I have no businesses in Israel," Lieberman told Haaretz at the time. "I prefer to concentrate my business dealings in other places."

Indeed, the all-powerful director general of the Prime Minister's Office during Benjamin Netanyahu's tenure joined the list of public officials who wanted to feather their nest, and within a short time became a success story. He pocketed $3 million after bringing about a significant devaluation of the Russian ruble, on behalf of an Austrian bank.

"It's like gambling on metals in the stock market," Lieberman told the mass-circulation daily Yedioth Ahronoth in 2003. "Some people specialize in wines, and others in Swiss francs. You check to see whether it's going up or down and you do all kinds of financial transactions."

This financial juggling act also impressed the NFIU, which conducted depositions in Vienna of senior officials at the Austrian bank. The officials were unable to explain to the investigators how Lieberman was able to save the bank from a loss of millions of dollars.

Baruch Kra, then a correspondent for Haaretz, reported that during a discussion in the Austrian parliament's committee on the secret services, local police intelligence officers presented information concerning donations from Austrian businessman Martin Schlaff to Lieberman's party, Yisrael Beiteinu. The NFIU investigated suspicions of illegal campaign contributions to Lieberman for seven years.

Lieberman's political ties, which date back to the glory days in the Likud Party Central Committee, apparently did not hurt his business dealings, either. In 1998, about NIS 735,000 was transferred to Nativ el Hamizrach from Tzivyon, a company owned by businessman David Appel. Lieberman received the fat check for consulting services rendered to the Greek island tourism project, even though he opposed it. "Appel asked me for an opinion and I told him that the project has no chance and that he was going to lose his shirt there," Lieberman explained several years ago.

Lieberman's metamorphosis from civil servant to businessman became obvious immediately. The modest new immigrant from Nokdim bought a fancy new Volvo, started to smoke cigars and opened a spacious, expensively designed office, complete with a bar, in Jerusalem's Givat Shaul industrial zone. It was obvious to everyone who entered the office that Lieberman had made it.

Employees of Nativ el Hamizrach relate that initially it was far from clear what the company would do. Said Iris Markman, the company's office manager until the elections of 1999, in which Lieberman ran for the Knesset for the first time: "There were a lot of ideas. They went for entrepreneurship, mediation between companies."

Lieberman and his aides visited Kyrgyzstan, touring the cotton industry there, and meeting with the president of the former Soviet republic, all the while escorted by the Israeli ambassador. A company employee recalls that they also considered going into the farming business in Africa: "Someone wanted to sell a flower-growing farm in Kenya. We went to look at it. We saw the business and we sat with the lawyer and the accountant of the enterprise, but in the end the owner changed his mind and didn't want to sell."

The breakthrough came in 1999, when millions of shekels began to flow to Nativ el Hamizrach from companies associated with the lumber industry and firms dealing in raw materials for construction. Lieberman then established another company, Nativ el Hamizrach Cyprus, afterward known as Trasimeno, which operated parallel to its Israeli sister-company. The relations between the two firms are mentioned in a Trasimeno bank account statement. In March 2001, for example, the Israeli company transferred about $35,000 to the Cyprus company.

After being elected to the Knesset in the May 1999 elections, Lieberman resigned, as he had to under the law, as CEO of Nativ el Hamizrach Israel. Three directors were appointed in his place: his right-hand person at the time, MK Ruhama Avraham, attorney Hagai Meidan and accountant Uri Lazar. At the end of 2000, the company informed Israel's Registrar of Companies that the shareholders were Lieberman's wife, Ella (one share), and Strauss Lazar, a trust company (99 shares). One of the owners of Strauss Lazar, Micha Lazar, was also the company's accountant. Lieberman's state-related business became intertwined with his private business affairs. In March 2001, when he was named minister of national infrastructure, he appointed Lazar to the board of directors of the Israel Electric Corporation. The request for a change of directors in Nativ el Hamizrach was signed by attorney Dov Weissglas, who acted as Lieberman's lawyer in various instances. Weissglas hooked Lieberman up with another of his clients, Martin Schlaff, who is suspected of having bribed former prime minister Ariel Sharon in the episode allegedly involving South African businessman Cyril Kern. The paths of Lieberman and Schlaff also converged in the lumber business, as will be seen later.

In April 2001, Nativ el Hamizrach Israel underwent another change of ownership: Strauss Lazar and Ella Lieberman transferred all their shares to a Belgian citizen named Yosi Shoultiner. Shoultiner, who died about a year ago, was a close friend of Lieberman. In June 2001, Shoultiner, then owner of Nativ el Hamizrach Israel, deposited some $450,000 in the account of the Cyprus-based Trasimeno company, formerly Nativ el Hamizrach Cyprus.

Officially, Lieberman acted as the law stipulates, formally divesting himself of the companies he established. But people who worked with him in the Knesset and the government recall that senior officials of Nativ el Hamizrach - CEO Andy Boiangiu and accountant Kalman Besser - visited his offices frequently during his tenures as MK and minister. The three declined to comment on the meetings.

Additional evidence that Lieberman engaged in business activity while serving in the Knesset appears in a suit that was filed in 2004 by his former adviser, Yossi Kamisa, against the diamond merchant Dan Gertler. Kamisa alleged that in July 2000, Lieberman invited him to a meeting in the Jerusalem offices of Nativ el Hamizrach, told him he was a partner to future deals in Congo, and that he wanted to have Kamisa take part in their security aspect. Kamisa noted in the suit that he had met Lieberman when the latter was establishing his party, Yisrael Beiteinu.

According to Kamisa, Lieberman sent him to Gertler, describing him as a partner in the deals. Gertler, the suit alleges, offered Kamisa the task of training the Congolese army, as part of a settlement the diamond merchant concocted with the African country: provision of security advice in return for being granted exclusive franchises for the export of uncut diamonds from Congo. Ultimately, the Gertler-Kamisa partnership fell apart. Kamisa's suit was rejected outright by District Court Judge Adi Azar. The grounds for the rejection: Kamisa reputedly signed a statement of receipt and annulment of all his claims and demands from Gertler - in return for which he received NIS 1.4 million.