Israeli Corruption Is a Tempest in a Champagne Bucket

Despite all the investigations and indictments, there is no sense that high-level criminality hurts the economy

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Champagne on ice at Le Bristol Hotel in Paris, France.
Champagne on ice at Le Bristol Hotel in Paris, France.Credit: Bloomberg

Israel ranks 28th among 176 countries in corruption, according to Transparency International, the organization that monitors corruption around the world.  That’s not an especially dignified ranking: Among European Union countries, our peer group, only Italy and Greece score lower.

People who follow what is going on in Israel might be under the impression that country is a cesspool of self-dealing, bribery, fraud, embezzlement, and conflicts of interest.

None less than the prime minister and a handful of his associates are being targeted by four separate police investigations. The top executives of the Bezeq telecoms giant and its controlling shareholder are expected to be charged with securities violations. Former deputy minister Faina Kirschenbaum, ex-tourism minister Stas Misezhnikov and nine other  ex- members of their party, Yisrael Beiteinu, have been indicted. Interior Arye Minister Arye Dery, who has already served time once for corruption, is suspected by police of diverting money from organizations his wife runs to their family and associates. Billionaire Beny Steinmetz is being investigated for bribing officials in Guinea.

And that’s just the biggest wheels. Go down a notch or two to the level of municipal officials and stock market operators and low-level army officers, and malfeasance multiples. It’s no wonder TI ranks Israel so low.

When your daddy run the country

But is Israel really all that bad? Bear in mind that TI doesn’t measure actual corruption but perceptions of corruption, which is understandable, since corruption by its very nature is hidden. The justice system only exposes a fraction of what’s going on, even in the best of cases.

We can take consolation in knowing that the justice system is operating, otherwise these cases like these against the powerful and the rich would have never seen the light of day.

The downside is that it leaves people with the impression that corruption is everywhere.

My guess is that Israeli corruption isn’t nearly as bad as the headlines make it out to be. Forgetting the strict legal interpretations of what is bribery or breach of trust, most of the scandals in Israel don’t meet the smell test of real corruption, as ordinary people understand it. A good anecdotal comparison emerged this week.

In Zimbabwe, the country’s long-time leader, Robert Mugabe, was apparently overthrown in a military coup connected with the regime’s corruption and self-dealing. Meanwhile, back in Israel, an aide to Bibi’s billionaire buddies, Arnon Milchan and James Packer, testified about the gifts they bestowed on the prime minister.

Mugabe’s downfall seems to have stemmed from nepotism: A plan to hand over the presidency to his wife angered politicians who had been waiting for decades for the chance at the job. Meanwhile, ordinary Zimbabweans bemoaned the ill-gotten gains of the Mugabe family and said they were glad to see them go.

Last week, a video emerged allegedly showing a Mugabe son, Bellarmine Chatunga, pouring champagne over an expensive watch. “$60,000 on the wrist when your daddy run the whole country ya know!!!” he is alleged to have posted on his Instagram feed.

In Israel, of the four cases pending against Netanyahu, one involves big money – Case 3000 and the money that allegedly changed hands illicitly over a multi-billionaire-dollar submarine deal. If true, it is nasty, all the more so because those suspected were profiting off the country’s defense -- although for now Netanyahu himself is not being counted among them.

The cases against the prime minister himself are small change. Milchan-Packer aide Hadas Klein’s testimony portrays the Netanyahus as greedy and grasping. But the police are struggling to figure out what the billionaires may have got in exchange for gifts of cigars, champagne, concert tickets and use of luxury homes – all of which, in money terms, doesn’t add up to much more than the value of Bellarmine Chatunga's wristwatch.

The trade-offs Bibi was allegedly willing to make with Yedioth Aharonoth publisher Arnon Moshes and with Milchan over Channel 2 television never happened. They do provide evidence of the PM’s dangerous obsession with media coverage, but as financial corruption goes, it doesn’t add up to much.

Zimbabwe ranks No. 154 on the TI corruption index, so we’re hardly flattering ourselves by the comparison. But the important thing is to understand the deleterious effect of corruption or the lack of it and its broader effect on the economy.

TI estimates that Zimbabwe loses at least $1 billion annually to corruption, which is big money in a $16 billion economy. Mugabe’s spy agency secretly controls a diamond mine in the Marange region that has enriched the president’s allies to the tune of $13 billion, according to the NGO Global Witness.

By comparison, when businesspeople were asked by the World Economic Forum what are the problematic factors in doing business in Israel, corruption came out at No. 11 among their concerns.

It’s not that what Bibi and his friends allegedly did isn’t corrupt, but it doesn’t add up to damage to the public pocket, and the public knows it. A Panels Research poll taken for Ma’ariv in September found that 54% of the respondents believed Netanyahu’s behavior is tainted by corruption, but the same poll showed he was by far their top choice for prime minister.

Even as it’s being flooded with daily reports of malfeasance, the public seems to have a better perception of real corruption and its costs than the media or the justice system.