Police Probing Lieberman on Suspicion of Illegal Business Ties

The police have been conducting a lengthy inquiry into suspicions that Transportation Minister Avigdor Lieberman has an illegal business relationship with Austrian businessman Martin Schlaff, who has substantial business interests in Israel.

The police have been conducting a lengthy inquiry into suspicions that Transportation Minister Avigdor Lieberman has an illegal business relationship with Austrian businessman Martin Schlaff, who has substantial business interests in Israel.

An Austrian court recently approved an Israeli request to conduct its investigation in Austria, allowing investigators to take depositions from various people and to examine bank accounts suspected of being connected to the affair. The court decision followed a lower court ruling denying the Israeli request.

Haaretz has learned that several years ago, during a special session of an Austrian parliamentary committee investigating that country's intelligence services, information came up regarding business connections between Martin Schlaff, the Austrian businessman who is believed to own 50 percent of the Jericho casino, and Lieberman, and how money was transferred to the political party Lieberman established, Yisrael Beitenu.

Austrian courts

Lieberman was not as lucky as Prime Minister Ariel Sharon. Two Austrian courts have turned down requests for Israeli police to continue their inquiry into suspicions regarding funds sent from Austria to Sharon's sons to pay back illegal campaign contributions made in 1999 to Sharon's Likud leadership campaign.

As in the Sharon-Cyril Kern affair, the Lieberman case also began in the wake of a State Comptroller's report on party financing. The report, which came out in 2000, was conducted mostly because of its examination of non-profit organizations that funneled funding to former premier Ehud Barak's election campaign in 1999. But the public interest in the millions that went to the Barak campaign distracted attention from some other scandals that appeared in the report, even though, as in the case of the Barak campaign contributions, the attorney general ordered police inquiries.

The comptroller said that Yisrael Beitenu received a million dollar credit line from a bank in Israel, using a bank guarantee from Vienna for the credit line. The Viennese bank, said the report, was given a personal guarantee of the million dollar guarantee by a foreign resident.

The comptroller did not take note of the odd roundabout route for the money. Instead he focused on the gaps between Yisrael Beitenu reports on its income and expenses during the campaign, and what the comptroller found. The comptroller decided to be lenient with his estimates, and ruled that NIS 200,000 in state financing for the party be discounted and that the party pay NIS 70,000 to the state.

Nonetheless, Attorney General Elyakim Rubinstein decided on a criminal inquiry against Lieberman and the party. Lieberman was outraged, accusing Rubinstein of "political motives" and claiming that the attorney general decided on the inquiry "to balance the decision to order the police to investigate other political parties and the prime minister's (Barak's) NPOs."

But Lieberman also refused to name the businessman who backed the million dollar credit line and only said it was a "personal friend" from Austria. Lieberman said that he met the "friend" after leaving the Prime Minister's Office (where he had been the bureau chief for former premier Benjamin Netanyahu) and went into business in eastern Europe. He emphasized that at the time he had no business ties with the Austrian, "who did not want his name published."

A few months later, close to the Camp David summit of 2000, Lieberman, then an opposition MK from the far right, met in London with Mohammed Rashid, Yasser Arafat's financier, who was known for his business relations with Schlaff as a partner in the Jericho casino. A few months later, Rashid and Schlaff met in Vienna with Dov Weisglass, who represents Schlaff's interests in the Middle East, Omri Sharon and Eitan Bentsur, a former director general of the foreign ministry. Then-prime minister Barak charged that Lieberman urged the Palestinians not to strike a deal with the Labor-Meretz government but to wait for a right wing government with which they could get a better deal. Lieberman refused then to comment on the connection between the meeting in London and the one in Vienna.

The police suspect the allegedly illicit campaign financing is not the full extent of the illegal ties between Lieberman and the Austrian businessman. Indeed, when a lower Austrian court turned down the request for an Israeli team to conduct their inquiry in Austria and take depositions, because the matter only referred to campaign contributions which is not a criminal matter in Austria, the Austrian prosecutor general, representing Israel, took the case to a higher court and argue that the suspected crimes were much more severe than illegal campaign contributions. The upper court panel of three judges approved the Israeli request, now enabling investigators from the Israeli National Fraud Squad access to banking records about various financial transactions connected to the affair. At a later stage, the Israeli detectives are expected to take depositions from Austrian suspects.

Lieberman is known to several Austrian government officials. One of the issues that preoccupied the Austrian parliament at the end of the 1990s was the use of Austria as a channel for financial transactions by Russian businesses, including some of a dubious nature. In more than one session of the Austrian parliament's committee on intelligence services, Lieberman and Schlaff's name came up, with explicit references made to Schlaff providing financial help to Yisrael Beitenu.