Taking Stock / The Father, the Son and the Cash

1. The police

We can hear the wailing now:

"Have we become a Third World country? The finance minister is suspected of receiving millions in cash-stuffed envelopes - who would have believed it?" No, we are not a Third World country, just a country that is showing the first signs - small ones - of dissatisfaction with the orgy of corruption, bribery and self-enrichment that has swept over the best and the brightest of the politicians, civil servants and businessmen here in Israel.

"My lawyer is right now advising the prime minister on forming the new cabinet," one of Israel's biggest tycoons told us a few years ago, in one of those rare moments of euphoria combined with hubris. "We have been giving his firm work worth hundreds of thousands of dollars a year. What do you think? Will he listen to my advice about divvying up the cabinet portfolios?"

Nothing new has been exposed in all of the corruption affairs being investigated in recent days: Everyone in the Israeli business world knows all about the corruption in the public sector, and the incredible importance of the machers who live on the gray border between the public purse and private enterprise.

So what has happened in the last few months that, one after another, senior officials are being lead off - from tax assessors to the finance minister himself - to the police interrogation chambers?

The answer is incredibly simple: The police have assigned hundreds more investigators to economic crimes in recent years. For the first time, the police are actually attempting to deal with the incredible scope of economic corruption.

Investigating economic corruption is complicated and complex. Most of the theft from the public coffers is carried out in very sophisticated ways.

The Israeli corruption market, as opposed to accepted practice in other corrupt countries such as Russia, China or Argentina, is not a "spot market." In other words, envelopes filled with cash are not handed over immediately once the official delivers the goods. Instead, Israel is a "forward market." For example, I provide a tender for you today, or a license, or some form of reduction - and in a few years you give me a job.

Increasing police manpower has allowed the force to switch from an investigative mode to an intelligence mode. Most of the information is gathered even before the suspect knows he is under suspicion. Today the police understand that as far as economic crimes are concerned, only long-term intelligence work brings results.

In Third World countries, every businessman knows that politicians, officials and regulators can be bought with cash-filled envelopes - or with a hint of a threat or a promise of a good job.

Third World countries are those where no one is surprised - or asks for an explanation - when some official's lifestyle improves amazingly during his tenure, or soon afterward.

But in developed countries, they do what our police have just started to do, they investigate the corrupt - however rich or important they are - and bring them to court.

2. The finance minister

Finance Minister Abraham Hirchson should resign.

The presumption of innocence is not relevant when the person who is supposed to be in charge of the economy is the subject of such serious allegations or such an intensive investigation.

Even if at the end of the investigation the police do not find sufficient evidence of clear criminal acts on Hirchson's part, a public representative's overwhelming fondness for envelopes stuffed with cash is enough to disqualify him from office.

Hirchson should never have been appointed finance minister. The only reason he got the job was the prime minister's cynical and self-interested desires. Hirchson's appointment was not the result of a coalition agreement or some special political requirement - only Ehud Olmert's personal preference.

Olmert, more than anyone else, knew perfectly well who the Hirchson family was. The father, a gray politico from the National Workers Union; and the son, drowning in enormous debts. This fit Olmert like a glove. Hirchson, a weak man, would be completely dependent on him.

The treasury officials also saw through Hirchson. They knew he was a functionary without any leadership ability, with no charisma and no special economic knowledge. They also thought this would be convenient: He would not bother them, and would do what he was told.

When Hirchson was the chairman of the Knesset Finance Committee, he insisted on dealing with matters relating to the banking sector reforms, in spite of his son's enormous debts to the banks. He claimed there was a complete separation between him and his son. Now, when he finds himself in trouble, he is claiming the exact opposite: Hirchson says it was his son who deposited the money in his bank accounts.

Last year I asked - several times - the three most senior people at the treasury if they really thought Hirchson could function as finance minister while his son was tied up in enormous debts. They preferred to remain silent.

3. The friend

Where does Abraham Hirchson start and Michael Zoller end? Zoller is his right hand, his shadow and friend for years.

How did Zoller manage to milk NIS 9 million from various bodies connected to the National Workers Union in recent years? And who approved such sums? Is there a connection between the hundreds of thousands of shekels that Hirchson overdrew from his account at Bank Yahav and the fact that his friend Zoller was chairman of the bank?

The treasury and the state comptroller have failed to provide proper answers to all these questions. Maybe the police will provide the answers.

4. The son

Ofer Hirchson was the star of the gossip columns at the beginning of the decade. He used to be described as a successful businessman.

It seems Hirchson junior believed what he read about himself in the newspapers, and took out enormous loans from the banks and bet on buying up traded companies - and he lost tens of millions of shekels in less than three years.

Bank Hapoalim, the main creditor of the younger Hirchson, was forced to refinance his debts. The public exposure of the debts was a serious problem for all those involved, and they found a solution: moving Ofer Hirchson's business out of the stock market arena and into privately held hands.

Since Hirchson junior abandoned publicly traded firms, no one knows anything about his debts anymore. In a television interview a few months ago, the father claimed that his son had straightened out all his debts. But how do you "arrange" debts of tens of millions? Only the Hirchsons know.

If Ofer Hirchson were a normal client, the banks would have long ago flayed him alive, confiscated his property and forced him to pass on every cent available for a settlement.

But Hirchson is still a preferred customer, who continues to live a fancy lifestyle as if his father were the finance minister of a Third World country.