Taking Strock / Corrupt - Who, Us?

Stanley Fischer thinks graft in Israel is more smoke than fire. Nice rose-colored glasses he's got.

Feel disgusted? Is your stomach heaving? Or have you given up following the most recent case of corruption?

We have good news for you: from Washington everything looks peachy keen. At least, when you look through the glasses of Stanley Fischer, governor of the Bank of Israel, who's participating in the International Monetary Fund conference. Chatting with TheMarker last week, Fischer stated that corruption in Israel isn't that bad. "Israel isn't an especially corrupt country," he remarked. "A lot of investigations start, but there aren't a lot of convictions. We hasten to accuse. The system accuses very fast. My impression is that we don't have an unusual level of corruption."

Fischer is a man of the world. During his international career, he must have encountered a great deal of graft, mainly when serving as first deputy managing director of the IMF, personally handling terrible financial crises in horribly corrupt nations.

Stanley Fischer has won praise as an economist and central banker, yet he seems to fail to grasp his status in the public eye. When a nation's central banker says we aren't "an especially corrupt country", he's signaling that corruption is normal, nothing to make a fuss about, as long as it doesn't mushroom into "unusual" dimensions.

His casualness toward corruption in Israel isn't only morally problematic: it's a full-blown economic problem as well. Fischer the economist must know that corruption warps resource allocation and acts as a disincentive. It wrecks the principle of equal opportunity in the labor market, too. In the interview, Fischer bewails the brain drain from Israel, mainly from the universities. He's right, too. But didn't it occur to him that talented young Israelis reading each day in the paper about nepotism and cronyism running riot in government, about fat cats living high on the unkosher hog with their taxes, might prefer to seek a future somewhere else? Or turn rotten themselves? The question of whether or not Israel has "unusual" levels of corruption doesn't really matter. The point is that all public figures, let alone leaders of Fischer's stature, should demonstrate their repugnance for corruption without faltering. But Fischer has a problem. He leads one of the few central banks in the west that has been caught by the state comptroller in a long list of corrupt practices of its own.

Fischer's claim that Israel has too many investigations and too few convictions is purely weird. A whole slew of corrupt practices have been exposed at the Bank of Israel, which nobody denies. Nobody denies the facts yet neither the police nor the prosecution has begun any investigations to elucidate who dunnit. They're too busy with other investigations.

More importantly, corruption isn't just an indictment that ends in a conviction. There are all sorts of corrupt practices that aren't precisely criminal, or regarding which it's hard to prove criminal intent. But they're still rotten to the core.

The previous prime minister, Ariel Sharon, was never convicted of any criminal activity, but the entirety of the facts regarding the many and myriad affairs with which he was associated indicates that his norms were corrupt, and ugly.

The report by Attorney General Menachem Mazuz to government about the Greek island affair did conclude that there was no evidence of criminal deeds, but the conduct of the parties had been suspect.

Last week Mazuz opened a third criminal investigation into the incumbent prime minister, Ehud Olmert, and published a draft indictment of the former finance minister, Avraham Hirchson. In the same week, Fischer chose to plug his theory that corruption in Israel isn't that bad, and that the only problem is the ruckus we kick up over it.

Is that so?

Imagine if the equivalent of finance minister in the United States or Britain was accused of embezzling public funds. Wouldn't the political systems of either country, which Fischer knows well, be shaken to the core?

Avraham Hirchson was a petty political hack who never should have been finance minister, or Knesset member for that matter. According to the draft indictment, he was also a petty crook who stole millions of shekels using some pretty sorry methods - cash in envelopes and inflated expense accounts.

But Hirchson isn't the story. The story is why he was named to the Finance Ministry. That's what matters. And, when he was appointed to the treasury, why the political and public echelons kept silent.

Hirchson is just another link in the chain of dreadful political appointments by Prime Minister Ehud Olmert; he's a small-time political hack on whom Olmert knew he could count, nothing more.

The courts dwell endlessly on what constitutes "breach of duty", but anybody with a brain cell knows it when he sees it. Appointing a person of Hirchson's ilk to finance minister may not be a criminal act, but it's certainly a breach of duty toward the public.

Hirchson had a young friend. Her name was Lilach Nehemia. In the world in which Hirchson and Olmert live, friendship is of a higher value, and one should take care of one's friends.

What actually is a "friend"? A friend is somebody you care about, somebody you help, but always, without fail, using money that isn't yours. At the moment of truth, the friend should reciprocate, through the control of resources under his care.

Based on the draft indictment filed against Hirchson last Wednesday, Hirchson wanted to take care of his friend. So he arranged that she should get NIS 5,000 a month in salary from the law office of Baruch Adler, not that she worked there or anything. In parallel, the retainer fees that the National Workers Union, which Hirchson chaired, paid to Adler's law firm increased. Truly a story of friendship that warms the cockles of one's heart, that.

But Friend Nehemia had a large appetite and that NIS 5,000 didn't go very far, which brings us to another criminal investigation that commenced last week, against the prime minister this time. One of his dubious appointments, when serving as industry minister, had been Ms Nehemia to a new job he invented for her - a veep at the Small Business Authority.

Olmert and his right hand, Raanan Dinur, appointed Nehemia to the job even though she'd been disqualified by a public panel from fulfilling another position at the Government Tourism Authority, because of her political affiliations and absence of noteworthy skills.

Naturally, Hirchson and Olmert could derail the prosecution's entire case very easily. How could anybody possibly claim that Nehemia lacked noteworthy skills if she managed to become a friend to both?