Watchdog Singles Out Barak in Report on State Extravagance, Misappropriation

State comptroller: Defense minister violated norms of public conduct in his private business dealings.

State Comptroller Micha Lindenstrauss harshly criticized Defense Minister Ehud Barak in a special opinion issued yesterday on the company Barak transferred to his daughters upon entering the cabinet.

According to the opinion, Barak's operations were not in line with the public norms expected of a cabinet minister or candidate. Moreover, it said that Barak did not act in accordance with the rules to prevent conflicts of interest.

Defense Minister Ehud Barak
Alon Ron

The opinion was written at the request of the State Control Committee and accompanied the annual state comptroller's report that was released yesterday. It reviewed Barak's actions in light of the rules laid down by the 1978 Asher Committee, formulated to prevent conflicts of interest between a minister's (or deputy minister's ) public duties and private business interests. The rules are designed to create a firm barrier between these interests, before the officials assume their posts.

According to an investigation by Haaretz journalist Uri Blau that was published in October 2009, Barak's former company had revenues of about NIS 6.5 million between June 2007, when he took office, and the time of Blau's investigation. Of this, around NIS 5 million went directly to Ehud Barak Ltd.

Barak founded the international consultancy a year after losing the 2001 general election to Ariel Sharon. In June 2007, after Barak became Labor Party chairman, he gave his shares in this company and in two subsidiaries to his three daughters and joined the Olmert government.

Lindenstrauss criticized Barak for making the transfer his stake in the company to his daughters only three days before his appointment, instead of immediately after winning the party primary, since that victory guaranteed his entry into the cabinet: The Defense Ministry had previously been held by the man he beat in the primary, Amir Peretz.

Transparency would have required Barak, either before or shortly after he became a minister, to ask the State Comptroller's Office committee governing issues of conflict of interest to determine an arrangement for his business affairs during his time in office. "It is unfortunate that Minister Barak did not do so," Lindenstrauss wrote.

Lindenstrauss also wrote that transferring his companies' shares to his daughters did not sever him completely from the companies, as the rules require.

In his probe, Lindenstrauss found that while Barak reported to the committee on the operations of the companies under his direct ownership, he did not disclose his links to subsidiaries of these companies - information that only emerged in the course of the probe.

These should also have been examined for possible conflict of interest, Lindenstrauss wrote, adding: "In actual fact, full disclosure did not occur."

Lindenstrauss determined that Barak should have followed the rules and signed an agreement with the government that would allow the comptroller to scrutinize the companies, particularly in light of the fact that the companies were not in his daughters' professional fields and they were not involved in them from the beginning.

The state comptroller also wrote that Barak's wife, Nili Priell, violated the Asher Committee rules in failing to refer her own consultancy, Taurus, to the conflict of interest committee. But since she closed the company in 2008 Lindenstrauss found no reason to pursue the matter.

In conclusion, Lindenstrauss wrote that candidates to join the cabinet should be held to a higher standard over the management of their business affairs, so as to leave no room for doubt as to possible improprieties.

In a statement issued yesterday after the release of the special opinion, Barak said he welcomed and respected the report and the institution of state comptroller and had already begun applying the recommendations detailed in the opinion.

Barak also said in the statement that he wished to clarify that the companies' income derived from activities carried out before he became defense minister and that none of the clients of those companies had any business ties to the Defense Ministry. Therefore at no point was there a concern over conflict of interest, Barak said in his response.

The statement also pointed out that the rules preventing conflict of interest as they are currently formulated do not prohibit the companies from receiving payment for services, and that Barak withdrew funds only in accordance with the permit granted him by the committee operating under the aegis of the State Comptroller's Office.

Following the release of the report yesterday, the Movement for Quality Government called for Barak to resign.

MK Yoel Hasson (Kadima ), chairman of the State Control Committee, said yesterday that the committee would discuss the report in the near future. He said Attorney General Yehuda Weinstein should investigate Barak, his companies and his daughters.