A loophole in local election funding law that does not require candidates to publicly report loans could be allowing wealthy individuals, as well as criminals, to influence the outcome of nationwide polls on October 30.
While legislation requires those running for office to publicly register donations — capped at NIS 5,000 ($1,350) — as well as unlimited loan guarantees, it only requires personal loans to be reported after the elections are over, and even then, the details are not published.
In a loan arrangement, one person lends his or her money to another, expecting it to be repaid at a determined time.
A loan guarantee enables a candidate or faction to borrow cash before the election from an institution such as a bank or to get an advance on state funds, which are calculated and fully paid only after the polls are over.
The loophole, which protects the identities of personal lenders and does not require publicizing how much they have lent, means that the public is unable to assess what behind-the-scenes influence a lender might wield on an elected candidate.
Furthermore, according to the Movement for Quality Government, a clean government watchdog, the loophole theoretically allows a supporter to provide a loan which the candidate can, in agreement with the supporter, never actually repay — and the public would not be privy to this information.
Lenders request anonymity for various reasons, in some cases, conditioning their loans on promises of anonymity. Sometimes, a single individual may lend money to several candidates, a fact he or she does not want made public.
“We are aware of the problem in real time,” MQG lawyer Zohar Altman-Raphael told The Times of Israel.
“You can give a loan and then not ask for it back. It’s a way of laundering donations without having to report them.”
As the law currently stands, each faction must have a campaign bank account and must continually update a publicly available website that is run by the State Comptroller’s Office with details of donations and loan guarantees — but not loans.
Donations must be reported, in Hebrew, within three days. They can only be given by citizens, not by companies or NGOs.
Both the duty to report income and the limit on donations are aimed at increasing transparency and equality — and at avoiding situations in which wealthy, or crooked, individuals can underwrite campaigns for a particular candidate on the unspoken understanding that the candidate will advance policies that favor them once he or she is elected.
Neither Altman-Raphael nor a spokesman for the State Comptroller’s office were able to explain why loans were not subject to the same public scrutiny rules as gifts and loan guarantees.
The spokesman said, ”Data about loans, just like data about loan guarantees, donations, and all other activities during the election campaign, are reviewed by the State Comptroller after the elections in accordance with the law and public announcements.
“In spite of that, the subject of publicizing loans will be reconsidered by the State Comptroller. If and when a decision is taken on this, advance notice will be given so that candidates and lenders will know about it, as was done before in relation to the publishing of bank guarantees.”
The Times of Israel turned to the three leading candidates in the hotly contested, and increasingly dirty, Jerusalem elections and asked — in the interests of public transparency and regardless of legal requirements — whether they had taken or been promised loans, and if so, by whom and for how much money.
As reported on Wednesday, Ze’ev Elkin — currently the government’s environmental protection and Jerusalem affairs minister and the prime minister’s man for the mayoralty— has raised NIS 6,166,000 ($1.7 million) for his election campaign, according to the figures on the State Comptroller’s website.
His list includes 16 loan guarantees, the four biggest for NIS 1 million each — two of them from the same person but on different dates — alongside contributions by individuals.
Fleur Hassan-Nahoum, number two on Elkin’s list, told The Times of Israel, “All our loan guarantees are on the State Comptroller’s website and we have not taken any [cash] loans, only loan guarantees.”
As of Friday, Moshe Lion, who is endorsed by leading ultra-Orthodox rabbis, had reported NIS 99,900 ($27,000), all of it from donations.
Lion’s spokesperson said he had taken neither loans nor a government advance and was largely funding his campaign himself.
According to the web page of the Hitorerut (Awakening) party and its leader Ofer Berkovitch, NIS 157,973 ($42,625) had been raised by Friday, all of it from donations of up to NIS 5,000.
Berkovitch — a secular 35-year-old whose slate reflects a spectrum of political views — admits to having taken loans, the terms of which, according to the rules, must be determined in writing. But he would not reveal the identity of the lenders.
A statement from Berkovitch’s office said that he and his faction “raised all money by loans and donations in accordance with the law. Every shekel is reported to the State Comptroller in accordance with his instructions. The State Comptroller decided what to publicize and what not.”
The statement added, “The State Comptroller sees a loan as a financial deal which is returned with interest after the elections. We act according to the State Comptroller’s instructions and this is the information that has been given to the various donors and lenders.”
Berkovitch’s refusal to reveal his lenders’ identities was recently exploited by Elkin’s camp, which, on Thursday was revealed by the Haaretz Hebrew-language newspaper to have been behind a campaign that sought to portray Hitorerut as a tool of the extreme left.
In addition to the loophole, lawyer Altman-Raphael said it was problematic that the State Comptroller waited until after the elections to begin his funding review, and then took months to publicize his findings.
“The review should be immediate. Instead, it takes a long time for the State Comptroller to check whether sums were reported on time, whether they exceeded legal limits, whether contributions came from sources other than individuals, and so on.
“By the time the report comes out, the public is already far less interested in whether a candidate has been fined for irregularities.”
Berkovitch’s slate was fined NIS 468,562 ($127,000) by the State Comptroller after the last local election in 2013, having “managed its accounts not in full compliance with the instructions of the State Comptroller” by failing to report all of its expenses.
Hitorerut had reported a surplus of NIS 323,066 ($87,400) when in fact it had ended the election with a small deficit of NIS 8,537 ($2,300).
The party’s total income for that election – which was not disputed by the State Comptroller – was recorded at NIS 3.192 million ($863,500), of which NIS 3.123 million ($845,000) had come from treasury funds and exactly NIS 64,388 ($17,418) from donations.
Hitorerut was in good company that year — large numbers of factions received black marks countrywide, including the that of Berkovitch’s chief rival at the time, Jerusalem’s now outgoing mayor Nir Barkat, which was fined 406,087 ($110,000) for faulty reporting.
The NGO route
Another way in which candidates may theoretically bypass election funding rules is via NGOs set up in a way that conceal their objective of raising money for a particular politician.
In 2015, Yitzhak Rochberger — the former mayor of Ramat Hasharon in central Israel — was sentenced to six months of community service, a suspended sentence of six months and a fine of NIS 40,000 ($10,300) for fraud and breach of trust.
Despite this, Rochberger launched a campaign for reelection as mayor.
Earlier this month, the Interior Ministry’s election supervisor for the area ruled that he was forbidden from running because his conviction carried moral turpitude — a designation that, according to election law, bars him from serving in public office for seven years.
Rochberger submitted an urgent petition to a Tel Aviv court to have the decision reversed – an attempt that ultimately failed — and had a top lawyer to represent him — Renato Yarak, who formerly directed the High Court petitions department at the State Prosecutor’s office.
An investigation by Hadashot News subsequently revealed that Yarak’s legal opinion had been addressed to and paid for by an NGO called “The Association for the Investigation of Public Officials.”
This was founded in March by a friend of Rochberger’s and all of its members were Ramat Hasharon residents.
The association has no presence on the internet and social networks.
The one thing it did, according to the probe, was to raise tens of thousands of shekels to fund Rochberger’s lawyer.
After the exposé, the Movement for Quality Government asked the State Comptroller to look into whether payment of Yarak’s fees by the NGO broke campaign funding rules, which prohibit a candidate from taking donations from companies or NGOs.