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State watchdog: IAI gave powerful workers union NIS 180m, without oversight

Under the leadership of current Welfare Minister Haim Katz, labor group received NIS 15 million in public funds annually for undocumented salaries, other costs

Welfare Minister Haim Katz speaks at a Finance Committee meeting in the Knesset on March 5, 2018. (Yonatan Sindel/Flash90)
Welfare Minister Haim Katz speaks at a Finance Committee meeting in the Knesset on March 5, 2018. (Yonatan Sindel/Flash90)

The state-run Israel Aerospace Industries funneled NIS 15 million ($4 million) a year in public funds to its powerful workers union, according to an ombudsman report released on Sunday, which described the findings as “serious.”

According to the report by State Comptroller Yosef Shapira, IAI funneled NIS 180 million ($47 million) to the workers union between 2006 and 2018, and waived its requirements for financial documentation of the transactions. During that period, Haim Katz, who is now the welfare minister representing the Likud party, and his son Yair helmed the workers union.

“For years, the company transferred huge amounts — amounting to tens of millions of shekels — from public funds to cover salaries and related expenses, without requiring the union to report on the identities of the employees and the costs of their employment in the company, and without even fully reviewing the financial reports of the workers union, and without proper oversight and control over the use of these funds,” the state watchdog said.

Senior members of the workers union were also given employment benefits, such as company cars, and were eligible for dozens of overtime hours per week, in an arrangement that was not regulated, said Shapira. Some of them worked full-time for the union, rather than the company, he said, and some employees were “borrowed” by IAI to serve the union.

The relationship between IAI and its union was so skewed, Shapira said, that at times it appeared the former served the latter.

“This activity must be halted immediately,” wrote Shapira, describing the findings as “serious.”

Shapira also noted that the Histadrut labor union and members of the IAI union had petitioned the High Court of Justice in a bid to block him from investigating the transfers. They later asked that the petition be erased.

Yair Katz (L), son of Welfare Minister Haim Katz (Likud), at a remand hearing at the Rishon Lezion Magistrate’s Court, March 22, 2017. (Flash90)

In February, police announced there was sufficient evidence to indict Katz, his son, and top Israel Aerospace Industries officials on corruption-related charges related to IAI.

In May, Attorney General Avichai Mandelblit informed Katz that he intends to charge him, pending a hearing, for bribery, fraud, and breach of trust.

But no indictment has yet been handed down.

Katz, who has been an MK since 1999, is suspected of bribery, fraud, and breach of trust while serving as the head of IAI’s workers’ union in the past.

Police said Katz used his senior position to advance his own interests, including promising lucrative employment — both inside and outside the company — to IAI board members who cooperated with him.

In addition, police said Katz violated a directive by Mandelblit, who ordered him to distance himself from board members while they appointed a new chairman.

Suspicions of corruption at IAI became public last year when police raided the defense contractor, arresting 14 people, including Yair Katz.

Haim Katz was questioned by Lahav 433 anti-fraud investigators at least three times in 2017. The final interrogation, in August, lasted for over 10 hours.

The labor union at IAI, which employs some 16,000 people and is Israel’s largest state-owned company, is seen as closely tied to Katz, who chaired the union for more than 20 years.

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