Tax breaks, visas, et al: The 6 frauds for which police want Netanyahu charged

Tax breaks, visas, et al: The 6 frauds for which police want Netanyahu charged

A guide to the list of alleged bribery offenses for which investigators recommend the prime minister be prosecuted — some previously leaked, others shocking new revelations

Raoul Wootliff

Raoul Wootliff is the The Times of Israel's political correspondent.

Prime Minister Benjamin Netanyahu during a tour of the Jerusalem Police headquarters at the Russian compound in Jerusalem, October 7, 2015. (Mark Sellem/Pool)
Prime Minister Benjamin Netanyahu during a tour of the Jerusalem Police headquarters at the Russian compound in Jerusalem, October 7, 2015. (Mark Sellem/Pool)

Police recommendations that Prime Minister Benjamin Netanyahu be charged for a raft of bribery and breach of trust transgressions caught both pundits and politicians by surprise Tuesday evening, both for the severity of the charges and the specifics of the accused crimes.

According to police leaks that had filled news reels and reams of paper day after day, the year-long probes of the so-called Case 1000 and Case 2000 had uncovered a fair bit of quid (in the form of gifts given by billionaire benefactors to the prime minister, and a promise for better coverage from the media outlet most antagonistic to him) but not much quo.

Even the most recent reports had indicated that in return for the gifts, perhaps the most significant example of a favor Netanyahu had done in return was helping arrange visas.

Police Commissioner Roni Alsheich speaks during the “Or Yarok” conference at the Avenue conference center on March 28, 2017. (Roy Alima/Flash90)

But Tuesday’s announcement, which came in the form of a 2,000-word statement detailing the recommended charges, demolished the assumption that the allegations involve little more than cigars and a bit of bureaucratic help.

Police are recommending that Netanyahu stand trial in both cases not only for fraud and breach of trust, but also for the still more serious crime of bribery.

Case 1000 probed allegations that Netanyahu and his wife, Sara, received gifts from billionaire benefactors, notably Israel-born Hollywood producer Arnon Milchan and Australian mega-investor James Packer, while Case 2000 involves an alleged deal between Netanyahu and the Yedioth Ahronoth newspaper publisher Arnon Mozes which would grant the prime minister more favorable coverage in that paper.

In addition to Netanyahu, police are also recommending indicting Milchan and Mozes, saying that “there is sufficient evidence that suspicions of bribery were committed” by all three.

According to Prof. Barak Medina, the former dean of the Hebrew University Law Faculty, the singular felony of “fraud and breach of trust” applies when public servants have have compromised their ability to act in the public interest.

“You don’t have to take money or get benefits to be guilty, you don’t even have to discuss it,” he said. “Actively putting yourself at risk of not acting in the public interest is the very definition of fraud and breach of trust. That’s it.”

Bribery, however, is considered an even more severe crime and carries with it the additional label of “moral turpitude” — defined in law as “an act or behavior that gravely violates the sentiment or accepted standard of the community” — which prohibits politicians from running for office for a full seven years after the end of a prison or community service sentence.

Police said that in Case 1000, Netanyahu and his wife are suspected of receiving illicit gifts amounting to some NIS 1 million ($282,000) with around NIS 750,000 ($212,000) coming from Milchan and a further NIS 250,000 ($70,000) from Packer.

Benjamin Netanyahu (left) is seen with a cigar in Jerusalem on July 2, 1997. (Flash90)

And according to the penal code, a public servant can be found guilty of bribery for requesting or agreeing to receive a bribe, even if the bribes were ultimately rejected or the deal fell through before implementation.

While some had indeed predicted Netanyahu would face at least one police charge of bribery, the recommendations (which advocate two such charges) also contain new and potentially explosive allegations that had previously not been part of the discourse surrounding the prime minister, and are likely to shape it in the coming weeks, months and even years.

Here are the specific alleged crimes for which police say they have collected enough evidence to bring Netanyahu to trial — five from Case 1000 and one multi-faceted claim from Case 2000. All, it should be noted, have been denied by Netanyahu:

1. Tax breaks and the ‘Milchan Law’

The central favor that police believe Netanyahu provided for both Milchan and Packer, one that has previously not been included in police leaks, was to work to extend a little-known tax exemption law known as Amendment 168 to the Tax Ordinance.

Ostensibly a piece of legislation meant to encourage aliyah (immigration to Israel) by Jews living abroad, Amendment 168 to the Income Tax Ordinance was signed into law in September 2008 by prime minister Ehud Olmert. As it stands, it grants a 10-year tax exemption on income earned abroad to new immigrants and to returning residents who have lived abroad for at least 10 years. In addition, it gives those eligible a 10-year exemption on reporting earnings abroad.

The law, however, flies in the face of international anti-money laundering standards and each year for the past several years the finance minister has tried to abrogate it. Each year, as part of negotiations over the Arrangements Bill, the effort to cancel it is scuttled, putting Israel in danger of being placed on international anti-money laundering sanctions lists.

Police now believe that Netanyahu worked both to protect and to advance a change to this problematic law on behalf of Milchan and Packer, who would have likely saved millions of dollars in taxes had the change to what has become known as the “Milchan Law” not been thwarted by the Treasury.

“The prime minister is suspected of working to extend the tax exemption for returning citizens beyond 10 years, a benefit of great financial gain for Milchan,” the police recommendations said, specifically claiming that Netanyahu asked Finance Ministry officials to approve the move.

Arnon Milchan, left, and Benjamin Netanyahu on March 28, 2005. (Flash90)

Police say that Netanyahu’s attempt to extend the tax exemption from a period of 10 years to 20 years was only blocked when the Finance Ministry insisted “it did not match the national interests of the public treasury.”

Both the Finance Ministry and the State Comptroller have agreed that the law, even in its current form, leeches millions of potential shekels from the state coffers each year and does more to help Israel thrive as a shady tax haven than it does to encourage aliyah. Nonetheless, every year what has been described by officials as “a hidden hand” ensures that the exemption remains part of the state budget against the wishes of the Treasury.

If, as the police recommendations suggest, that hand belongs to Netanyahu, prospectors would be able to argue a clear quid pro quo which was not just proposed but was implemented for nine years in a row.

2. A free trade zone and a Jordan-Israel peace initiative

In the second allegation of Case 1000, police say that Netanyahu promoted a free trade zone near the Jordan-Israel border that could have benefited Milchan personally.

“The prime minister is suspected of working to advance a business project that Milchan had a direct interest in being approved as part of his partnership with Indian businessman Ratan Tata,” the police recommendations read.

Ratan Tata (Public Domain)

Ratan Tata is head of the Tata business conglomerate and hails from one of the most prominent Indian families. The largest company in India and one of the most influential in the world, the Tata Group and its subsidiaries own hundreds of global companies and financial services and are engaged in a similar number of quasi-governmental projects around the world.

The project in question was a 2009 proposal for Tata Motors, which includes the Jaguar and Land Rover brands, to build a low volume automotive assembly plant in the West Bank intended to provide skilled jobs to Palestinians. The estimated $250 million plan, which was proposed as part of an Israeli-Jordanian peace initiative, was set to include a free trade corridor to Haifa to offset higher logistic costs in Israel, the company said.

“The prime minister is suspected of trying to push the deal at the request of Milchan, against the opinion of officials in the Prime Minister’s Office and the Defense Ministry,” police said Tuesday.

A high level former Defense Ministry official, who asked to remain unnamed, confirmed to The Times of Israel that the ministry expressed its opposition to the project in a series of initial meetings at the time.

Testifying to Israeli police in November, Tata confirmed that Milchan’s Blue Sky International security advisory firm provided services to the Tata-owned Taj Hotel Group, following the 2009 terrorist attack in Mumbai, according to a statement released by his office at the time.

The statement said that Tata told police that Milchan “was requested by a member of the Israeli security team to assist in preparing a concept plan for the project,” but that he has never discussed the project with him.

An IDF border guard post seen at Qasr el Yahud, near the Jordan River and the Israel-Jordan border, on January 18, 2015. (Hadas Parush/Flash90)

Asked by investigators whether the prime minister had been involved, “Tata stated that there had been one meeting of about 10-15 minutes where Netanyahu was present at which he had suggested one or two preferred sites for the plant,” the statement added.

Indian media reported that a concept layout plan for the plant was drawn up but the project died a natural death when the peace initiative was dropped.

Netanyahu’s involvement, according to the police recommendations, would signal that his efforts on Milchan’s behalf go far beyond changing legislation as may be the case with the “Milchan law” and extend to multimillion-dollar intergovernmental projects and even the sensitive topic of Israeli-Palestinian peace plans.

3. and 4. Media monopolies and manipulation

Netanyahu has long sought control over certain aspects of Israel’s media landscape, even appointing himself a communications minister in 2015 and overseeing a number of major reforms to public and commercial outlets.

As with his involvement in the tax exemption law and the Tata automotive plant, the police recommendations suggest that bribes from Milchan may explain his motivation for meddling in the media.

According to police, Netanyahu was involved in two separate but linked schemes aimed at manipulating media executives in order to benefit Milchan.

Channel 10’s announcement about its closure, blaming Prime Minister Benjamin Netanyahu (screen capture: Channel 10)

“The prime minister is suspected to have worked to advance the acceptance of Milchan as a shareholder for the ‘united’ Channel 2, an investment that Milchan sought for financial gain,” the first clause in the recommendations regarding the media reads.

Later in the document, police also write that “the prime minister is suspected of working, against the law, on the issue of Channel 10, despite his friend Milchan’s being a shareholder in the channel.”

The suspicions relate to a series of interventions that Netanyahu is said to have carried out on Milchan’s behalf dating back three years to when the Hollywood producer sought to sell the majority of his shares in the financially strapped Channel 10.

The channel, one of only two independent television stations in Israel, has for years been struggling to pay back the millions of shekels it owes to the government, and has been repeatedly saved from going completely dark by a number of last-minute reprieves.

In 2015, after Netanyahu threatened to withhold renewal of the channel’s broadcasting license, Milchan sold over half of his 24 percent stake in the company, pocketing an estimated NIS 25 million ($7 million) from the transaction. Purchasing the shares, as well as those sold by several others, British-American billionaire businessman Len Blavatnik’s RGE Group became Channel 10’s majority stakeholder.

Len Blavatnik, head of the Blavatnik Family Foundation (Courtesy)

According to leaks from the investigations first reported by Haaretz, Blavatnik told police that he was personally approached by Netanyahu and asked to make an offer for the shares. He reportedly said that Netanyahu had even sent his then-chief of staff Ari Harow, whom the prime minister is said to have sought to install as Channel 10’s director, to meet with him to discuss the transaction.

Harrow turned state’s witness against the prime minster last year in a deal likely to lessen punishment in a separate corruption charges he is facing.

The prime minister’s apparent involvement in the sale should have been prohibited due to his friendship with Milchan, police say, regardless of the allegations regarding the gifts. Given his long friendship, he should have recused himself from involvement, according to the Restrictive Trade Practices Law. The gifts, however, turn the case from a conflict of interest into bribery.

But the story does not end there.

After selling the Channel 10 shares, Milchan is then believed to have indicated an interest in securing another key position in the Israeli media industry.

The first police allegation refers to several meetings held in late 2015 in which then-communications minister Netanyahu aided Milchan in his attempt to secure a major interest in Channel 2 television.

Then, Israelis could choose between three news channels — the state broadcasting authority’s Channel 1 (recently replaced by Kan), Channel 10, and Channel 2, which was operated by two franchises, Reshet and Keshet, which shared airtime. (From November, Reshet and Keshet have aired separately seven days a week.)

Under the plan hatched by Netanyahu and Milchan, the Hollywood producer would have gone into partnership with Reshet — specifically, with controlling shareholder Udi Angel, Haarez reported. Then, at some point in the future, Milchan is believed to have hoped to merge Reshet with Keshet.

The suspicion is that Netanyahu stepped in to help.

According to police leaks, a number of meetings with various figures took place, all of them with the participation of Netanyahu, Milchan, Milchan’s Israeli business adviser Ze’ev Feldman, and Shlomo Filber, the then-director general of the Communications Ministry and a Netanyahu loyalist. One even took place at Milchan’s Israel home.

Shlomo Filber, director general of the Communications Ministry, during a court hearing in the Supreme Court regarding the closing of the Israel Broadcasting Authorities. May 15, 2017. (Miriam Alster/Flash90)

“The prime minister is suspected of pushing the issue with Communications Ministry officials while he served as communications minister,” police said.

Filber has since been banned from the ministry amid an investigation into suspected criminal wrongdoing related to a merger involving the national telephone company Bezeq, which is owned by another Netanyahu associate, Shaul Elovitch. Netanyahu resigned as communications minister last February shortly after the investigations were opened.

Milchan needed Netanyahu and Filber because a merger of the Reshet and Keshet franchises would have required regulatory changes.

In the end, however, the deal fell through over opposition by the late Muzi Wertheim, one of the owners of Keshet.

5. The US visa

The last allegation of Case 1000 relates to the one matter that has, as noted, received most media coverage during the investigations: in an alleged favor granted to Milchan in return for the gifts, Netanyahu helped him secure a long-term US visa.

“The prime minister is suspected of working to help Milchan in his arrangement for a visa to the United State after he faced difficulties in extending it,” the recommendations say. “The prime minister is suspected of turning to government officials including the US secretary of state and the US ambassador in Israel.”

Born in Israel, the LA-based Hollywood producer Milchan, 72, never became a US citizen, but used to enjoy 10-year visas to live there. However, in 2013, he gave an interview to Israel’s Channel 2 in which he acknowledged that he had worked in the past for the Israeli intelligence community. In the wake of his disclosures, according to Channel 2, Milchan — behind such movie hits as “Fight Club,” “Pretty Woman,” “LA Confidential,” “12 Years a Slave” and “The Big Short” — was no longer granted 10-year US visas, and instead was required to apply for an annual extension.

It was then, police suspect, that Netanyahu first got involved.

Netanyahu has admitted to asking then-US secretary of state John Kerry to intervene to restore the 10-year US visa but has claimed it had nothing to do with the gifts, and that he has made similar gestures for others.

Acting on Milchan’s behalf, Netanyahu is believed to have asked Kerry about the visa three times in 2014 as well as asking then-US ambassador to Israel Dan Shapiro on a number of other occasions.

A US State Department official told The Times of Israel Wednesday that, even though the incidents took place during the Obama administration, they would not comment on any internal Israeli investigation.

Prime Minister Benjamin Netanyahu (R) and his then-chief of staff Ari Harow arrive at a Likud faction meeting in the Knesset, November 24, 2014. (Miriam Alster/Flash90)

Strengthening the suggestion of a quid pro quo, Netanyahu even asked Milchan if he had brought him cigars during a conversation regarding his difficulties renewing the visa, the prime minister’s former chief of staff Ari Harow reportedly told police.

When the two met to discuss the issue, Harow said, the prime minister directly asked Milchan if he had brought him cigars. “Did you bring the cigars?” he asked frankly.

While the quid pro quo deal appears to be Netanyahu’s help with the visa in return for the gifts, the police have framed the visa issue as another way for the prime minister to have helped Milchan financially, saying that, given Milchan’s primary business interest in the US, “the issue is one of wide-reaching financial significance” for him.

6. Courting coverage, cutting circulation

Case 2000 involves a suspected illicit quid-pro-quo deal between Netanyahu and Yedioth Ahronoth newspaper publisher Mozes that would have seen the prime minister weaken a rival daily, the Sheldon Adelson-backed freebie Israel Hayom, in return for more favorable coverage from Yedioth.

Under the alleged agreement between Mozes and Netanyahu — which was not implemented — the prime minister said he would advance legislation to curb the circulation of Israel Hayom if Mozes instructed his reporters and op-ed writers to change their often negative stance towards him.

“Police have concluded that there is sufficient evidence against the prime minister in this case for the offense of bribery, fraud and breach of trust,” the recommendations read.

From 2009 “Netanyahu and Arnon Mozes held conversations and personal meetings during which they discussed helping each other as a quid pro quo to advance their respective interests,” said police.

Publisher and owner of the Yedioth Ahronoth newspaper Arnon ‘Noni’ Mozes arrives for questioning at the Lahav 433 investigation unit in Lod on January 15, 2017. (Koko/Flash90)

Furthermore, the investigation revealed “that the sides took actual active steps in advancing each other’s interests in continuation of the understandings reached between them, or at least presented to each other as if they had acted that way.”

Police said that Netanyahu offered his support for possible measures including closing Israel Hayom, helping to shrink the newspaper’s circulation numbers, and nixing the free daily’s weekend edition. The law did not pass, as the government folded and went to elections in 2015.

In addition “the prime minister acted as an agent for the Yedioth Ahronoth publisher with other business people, in the purchase of Yedioth Ahronoth, while he was communications minister,” police said.

Yedioth, once the country’s largest tabloid, is often seen as critical of Netanyahu.

If Netanyahu did indeed say that he would be able to close or constrain the paper on his own, it would constitute his first publicly known admission that he could wield such influence, and could land him in trouble for another crime: perjury.

In an affidavit submitted to Israel’s Central Elections Committee in February 2015, Netanyahu said he “does not have, and has never had, any ties of control or any other organizational ties, in any form, with Israel Hayom, or with newspaper staff or journalists writing for it, that would influence the paper’s editorial considerations or its contents.”

In October 2016, the state comptroller rejected allegations that Israel Hayom should be considered political campaign material for Netanyahu and the Likud party, based, partly, on that affidavit.

Forced by a Supreme Court order to reveal the dates of his phone calls with the owner and chief editor of a newspaper seen as staunchly loyal to him, Netanyahu revealed last year that in 2012-2015 he spoke with American Jewish casino mogul Sheldon Adelson almost once a week and nearly double that often with then-Israel Hayom editor Amos Regev.

American businessman and investor Sheldon Adelson (L) with Prime Minister Benjamin Netanyahu at a cornerstone laying ceremony for the Medicine Faculty buildings at the Ariel University in the West Bank, June 28, 2017. (Ben Dori/Flash90)

The prime minister said that in the three years between 2012 and 2015, he spoke to Adelson on average 0.75 times a week, indicating there were some 117 phone calls with the Israel Hayom owner during that period. The calls with Regev occurred around 1.5 times a week on average, Netanyahu said, totaling over 230 calls.

Since its founding a decade ago, Israel Hayom has consistently supported the prime minister. Its unfailing backing of Netanyahu has been characterized by the playing down of his failures, the hyping of his achievements and the lashing of his critics. Furthermore, it has shied away from praising his rivals.

Some media analysts, however, have noted a shift in its coverage of late that may suggest a cooling in the paper’s support for Netanyahu and his family in recent months.

Adelson is said to have testified in the investigations that Netanyahu spoke with him about the possibility of canceling some of Israel Hayom’s weekend supplements, which would have reduced its appeal and its revenues.

Adelson is also reported to have said that he was “surprised, disappointed and angered” to learn of the conversations between Netanyahu and Mozes.

Netanyahu denies any wrongdoing.

Simona Weinglass contributed to this report.

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