Haaretz
January 8, 2003 (Wednesday)
Shvat 5, 5763
PM aides admit Sharon got $1.5m from S. African businessman
By Baruch Kra, Ha'aretz Correspondent, and Ha'aretz Service
Following allegations of financial improprieties by Prime Minister
Ariel Sharon and his two sons, which were reported in Ha'aretz
yesterday, advisers to Sharon conceded Tuesday that the prime
minister had received $1.5 million from a South African businessman,
but denied any connection to criminal activity.
According to the allegations, Ariel Sharon received $1.5 million from
Cyril Kern, a South African citizen, to serve as collateral for a loan
his sons Omri and Gilad took out to pay back a company from which
Sharon received illegal campaign contributions during his primaries
campaign for the Likud leadership.
Speaking at a press conference in Tel Aviv convened in response to the
allegations, Ariel Sharon's political adviser, Eyal Arad, told
reporters that "it is not by chance that there are leaks, lies and
disinformation designed to bring down the prime minister and his
government."
Arad denied that the loan from Kern was a bribe, and said that it was
a lawful loan that was repaid with interest last month.
Arad also confirmed that Sharon has ordered Attorney General Elyakim
Rubinstein to root out the source of allegations.
The State Attorney's office has asked the South African Justice
Ministry for help in its investigation of how and why Sharon received
the money from Kern.
According to the online edition of Mail and Guardian, a South African
newspaper, South African Justice representative Paul Setsetse
confirmed that the ministry was aware of the request made by the
Attorney General's office for Justice Minister Penuell Maduna to
assist in the investigation.
The paper quoted Setsetse as saying that, "The documents were sent to
us via [the department of] Foreign Affairs but they are still in the
diplomatic bag. They will land on the minister's desk in the next few
days and he will consider the written request; we will decide how to
respond."
In a conversation with Ha'aretz on Tuesday morning, Kern said that he
was "not involved in Israeli politics, and I do not want to be." Aides
to the prime minister announced that they would be holding a press
conference Tuesday afternoon to address the latest charges.
Labor Party Chairman Amram Mitzna on Tuesday called on Sharon to
resign or present his own account of the events in question. "If
Sharon decides to keep quiet he will lose his legitimacy and be
unworthy of leading Israel in its hour of crisis," he said.
The head of Labor's election team, MK Ofir Pines-Paz, submitted an
official request to the police commissioner and head of the police
investigation branch for Sharon to be interviewed on the matter.
The state's written request implies that Sharon and his son Gilad
deliberately deceived the State Comptroller and the police when they
were questioned about how Sharon intended to repay the money, as
ordered by the State Comptroller.
Army Radio reported Tuesday morning, however, that sources in the
Likud said they have in their possession a document proving that he
was able to secure a loan using his Negev property as collateral. The
sources also rebutted charges of wrongdoing by Sharon as "journalistic
nonsense."
Shell companies
In October 2001, the State Comptroller issued a report on shell
companies that allegedly financed Sharon's campaign for the party
leadership in 1999. The suspicions against Sharon were that he
violated the party financing law, which is not a criminal offense.
However, Ha'aretz has learned that other suspicions, far more serious,
have been raised about Sharon and his sons: the three are suspected of
allegedly receiving bribes, fraud and breach of trust, as well as
deceiving the State Comptroller and police. The Sharon family has not
yet been questioned about the new suspicions.
The origins of the affair are in the campaign Sharon ran against
Foreign Minister Benjamin Netanyahu for the Likud leadership in May
1999. State Comptroller Justice Eliezer Goldberg issued a report in
October 2001 covering all the election campaigns of the year, and
revealed that payments to various professionals who worked for
Sharon's campaign were channeled through shell companies, including a
company called Annex Research, established before the Sharon campaign
by Sharon's attorney - and now his bureau chief - Dov Weisglass.
Sharon was instructed by the State Comptroller to repay NIS 4.7
million to Annex, out of a total of NIS 5.9 million that the company
paid to Sharon campaign professionals. According to the letter sent to
the South African Justice Ministry, a few days after the Goldberg
report was issued, on October 4, 2001, Sharon handed over a first
check of NIS 500,000 to the company. Immediately after that, says the
document, Gilad and Omri Sharon, the prime minister's sons, began
seeking the rest of the sum.
To that end, Gilad Sharon went to the Leumi Bank branch in Sderot,
where the family accounts are kept, and on October 22 asked for a NIS
4.2 million loan, the remainder of what his father was supposed to pay
back to Annex Research. In exchange for the loan, it was agreed that
Gilad would mortgage the family-owned Sycamore Ranch. The loan was
granted, and the next day, the prime minister handed over NIS 4.2
million to Annex research.
But when the bank began processing the mortgage application, it
discovered that it is impossible to mortgage the ranch because it is
leased property owned by the Israel Lands Administration. The bank
demanded an alternative arrangement to the mortgage, or the money
back, so the Sharon family had to find another solution - and found it
in South Africa.
A police investigation learned that Kern transferred $1.49 million to
Gilad and Omri Sharon, on January 15, 2002, from a bank account in
Austria, through the JP Morgan Bank in New York, and into the Sharon
brothers' account in a Discount Bank branch on Tel Aviv's Rothschild
Boulevard.
With that money in hand, the Sharon brothers could take another loan
to pay back the one taken from the Sderot branch of Leumi. The Kern
money served as collateral for a NIS 4.2 million loan the brothers
took on April 30, 2002, from Discount Bank in Tel Aviv. That same day,
the money was transferred from the Discount branch in Tel Aviv to the
Sderot branch of the Leumi bank and the original loan was repaid. The
Sharon family's loan from the Discount Bank is due by April 30, 2003.
While all this was going on, the police were investigating the shell
companies, and eight days before the sons took the second loan, Prime
Minister Sharon was questioned by national fraud squad police at his
official residence in Jerusalem. He was asked, among other things, if
he repaid the money to Annex Research, as ordered by the State
Comptroller, and how he did so. Sharon is now suspected of lying to
the investigators when he said that he took a loan from the Leumi bank
branch in Sderot and in exchange mortgaged the Sycamore Ranch, hiding
from the police the information about the money his sons received from
Kern.
The document sent by the Israeli Justice Ministry to the South African
Justice Ministry includes suspicions the prime minister was not fully
forthcoming during the questioning that took place on April 22 at his
residence.
"On April 22, it was already known to all involved that it was
impossible to mortgage the ranch in exchange for the loan," says the
letter, "therefore, the ranch could not be mortgaged to pay back the
hundreds of thousands of dollars borrowed from the Sderot bank.
Despite this, when Sharon was asked by the police how he organized the
large payment to Annex, he replied that the payment was made possible
as a result of mortgaging the ranch. Mr. Kern was not mentioned, nor
was the money that was transferred or loaned by him."
In response to various questions, Sharon referred the police
investigators to his son Omri. For example, when asked about Annex's
sources of money, Sharon replied: "It's financial sources? I never
dealt with those financial issues. I think there is one person who
might know, and that's Omri." When his interrogators argued that Omri
had chosen to remain silent, Sharon responded: "Look, Omri's a big
boy; he needs to decide by himself."
The letter to the South African Justice Ministry also describes
suspicious activity by the other son, Gilad. After paying back the
Sderot loan, Gilad was asked to sign a statement clarifying the source
of the money paid to cover the loan, as required by the money
laundering law. "It must be noted," says the letter to the South
African Justice Ministry, "that Gilad Sharon tried to avoid signing
the document in the bank, according to which he received the money
from a lender named Cyril Kern. In effect, Gilad only signed the
declaration after the Israeli police began its investigation and began
asking questions at the aforementioned banks (Leumi in Sderot and
Discount in Tel Aviv - B.K.)." Indeed, the signature on the
declaration regarding the source of the money came only four months
after the money was paid back.
In its letter to the South African Justice Ministry, the State
Attorney asks the South African authorities to question Kern, since
the police and prosecution in Israel have no information about him -
or even proof he exists. The state attorneys make clear in their
letter to South Africa that the suspicions are that the financial
connection between Sharon and Kern are illegal, and that Sharon is
suspected of receiving bribes, fraud and breach of trust. "The purpose
and circumstances of the `loan' (quotation marks in the original -
B.K.) by Mr. Kern must be clarified by an Israeli police
investigation," says the letter.
Ha'aretz contacted a man by the name of Cyril Kern in South Africa,
who confirmed that he has a personal connection with Sharon. Asked by
Ha'aretz about the loan, the man responded "I don't know what you're
talking about. I'm afraid that too many stories are coming up in
Israel right now." Are you a businessman? he was asked. "I am very
sorry, I am an honest citizen and I am not interested in continuing
this conversation," he answered.
© Copyright Ha`aretz. All rights reserved