Sharon implicated in corruption scandal

Michael Pollak mpollak at panix.com
Tue Jan 7 17:09:39 PST 2003


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.

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