Israeli businessman Beny Steinmetz has been negotiating with the Israel Tax Authority and the State Attorney’s office for taxation and economics for several months in an effort to have the state’s civil and criminal cases against him closed, sources inform “Globes.”
In a civil case, the state is demanding NIS 4 billion from Steinmetz. In a criminal case, Steinmetz is suspected of bribing a foreign public servant in Guinea and conducting a fictitious transaction in Romania.
In the settlement under discussion by the parties, both affairs will end with payment of tax and no criminal sanctions.
The state has expressed willingness to compromise, but the Tax Authority’s demands are still unacceptably high for Steinmetz. The original tax assessments issued for Steinmetz amount to NIS 4 billion, while Steinmetz is believed to be offering hundreds of millions of shekels for closing the cases.
A source in the case says, “The parties have been in advanced negotiations for some time, with each side putting its demands on the table. There has still been no breakthrough in the negotiations, however, and we have not yet reached the home stretch.”
Another source in the case told “Globes,” “Progress in the negotiations is slow, with the goal being to conclude all of the cases simultaneously. There are understandings and a general direction, and there is a message of willingness to move ahead, given a number of conditions and demands, but these conditions are material and difficult, and there is no agreement on them right now.”
It started in Africa
Steinmetz’s legal problems in Israel are a result of his overseas business. Most of Steinmetz’s business, including diamond and iron mines, is outside Israel, mainly in African countries. A large part of this business is held through trusts, at least some of which are registered in tax shelter countries.
In 2012, “Globes” reported a dispute between Steinmetz and the Tax Authority, which was demanding hundreds of millions of shekels from Steinmetz – the alleged difference between the tax he paid for his business held in various trusts, mainly overseas, and what the Tax Authority alleged that he should pay. The case went to court, where it was revealed that the Tax Authority was demanding NIS 4 billion from Steinmetz.
The case has been in court for years, led by Adv. Iris Burshtein-Moses, currently manager of the fiscal department in the State Attorney’s Office, Tel Aviv district. Steinmetz is represented by Adv. Pinhas Rubin and Adv. Daniel Paserman.
As part of the dispute between the parties, the Tel Aviv District Court in 2014 required Steinmetz to the Tax Authority to deliver a long list of documents about the overseas trusts and companies he held.
The case and documents provided by Steinmetz gave the state a broader picture of his business and income, which probably resulted in the first criminal investigation against him in Israel for bribing a foreign public servant.
In December 2016, the Israel Police National Serious and International Crimes Unit arrested Steinmetz for questioning under caution on suspicion of involvement in a global affair concerning payment of a bribe in the tens of millions of dollars to late Guinea President Lansana Conte allegedly paid in exchange for iron mining licenses that generated hundreds of millions of dollars in profits for Steinmetz in 2006-2012. The National Serious and International Crimes Unit questioned Steinmetz a number of times on the Guinea affair, and he deposited bail of NIS 100 million. Steinmetz is represented in this case by Adv. Nati Simchoni, Adv. Rosen Rosenbloom, and Adv. Uri Korev.
The affair in which a judgment was handed down in Romania is unrelated to the investigation against Steinmetz in Israel, and the investigation against Steinmetz on suspicion of conducting fictitious transactions in Romania continued.
Another criminal case was opened against Steinmetz in August 2017, when he was arrested and questioned. He is suspected of carrying out a fictitious transaction in Romania in 2009 that included money transferred for payment of bribes. The transaction allegedly included a €9 million payment for the purchase of land worth €3 million. The police suspect that the remaining €6 million was put in a petty cash fund used to bribe several parties, including €1.5 million transferred to Lansana Conte’s wife.
Payment of a fine, as in the Teva affair
In June 2019, Adv. Yuval Sasson, Steinmetz’s legal representative in the Romania affair, announced that the Brasov District Court in Romania had acquitted Steinmetz, media consultant Tal Zilberstein, and two other Israelis who had been investigated on land fraud charges. Steinmetz’s investigation in Israel in this affair is nevertheless being continued.
While the civil tax dispute is being heard by the court, the first criminal case in the Guinea affair reached the State Attorney’s office for taxation and economics. This is the first important case prosecuted by the state against a business party under the statue against bribing a foreign public servant.
This statute has existed in Israeli law since 2008, but enforcement by the law enforcement authorities has been expedited only in the past three year. Enforcement was greatly stepped up in late 2017, when three of the five investigations reached an advanced stage, two of them being the alleged bribery in Africa by Israel Shipyards, a leading company in the manufacturing and production of civilian and military vessels, and the Shikun & Binui investigation.
Following these developments, Steinmetz’s lawyers and the State Attorney’s office for taxation and economics began negotiations to close the case. Less intensive negotiations are also taking place between Steinmetz’s lawyers in the civil dispute and the fiscal department of the State Attorney’s office for taxation and economics. Court evidence is now being presented in the civil case.
One of the things that has expedited the talks between the parties in the past month was the announcement that an indictment had been filed against Steinmetz in Switzerland in the alleged bribery affair in Guinea. Last August, the general State Attorney’s office in Geneva announced that it would file an indictment against Steinmetz on suspicion of bribing senior officials in Guinea and forging documents. Special prosecutor Claudio Mascotto filed the indictment against Steinmetz following an investigation that began in 2013. “The investigation required extensive cooperation with foreign law authorities,” the announcement stated. Some of this cooperation was with Israel.
The proceedings in Switzerland are likely to have a dramatic effect on the conclusion of the proceedings against Steinmetz in Israel, similar to the model of the settlement signed last year by Teva in the case of corrupt payments to public servants in Russia, Ukraine, and Mexico. In the settlement signed with Teva, the company agreed to pay NIS 75 million in exchange for closing the criminal cases against it.
With this in the background, the negotiations conducted by Simchoni, Rosenbloom, and Korev made progress, with the parties agreeing that any settlement would include a complete solution in the cases against Steinmetz.
One of the state’s main conditions is a large tax payment. Sources in the case say that the amount demanded by the state is “huge,” and that Steinmetz will not be willing to pay it.
Steinmetz’s spokesperson said in response, “Just as the Guinean government withdrew its claims and the Romanian court completely acquitted Steinmetz of the false charges against him, it will also be found in Israel that his actions were irreproachable. The dispute with the Tax Authority is a civil dispute being heard in a civil proceeding. What is stated in the report does not reflect the real situation, but we do not intend to comment on rumors of alleged negotiations or settlements.”
Presumption of innocence: Beny Steinmetz has not been convicted of any of the aforementioned offences and must be considered innocent of any crimes.
Published by Globes, Israel business news – en.globes.co.il – on October 29, 2019
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