Netanyahu must be questioned in submarine graft case, ex-prosecutor says

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Recent television reports claim that state prosecutors have begun drafting a legal opinion recommending Prime Minister Benjamin Netanyahu stand trial for bribery, fraud, and breach of trust in the so-called Case 4000, the gravest of the three criminal probes against him. This comes after a draft charge sheet was published in February, and following this month’s attempts by Netanyahu’s attorneys, at a pre-indictment hearing, to persuade the prosecution to close Case 4000 and the two other cases in which is embroiled.

In an in-depth conversation with Zman Yisrael, the Hebrew sister site of The Times of Israel, former deputy state prosecutor Yehuda Sheffer said bribery may appear as a more serious charge under the law but in reality, breach of trust often emerges as a far graver offense.

The prime minister faces three separate corruption investigations, known as Case 1000, Case 2000 and Case 4000.

Case 1000 alleges Netanyahu received tens of thousands of dollars’ worth of gifts from wealthy benefactors, most notably Hollywood producer Arnon Milchan, in exchange for assistance on various issues. Case 2000 accuses him of agreeing with Yedioth Ahronoth newspaper publisher Arnon Mozes to weaken a rival daily in return for more favorable coverage from Yedioth. The agreement was never implemented. In Case 4000, Netanyahu is alleged to have secured improved coverage from the Walla website in a quid pro quo arrangement in which he approved business arrangements of immense financial benefit to then-Walla’s owner Shaul Elovitch, the then-majority shareholder in Israel’s Bezeq telecommunications giant.

According to television reports, on Sunday Mandeblit will begin a final stage of consultations with state prosecutors to make a decision on whether to indict — a decision expected by year’s end.

Sheffer believes the differences between the charges of bribery and breach of trust depend mainly on the circumstances.

“If you take a bribe to issue a license that you should have issued anyway, it’s less serious to me than a situation where you issue some license sans a bribe and regardless of a conflict of interest, to a person who didn’t deserve it,” he explained.

“As a legal tactic, I understand the defense’s attempt to try to have the allegations reduced to [only] breach of trust, because it can help [Netanyahu] in the Knesset as well as with respect to public opinion; and also because, under the law, the punishment for bribery is far more severe than it is for breach of trust. But again, it’s the circumstances that count,” said Sheffer.

Israeli law states that accepting a bribe is a felony punishable by up to 10 years in jail while offering a bribe is an offense punishable by up to seven years imprisonment. In comparison, the maximum sentence for fraud and breach of trust stands at three years.

Furthermore, Sheffer believes that the media leaks from the pre-indictment hearings held for the prime minister before Attorney General Avichai Mandelblit — a routine procedure for public officials facing potential criminal charges — cannot give a clear indication of whether Mandelblit will decide to pursue the cases against Netanyahu.

Still, a decision will be made sooner rather than later, he said.

Former deputy state prosecutor Yehuda Sheffer. (via Zman Yisrael)

“There is every reason to believe that a decision will be made within a few weeks. First, both the attorney general and his advisers are familiar with the material — they have been supervising these cases since the beginning due to their inherent sensitivities. Second, I believe that while the considerations are strictly matter-of-fact, the timing is important,” Sheffer said.

“Politics can make a difference, so it’s unlikely that it will take [Mandelblit] months to reach a decision. I think that, knowingly or unknowingly, the political significance of the decision affects the pace of the decision-making process,” he said.

‘Investigations not tainted by political motives’

Sheffer, 57, who headed the Israel Money Laundering and Terror Financing Prohibition Authority from 2002 to 2009, retired from the State Attorney’s Office last April and currently serves as a private consultant on combating money laundering for various countries, including China, Panama and Latvia. In Israel, he advises financial technology companies on how to conduct themselves with banks.

While critical of how the State Attorney’s Office is handling some of the cases pertaining to Netanyahu, Sheffer is confident that Mandelblit and his team have made sure the integrity of the investigations against the prime minister remains beyond reproach.

Attorney General Avichai Mandelblit arrives at the Justice Ministry in Jerusalem for the hearing on Prime Minister Benjamin Netanyahu’s corruption cases on October 7, 2019. (Flash90)

“Knowing those involved, I am convinced that the decision on this issue will be based solely on merit. There are no political or foreign considerations at play here. You can, perhaps, criticize the fact that the process is not handled expeditiously, and you may even criticize the decisions themselves — no one is immune to criticism — but I am sure the considerations are pertinent to the issue,” he said.

Following the September 17 election, Netanyahu is currently tasked with forming the next government, but he recently returned the mandate and Blue and White head Benjamin Gantz is now taking up the challenge. Regardless of whether Gantz is able to form a coalition, or whether Israel will find itself facing its third general election in the span of one year, there is a political consensus that if Netanyahu is indicted, on top of the allegations against him he will also have to contend with various High Court of Justice petitions demanding his resignation.

While Israeli law does not demand a sitting prime minister resign if indicted, but rather only if convicted, it is uncertain whether a premier facing criminal charges can vie for another term in office.

“The fact that politicians cite Basic Law: The Government, which states that a prime minister can stay in office until a case concerning a criminal offense that carries moral turpitude is adjudicated, is true,” noted Sheffer.

Sheffer explained that there is already a High Court ruling in place stating that indicted ministers must resign even before a verdict in their case is rendered. But, he said, the court has yet to rule on the issue of an indicted prime minister — simply because it never had to do so before.

“The last thing the High Court wants to do is interfere with the political process, especially when it is already accused of doing so — but it may have to weigh in on the matter,” Sheffer said, referring to the disapproval expressed by many right-wing politicians over what they see as the judiciary’s meddling in Knesset legislation, and their repeated demands to curb the High Court’s powers.

“I doubt the court will relish the chance, but if the legal question is presented it may not have a choice,” Sheffer said. “This is no simple matter, if only for the fact that this isn’t just a legal question — it’s also a public one. In other countries, a person facing criminal charges can’t run for office, let alone for the position of prime minister.”

As criminal proceedings mandate the defendant be present in court, “it is inconceivable that a prime minister, certainly in Israel, will be running the state’s affairs while facing trial. The court can issue exemptions here and there, but the entire situation is inconceivable,” Sheffer said.

Another issue that must be considered with respect to a sitting prime minister standing trial is that of perceived improprieties.

Prime Minister Benjamin Netanyahu (R) and Supreme Court President Esther Hayut. (Noam Revkin Fenton/Flash90)

“An incumbent prime minister influences top nominations in the public service,” Sheffer explained. “Even if he personally has nothing to do with naming senior prosecutors, police officials and judges, he can still influence it [the nomination process]. How will it look if a judge who is up for a promotion presides over the trial of a prime minister who can indirectly influence the Judicial Appointments Committee?”

“The mere perception of impropriety undermines the public’s faith in its systems [of government]. Every person is entitled to the presumption of innocence, but it doesn’t entitle him to hold such high office,” Sheffer said.

‘Authorities must take a firmer stand’

According to Sheffer, the three corruption cases in which Netanyahu is embroiled are so convoluted that they have sidelined other cases in which he has been implicated to various degrees — namely, the false capital statements he filed with the State Comptroller’s Office and the shady SeaDrift stocks affair.

But most of all, they have dwarfed what has become known as the submarine scandal.

Already infamous as the largest alleged graft scandal in the country’s history, Case 3000, as it is known, centers on a possible conflict ‎of ‎interest surrounding the multi-billion-shekel procurement of naval vessels and submarines from ‎German ‎conglomerate ‎ThyssenKrupp in 2016.

The high-profile investigation has ensnared several close associates of Netanyahu, but not the premier himself. The prime suspects include, among others, Netanyahu’s attorney ‎and ‎cousin David Shimron, former National Security Council Deputy ‎Director ‎Avriel Bar Yosef, Israeli businessman Miki Ganor, who ‎was ‎the German company’s representative in Israel, former Israeli ‎Navy Commander Vice Adm. ‎‎(ret.) Eliezer Marom, Shay Brosh, former commander of the navy’s elite Shayetet 13 commando unit, and David Sharan, who ‎served as the prime minister’s bureau chief between late 2014 and ‎mid-2016. ‎

(L-R) Prime Minister Benjamin Netanyahu’s personal lawyer David Shimron, his former diplomatic envoy Yitzhak Molcho, his former bureau chief David Sharan, former deputy national security adviser Avriel Bar-Yosef and former commander of the Israeli Navy Eliezer Marom. (Flash90)

Law enforcement should take a much firmer stand on these cases, Sheffer stated.

“In my personal opinion, the prime minister has to be questioned in the submarine case. The fact that [the police and the Attorney General’s Office] stated right from the start that he was not a person of interest in the case is very problematic,” he said.

“When you hear the prime minister say the deal was driven by some state secret only he and the national security adviser were privy to — something neither the defense minister nor the IDF chief of staff were aware of — you have to wonder. This mandates an investigation, and one will be launched eventually. Things like this have a way of rising to the surface.”

Sheffer further expressed confidence that other pivotal questions that have turned up since Case 3000 came to light will be investigated as well. For one example, Netanyahu approved a Germany-Egypt submarine deal to attain a multi-million dollar discount for Israel’s own naval purchases.

“These questions can’t be swept under the rug,” he said.

Sheffer hypothesized that Mandelblit rushed to declare that Netanyahu was not a suspect in Case 3000 because based on their years of working together, he finds it hard to believe that the prime minister would compromise state security.

“I assume the question of whether [a probe] will compromise relations with Germany, including future transactions, was also taken into consideration,” Sheffer said.

“This is my personal assessment,” he stressed. “I have no information [about the investigation] but I believe that every suspicion has to be explored even if it may jeopardize other deals — and I don’t think it would. That sounds highly unlikely.”

While in the past there have been times when the Attorney General’s Office put the kibosh on probes and legal proceedings for security reasons, Sheffer said those were “extreme-case scenarios relating to bribery suspicions overseas.” He emphasized that “things have changed completely. Since we signed the OECD’s treaty fighting bribery among foreign public servants, Israel has been careful to investigate such suspicions in full.”

The Organization for Economic Cooperation and Development’s Anti-Bribery Convention aims to reduce political corruption and corporate crime in developing countries by encouraging sanctions against bribery in international business transactions.

The attorney general, said Sheffer, has the authority to halt or close an investigation if it serves the public’s interest, “but this is not the case. If there is a suspicion of corruption, of venality, of profiteering, or of a tainted decision-making process it should certainly be investigated.”

Mutual trust issues

Sheffer said he understands the public’s mistrust in the way Mandelblit — a former cabinet secretary who is considered a Netanyahu loyalist — is handling the investigations against the prime minister. He insisted that “as someone who knows the man and the system, I do trust him. I can see how the decision not to question Netanyahu in this issue [Case 3000] is puzzling for some, but I’m sure the motives here are pure.”

“Still, it doesn’t mean this was the right decision. I think it was wrong,” Sheffer said.

Trying to predict how Case 3000, which could have significant ramifications for senior officials in the Defense Ministry, the navy and the Prime Minister’s Office, will end is useless, he said.

“I don’t know how this will unfold. Either a commission of inquiry will be formed, as some politicians have demanded, or a probe will be conducted in some other way. But at the end of the day, a case of such gravity has to be scrutinized. I believe the truth will come out in the end,” Sheffer said.

Netanyahu’s critics have often castigated him for sparing no effort to remain in office so as to avoid facing corruption charges. But could it be that his decision not to pursue a plea bargain in the current cases also seeks to ensure he can thwart the formation of a state commission of inquiry into the submarine scandal?

According to Sheffer, this could be the case.

Prime Minister Benjamin Netanyahu gives a press statement in the Israeli parliament on September 15, 2019, a few days before the Israeli elections. (Yonatan Sindel/Flash90)

“It doesn’t sound implausible to me,” Sheffer said. “The bigger concern [for Netanyahu] may very well be a state commission of inquiry, for two reasons: First, the criminal suspicions in this case may be more serious, and second, it may uncover things that may not be criminal on the part of the prime minister but may prove questionable.”

“If you, as the prime minister, can be easily fooled by your closest associates, well, that’s highly problematic,” he said.

A state commission of inquiry, Sheffer explained, “investigates more than just criminal issues, and I don’t know what’s worse — a prime minister who knows his associates are taking bribes and looks the other way, or one who has no idea what’s going on and greenlights deals that could prove dangerous to the state.”

“We don’t have all the facts yet but given that [Netanyahu] signed off on the sale of quality submarines to Egypt, something that has security implications, without consulting defense officials, navy officials, the chief of staff — that certainly requires an investigation,” he said.

Legal twilight zone

As a former prosecutor, Sheffer agrees that leaving the type of suspicions arising against the prime minister from the false capital statements or the SeaDrift affair unexplored is problematic.

“That’s something that should be investigated in and of itself,” he said.

Moreover, said Sheffer, issues pertaining to potential tax offenses were uncovered when Netanyahu petitioned the State Comptroller’s Permits Committee for a special dispensation to raise some NIS 5 million ($1.4 million) to cover his legal fees, a request which was denied.

“These things mandate a far more vigorous investigation, if only for the sake of public perception,” he said.

A sluggish decision-making process in these two cases could be linked to authorities’ desire not to delay the current proceedings, Sheffer said.

“Can you imagine if [the police] would launch an investigation that would delay the rulings on the current cases for six months or a year? The public wouldn’t stand for it,” said Sheffer. “You have to balance efficiency and absolute truth, and justice is somewhere in the middle. Getting to the absolute truth is not necessarily the most effective course of action.”

“On the other hand, we have to investigate these things,” he said. “To me, if the prime minister failed to declare his assets and his interests in full, and he sells and buys shares behind our backs — and this is a prime minister who has previously admitted he had an account in Jersey Island — these things are very disturbing. The prime minister may be a righteous man, but right now he has to prove it.”

Jersey is the largest and southernmost of the Channel Islands, off the coast of Great Britain. While it is a Crown dependency, as a self-governing territory it retains complete financial and political autonomy and its relaxed tax laws have birthed one of the most popular offshore tax havens in the world.

The fact that Netanyahu held shares in a foreign steel company, filed false capital statements with the state comptroller, and admitted having an account in an island known as a tax shelter, led investigators to believe that the prime minister’s personal fortune most likely exceeds the NIS 50 million ($14.25 million) he reported.

A source privy to the material in these cases told Zman Yisrael that police officials said they wouldn’t be surprised if eventually, Netanyahu’s fortune would emerge as closer to NIS 1 billion ($285 million).

The headquarters of the Israel Police’s Lahav 443 Major Crimes Unit in central Israel. The unit is tasked with heading the investigations against Netanyahu. (Yossi Zeliger/Flash 90)

An expert on asset-concealing techniques and money laundering, Sheffer said that even if that is an exaggeration, the fact that such figures even come to mind indicates that there is much more here than meets the eye.

“I think the legal procedure we have, by which ministers must submit a capital statement to the state comptroller and MKs must file one with the Knesset speaker, is insufficient,” Sheffer said. “I think we should follow other countries and have [elected] officials produce a detailed capital statement, including a map of [business] interests and a list of all the rich and powerful people in their [social] circle. And this should be available online, for all to see.”

Public officials should exercise full transparency, Sheffer said. “That’s how they do it in Britain and other places around the world. Everything is online. In Israel, everything is shrouded in secrecy.”

“This reality is highly problematic because not only do you lose confidence in the integrity of your elected officials, you also lose track of the interest they represent. There could be conflicts of interests the public doesn’t know about,” he said.

Netanyahu, he continued, “may very well be a man whose good graces are sought after by many billionaires and millionaires residing overseas. NIS 50 million, you say? What Mr. Sheldon Adelson has been giving Netanyahu for years is worth hundreds of millions. That’s a monetary benefit given in broad daylight.”

The Adelson family owns Israel Hayom, a tabloid widely regarded as being strongly pro-Netanyahu in its orientation.

While Sheffer agrees that mandating public officials to post their capital statements online does not guarantee their accuracy, he believes that “mandating such transparency [by law] means that any infringement on it will be a felony.”

“Right now, the state comptroller has no way of cross-referencing capital statements with the Tax Authority and the Money Laundering Prohibition Authority. If it’s not transparent, [state agencies] can’t share the information. Take the SeaDrift affair — did Netanyahu declare that before the Tax Authority in real-time? How? I’m not sure anyone ever really looked into that,” Sheffer said.

According to Sheffer, if investigators are able to prove Netanyahu knowingly filed an inaccurate capital statement with the state comptroller, it would constitute a criminal offense.

“If he filed a capital statement or and= annual income tax report without declaring [profits derived from the shares’ sale] that’s a deliberate omission. Forget the other cases — it’s alleged tax evasion, which is punishable by seven years’ imprisonment. That’s all it takes, like with Al Capone,” he said, invoking the name of the notorious 1930s Chicago crime boss who was famously jailed for tax evasion.

The suspicion of tax evasion, he explained, “Stems from the fact that there are discrepancies between Netanyahu’s capital and tax statements. The authorities don’t launch a criminal investigation for nothing.”

“We’re dealing with contradicting statements regarding stocks and money from a man who is already under investigation. That’s why this is more than just a mere suspicion of tax evasion. And I’m not sure these things are really being investigated. They may have been, but the public doesn’t know about it,” said Sheffer.

Zman Yisrael approached the State Attorney’s Office and the Tax Authority for comments, but none were issued.

The Tax Authority argued that privacy laws prevent it from disclosing whether a review of Netanyahu’s tax reports was made following the SeaDrift stocks affair, let alone releasing its results.

These claims, it should be noted, are inaccurate because said privilege applies only to the information itself, not to the general question of whether a review was ever held.

The Justice Ministry declined to say whether the State Attorney’s Office had initiated a review of Netanyahu’s tax statements, repeatedly avoiding addressing the issue of what action, if any, was taken by the latter on this issue and insisting that this matter falls under the jurisdiction of the Tax Authority.

A version of this article first appeared in Hebrew on The Times of Israel’s sister site, Zman Yisrael With contributions from Times of Israel staff and wires.



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