Ehud Barak & co.

By Uri Blau Haaretz Magazine October 9, 2009
www.haaretz.com/hasen/spages/1119757.html

Early in 2006. Citizen Gabi Ashkenazi, just recently discharged from the
position of deputy chief of staff, entered the Millennium Tower on Ha'arbaa
Street in Tel Aviv and marched to the elevator. Dressed sporty and
elegantly, Ashkenazi went up to the 19th floor of the tower, where he had a
meeting with an old acquaintance: former prime minister and now businessman
Ehud Barak, who after his defeat by Ariel Sharon in the 2001 elections had
painstakingly made his way across the political desert and accumulated
capital in the jungle known as the business world.

The conversation took place in Barak's office, which was chock-full of
wooden furniture. The general and the former chief of staff did not discuss
security matters, terror or the Iranian nuclear program, but rather
something much more down-to-earth: the possibility of business cooperation
between them. The bursting bookshelves, the electronic piano in the next
room, the special cigar storage space and the photos of Barak posing with
world leaders was an appropriate backdrop for the former prime minister's
meetings during that period, when he was involved in mediation and
consultation for international transactions, mainly through the company he
owned, Ehud Barak Ltd. Half a year passed, and Ashkenazi was appointed
director general of the Defense Ministry. For his part, a year later Barak
ran in the primaries for the Labor Party leadership, won, and in July 2007
was appointed defense minister in Ehud Olmert's government. With Barak's
return to the public arena, the shares of Ehud Barak Ltd. were transferred
to his three daughters, and the defense minister declared that they were not
conducting any business activity in the firm. An investigation by Haaretz,
which reveals new details about Barak's business dealings, shows that since
Barak assumed his present position, over NIS 6.5 million from Israel and
abroad have flowed into Ehud Barak Ltd. and its subsidiary. It also turns
out that up until June 2007, when the new-old chairman of the Labor Party
assumed his place at the Defense Ministry, Barak withdrew from his firm
salaries totaling about NIS 3 million.

President, consultant, partner

Barak became a businessman in 2001, after his defeat by Ariel Sharon. His
tenure as prime minister had been the shortest in Israeli history. He
announced at the time that he would take a break from political life and
feather his own nest. In the first months after his retirement, he kept busy
on the lecture circuit for the Harry Walker Agency and looked for new ways
of making money. In late 2001 he was appointed a special consultant in the
EDS computer firm, and in 2002 he founded Ehud Barak Ltd.

An investigative article published in this magazine in May 2007 (by this
writer and Gidi Weitz) revealed that until 2007, when Barak returned to
political life, the firm's income was almost NIS 30 million, most of it from
abroad. Barak also upgraded his lifestyle and moved with his wife, Nili
Priel, to a spacious apartment the two purchased in Akirov Towers in Tel
Aviv. The investigation revealed a long list of business transactions
promoted by Barak and the businessmen with whom he was in contact.

For example, Barak traveled with Ofer Glazer to a meeting with King Abdullah
of Jordan, in which they discussed a special patent for producing oil from
oil shale, which Jordan has in abundance. Barak, together with Glazer and
businessman David Dudai and Barak's associate Loni Rafaeli, initiated the
construction of a chain of parking lots in Istanbul. Barak also tried his
luck with diamond mogul Benny Steinmetz, a good friend of former prime
minister Ehud Olmert, with whom he flew to Eastern Europe, among other
places, to look into possibilities for various cooperative ventures,
including real estate.

In addition, Barak was appointed to the position of "honorary president" in
Gilat-Satcom, owned by Zvi Barenboim. He served as a member of the board of
directors in the Tamir Fishman investment banks and venture capital fund; as
an adviser to Canada Israel, which belongs to Assaf Tuchmeier and Barak
Rosen; an adviser to the Swiss venture capital fund CMI and the venture
capital fund Star Ventures, owned by businessman Meir Barel, and more.

It is interesting to discover now that several of these people, with whom
Barak the businessmen worked, donated money to Barak the politician when he
ran in the primaries against Ami Ayalon for the leadership of the Labor
Party. Barak Rosen donated NIS 35,000; Mirit Tuchmeier (the wife of his
partner Assaf) donated an identical sum; Meir Barel and his wife donated NIS
17,000 and Nathan Hetz, who held contacts with Barak for joint business
ventures, donated NIS 36,000.

Two private citizens

Gabi Ashkenazi, who retired in mid-2005 from his last position in the Israel
Defense Forces, also entered the business world and met with Barak early in
2006. In January 2006, Ashkenazi, together with Zeev Bronfeld, Ariel Malik
and Kobi Livne, established the Innovetica Group Ltd. Two months later, they
opened another firm, naming it Gabi Ashkenazi Ltd. (see box). Malik, a
business entrepreneur and a partner in technological incubators, told
Haaretz that "Ashkenazi was the driving force in Innovetica. Each of the
other partners has additional businesses, and he was the dominant one." A
businessman who was involved in Innovetica at the time and asked not to be
named, said that the company had planned to put investors' money in start-up
firms in the field of internal security: "Ashkenazi was supposed to
contribute his knowledge in the security field."

What did Barak and Ashkenazi discuss at the meeting they held? Barak chose
to ignore Haaretz's question, whereas Ashkenazi said, via the IDF spokesman,
that they "discussed the possibility of business cooperation." One who is
willing to shed light on the matter is the above-mentioned businessman, who
speaks of "several ideas" for cooperation with Barak: "One idea, as we did
at Innovetica, was to bring in Barak as a member, was rejected. There was
also an idea of forming a public corporation in which Barak would be a
director, and we would collect money and invest it. That is, money you take
from investors, invest it in one company with the approval of 80 percent of
the investors, and make sure to raise the value of the firm, to issue shares
on the stock market and allow the investors to profit. We developed the
idea, interested Ehud Barak, who had already heard and understood such
things, and started talking to him."

During the same period, there was cooperation between Barak and the U.S.
firm Acro, which had developed a method for identifying liquid explosives
and which in February 2006 had started an Israeli subsidiary named Acrosec.
Early in April 2006, Barak was appointed to the advisory board of the mother
company, in return for shares that were allocated to him. The purpose of
Barak's appointment, explains Yami Tarsi, one of the directors of Acrosec at
the time, was "that there would be someone with a security record and enough
global connections in the field in which the company was involved. Of course
security connections were important."

Two of Ashkenazi's partners in Innovetica, Malik and Bronfeld (a businessman
who invests mainly in biotechnology) were also involved in the establishment
of Acrosec, which in its first months was a subtenant in the Innovetica
offices on Jabotinsky Street in Ramat Gan. Malik and the director of
Acrosec, Gad Aner confirmed the details, whereas Bronfield did not reply to
our question on the subject. Tarsi adds that "there were contacts to try to
merge activities" between Innovetica and Acrosec.

Activity in Innovetica stopped toward the end of 2006, a few months after
Ashkenazi assumed the position of director general of the Defense Ministry
and before his business cooperation with Barak began. Aner says that "the
moment Gabi was appointed director general of the Defense Ministry the
company stopped operating," and Ashkenazi's partners confirm that.

Did the two men who are now running Israel's defense establishment together
report to anyone about the business contacts between them? Chief of Staff
Ashkenazi believes that he was not obligated to do so. In a reply to Haaretz
he said that "there is and was no legal obligation to report on this
meeting, which took place between two private citizens and which did not
give rise to any joint business activity."

However, an examination of the conflict of interest arrangement signed by
Ashkenazi when he took up the position of director general of the Defense
Ministry (an arrangement that continues to apply after his appointment as
chief of staff) reveals that although his contacts with Barak were not
mentioned in it, Ashkenazi did mention connections and meetings he held with
businessmen, including some that ended without results.

It should also be noted that according to a General Staff order regarding "a
prohibition against conflict of interest," a soldier who returns to regular
service must fill out a form in which he mentions who employed him, what
issues he handled and with whom he came into contact while a civilian.
Ashkenazi did not fill out the form. The IDF spokesman explains that the
"questionnaires" filled out by Ashkenazi when he became director general of
the Defense Ministry "fulfill the basic requirement of the army instructions
on this matter. This agreement was reached with the knowledge of the senior
legal officials responsible for the matter and even was approved by the
deputy attorney general. Under these circumstances, it is clear that the
chief of staff met the requirements of the law and the instructions of the
army."

And what about Barak? He chose not to provide direct answers to Haaretz's
questions on this issue.

Family business

Barak's appointment as defense minister required him to part from his
holdings in Ehud Barak Ltd. The firm's shares were divided equally among his
three daughters, Yael, Michal and Anat. Listed as the director of the firm
was attorney Doron Cohen, Barak's former brother-in-law and present
confidant. According to the rules of the Asher Committee for preventing
conflict of interest of ministers and deputy ministers, the transfer of a
minister's company to his family is permitted only if they worked in the
company during the year before he assumed the public position (or if he
requested and received special permission). An examination by Haaretz and
talks with people who worked with Barak during the period when he was an
up-and-coming businessman indicate that his daughters were not involved in
running his businesses. In response, Barak told Haaretz that the company was
transferred to his daughters "as a gift."

This gift is worth quite a lot of money. Findings that reached Haaretz
indicate that up to April 2008, about 10 months after Barak entered the
Defense Ministry, over NIS 5 million was accumulated by Ehud Barak Ltd. Some
of the money was transferred from companies with which Barak is known to
have worked, such as Tamir Fishman and Escape Rescue Systems - a company
that specializes in rescuing people trapped in tall buildings. However, most
of the money was transferred from anonymous sources in Israel and abroad.

In April 2008, the flow of money to Ehud Barak Ltd. ceased. That month,
Barak's wife, Nili Priel, founded Taurus Israel Financial Ventures. The
company operated for only a few months and was closed after news of its
existence was published and met with sharp public criticism. At present the
company is in the process of disbanding voluntarily, but in the short time
it operated it received NIS 140,000 from groups abroad. In an interview with
this magazine about two weeks ago, State Comptroller Micha Lindenstrauss,
who is investigating the matter, said that Barak informed him that his wife
had returned the money to the investors. The comptroller remarked that
"there was a correlation between some of those who donated to Barak and the
investors in Taurus."

At this point, after the closing of Taurus, a new company became part of the
money-channeling circle, Cardo Business Development. In June 2007, at the
same time Barak was elected chairman of the Labor Party and appointed
defense minister, Ehud Barak Ltd. became the partner holding 50 percent of
the shares in both firms: Cardo, founded in 2004 and located in the office
of attorney Cohen, who holds the rest of the shares and runs the company,
and Essence International Parking Ltd., founded in 1995 and also run by
Cohen.

According to information that reached Haaretz, there is no activity in
Essence; it is in effect a shelf company (a company that is legally
incorporated but not active). On the other hand, Cardo, which is registered
as providing "business consultation" and which, until it became part of Ehud
Barak Ltd, was also an inactive shelf company, received almost NIS 1.5
million between 2007 and December 2008, all from anonymous sources abroad.
All in all, therefore, since Barak became defense minister, over NIS 6.5
million have been transferred to companies to which he is connected and
which are now owned by his daughters and his former brother-in-law.

Attorney Doron Cohen: "As far as I know, Ehud Barak Ltd. is not active.
Cardo is an active company."

What kind of business does it do?

"To date, Cardo has not been engaged in any activity connected to the State
of Israel. Since Cardo is a private firm, it does not provide information
about its activity, revenues and clients to the public."

According to the information we have, since Barak's appointment as defense
minister millions of shekels have been received by Ehud Barak Ltd. from
Israel and abroad. If the firm is not active, what is the source of the
money?

"The source of all the money received by the firm is Ehud Barak's activity
before entering the government. The portion of the income that was received
by the firm after he entered the government, for his activity, as we
mentioned, was reported to the authorities, as required."

The Asher Committee rules do not permit transferring a company to a
minister's relatives, unless they worked there for a year previously.

"I'm not going to share the interpretation of the Asher Committee rules with
you."

Barak would not agree to reveal who had transferred money to the companies
and for what purpose. His office said only that "all the activities of Ehud
Barak and the companies to which he is connected were handled exactly
according to law. From the day of his appointment as a cabinet member,
Minister Barak has maintained his rights and obligations with full
transparency before all the relevant bodies."

The state comptroller makes sure that the ministers abide by the Asher
Committee rules. His spokesman, Shlomo Raz, was asked whether Barak reported
the receipt of this money. Raz said in reply that "the State Comptroller's
Office, which favors maximum transparency, is committed to working according
to the law and the rules. The rules for ministers in order to prevent
conflict of interest state in article 11b: 'Unless specifically stated
otherwise in these regulations, the state comptroller will maintain the
secrecy of the ministers' declarations and will not reveal any detail
without receiving the agreement of the affected minister.'