Austrian MP Calls for Inquiry Into Sharon’s Vienna Dealings

By Marc Perelman, With Reporting by Chemi Shalev in Jerusalem.

Published August 08, 2003, issue of August 08, 2003.
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An Austrian lawmaker is calling for a formal inquiry into charges that Vienna is blocking an Israeli investigation of alleged campaign finance violations by Prime Minister Sharon — purportedly in exchange for Jerusalem’s agreement to restore diplomatic ties with the alpine nation.

The lawmaker, Peter Pilz of the Green Party, formally requested a parliamentary investigation last week, just before Parliament recessed for the summer. Pilz told the Forward he is planning to ask Austrian authorities to explain their attitude when Parliament reconvenes in mid-September.

“Those are allegations we have to take very seriously,” Pilz said in a telephone interview from Austria.

Pilz said further investigations could be on the way. He said Justice Ministry officials had told him they were considering launching further investigations into allegations that the Austrian government had used money channeled via Austria to Sharon from a South African businessman, Cyril Kern, to influence Israeli policy. He did not specify what sort of influence his government might have been seeking.

Kern loaned Sharon $1.5 million in January 2002 to repay illegal 1999 campaign contributions. Israeli police and prosecutors suspect Kern was a conduit for other unknown donors.

Speculation has been rife in the Israeli press in recent days that Sharon agreed to restore ties with Vienna only after an Austrian judge rejected several requests from Israeli police to subpoena bank records related to the Sharon investigation. Israeli police have asked to see records of a possible transfer of funds from Vienna’s Bawag Bank to a Tel Aviv bank account owned by the prime minister’s sons.

An Austrian judge has twice rejected Israeli requests to examine the bank records. The first request was rejected because the Israeli request came in an incorrect format. The second was rejected on grounds that foreign campaign financing is not a criminal offense in Austria. There were reports that a third request had been made on Wednesday, but it could not be confirmed by press time.

An Austrian district attorney has appealed the ruling. A decision by a three-judge panel is expected in the fall.

“If there are indications that the money was used to buy influence, the [appeal] judges could be forced to change their minds” and allow the opening of a criminal investigation into possible influence-peddling, Pilz said.

Pilz noted that contrary to reports in the Israeli media that the Justice Ministry had rejected the Israeli requests, the ministry had in fact asked a district attorney to lodge the appeal.

Israeli newspaper reports have suggested that Justice Ministry officials connected to the far-right Freedom Party might have played a role in Austria’s rejection of the Israeli subpoena requests. Pilz noted that the rejection had come from a judge, not a ministry official.

The Justice Ministry would not comment on the matter.

Pilz said that if the ruling is not overturned, another possible ground for legal action could be suspicion that Austria’s banking laws had been violated. The laws oblige financial institutions to report any suspicious transactions. He said the police and the Interior Ministry had told him that the Bawag bank had not reported any dubious financial movements.

He plans to ask the Finance Ministry, which oversees financial establishments, to launch an investigation.

In Israel, the pressure is also mounting. Labor Party secretary general Ofer Pines raised the issue in a formal parliamentary question, suggesting a possible quid pro quo with Austria.

Sources in Jerusalem told the Forward that Sharon had been personally involved in calling for an upgrade of diplomatic relations with Austria. Moreover, the sources said, the decision was pushed by the political appointees within the Foreign Ministry rather than by the professional staff, which had allegedly rejected the restoration of ties last November and eventually acceded two weeks ago.

Israel downgraded its ties with Austria in 2000, together with members of the European Union, after the Freedom Party, then led by far-right activist Jorg Haider, was brought into the governing coalition. Haider has since resigned from the party leadership, leading European countries to restore ties. However, the Freedom Party remains in the coalition, which Israel had until last week cited as a reason for continuing the chill. Critics have called on the government to explain its shift.

Raanan Gissin, Sharon’s chief spokesman, said he could not comment since this was a private matter.

Gil Kleiman, a police spokesman, said the police are not commenting on ongoing investigations.

The Austrian investigation is the latest episode in the saga launched last January when the daily Ha’aretz reported on a $1.5 million loan given to Sharon in January 2002 by South African businessman Cyril Kern, an old friend, to serve as a collateral for a loan drawn from an Israeli bank by Omri and Gilad Sharon to pay back illegal contributions to Sharon’s 1999 Likud primary campaign.

According to published reports, the Israeli police national fraud unit has found that the money sent by Kern to the Sharon family came to Israel through an account at the Bawag bank in Vienna. Since Kern has no known business interest in Austria — and is believed to have lost much of his fortune in the early 1990s — investigators believe he might have been serving as a conduit for other donors, whom they are trying to identify.

Because of the Vienna connection, they are apparently setting their sights on Martin Schlaff, an Austrian billionaire who is known to be close to senior Israeli officials.

Schlaff is a part owner of the Oasis Casino in Jericho, which opened in September 1998 and was shut down in October 2000 following the onset of the intifada. The casino is owned by an Austrian company called Casino-Austria. Israeli media reported that he is currently trying to obtain anchorage rights to operate a casino ship off the Red Sea resort of Eilat.

On the eve of the February 2001 elections that brought Sharon to power, Schlaff allegedly hosted a meeting at his Vienna home between Omri Sharon and Mohammed Rashid, chief financial adviser to Yasser Arafat. Also reportedly present at the meeting was Dov Weisglass, who was then an attorney for both Sharon and Schlaff. He is today the prime minister’s chief of staff.

A the time, Israeli media speculated that the meeting was focusing on the possible reopening of the casino, in which Rashid is believed to be a partner. But the meeting could now receive some scrutiny in light of the new allegations.

So could another meeting in May 2002, when Schlaff and Joseph Taus, a businessman close to Austrian Chancellor Wolfgang Schuessel, met with Sharon and discussed renewing Israeli-Austrian relations, according to the Israeli daily Yediot Aharonot. The two Austrians are involved in business interests in Bulgaria with Israeli investors. Three months later, Sharon told German television that he was considering restoring relations with Austria.

Speculation about meddling by business interests was fueled last week following an Austrian press interview in which the foreign minister, Benita Ferrero-Waldner, acknowledged that business ties between Sharon’s sons and Austrian industrialists had played a role in improving bilateral relations last year. Yediot reported the interview.

Ariel Muzicant, chairman of the Austrian Jewish community, said that while he had no way to verify the allegations, he welcomed the decision to restore ties between the two nations.

Muzicant told the Forward he had written to Sharon 18 months ago asking him to restore diplomatic relations. He said he renewed his request when he met Sharon and Weisglass last April during a trip to Israel by leaders of the European Jewish Congress.

He said Schlaff knew “everyone” in Israel.

Schlaff’s name surfaced several years ago in Austria in connection with an investigation into money transferred via Austria to the Russian-born Israeli politician Avigdor Lieberman, who is currently Israel’s minister of infrastructure. Pilz, the Austrian lawmaker, confirmed that Schlaff’s name had come up in several discussions, including the Lieberman case, in the Parliament’s intelligence committee, of which he is a member.

Asked whether Schlaff was currently under investigation, he said he could not answer.

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