Likud Sweats As Scandal Tars Sharon

Fund Probe Edges Terror off Page 1

By Chemi Shalev

Published January 10, 2003, issue of January 10, 2003.
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JERUSALEM — With Israel’s elections barely three weeks away, shell-shocked voters are experiencing a sort of whiplash, emotionally buffeted between horrific Palestinian terrorism and the ever-spreading revelations of corruption at the top — revelations that now point directly to Prime Minister Sharon.

Last weekend, a double-bombing massacre of 22 Israelis and foreign workers in downtown Tel Aviv put security issues back at the top of the campaign agenda, but only for a brief 48 hours. By mid-week, focus returned to the alleged misdeeds of Sharon’s Likud Party, leading some Likud figures to fret for the first time that their victory could be in doubt. The latest bombshell was a disclosure by the daily Ha’aretz that the police and Justice Ministry are investigating Sharon himself on suspicion of bribery, fraud and breach of trust.

The new scandal appears unrelated to the ongoing police investigation of misconduct in the recent Likud primaries, although Sharon’s son Omri is considered a major player in both controversies. According to Ha’aretz, the police are investigating alleged wrongdoing in Sharon’s campaign financing in the 1999 Likud primaries. The paper alleged that Sharon himself may have lied to police in his April 2002 testimony on the matter.

Sharon’s office called the allegations “leaks, lies and disinformation designed to bring down the prime minister and his government” — although a spokesman later acknowledged that some key elements might be true.

The new allegations stem from an October 2001 report by Israel’s state comptroller, which found that Sharon had circumvented campaign finance laws through a complex web of shell companies centering on a firm called Annex Research, which was in turn the main contributor to Sharon’s campaign. The state comptroller, former Supreme Court justice Eliezer Goldberg, ordered Sharon to return more than $1 million to Annex. According to press reports at the time, Sharon raised the money through a bank loan, using his famous Sycamore Ranch in the Negev as collateral.

But according to Ha’aretz, the bank refused to accept the farm as collateral because the land on which it stands is actually owned by the state, leased to Sharon, and of limited mortgage value. According to the report, Sharon’s two sons, Omri and Gilad, then took out a new loan to replace the old, using as collateral $1.5 million transferred to Israel by a South African millionaire named Cyril Kern.

The newspaper cited a leaked Justice Ministry letter to South African authorities asking for an investigation of Kern and his ties to Sharon. The letter explicitly mentioned that Sharon and both his sons are under suspicion of bribery, fraud and breach of trust. The police suspect that Sharon may have lied to the police in April 2002, when he claimed his farm had served as collateral for the loan and did not divulge the apparently illegal funding from Kern.

Kern, a retired British fashion executive who has known Sharon since 1948, this week acknowledged lending Sharon $1.5 million, but said there was no illegality. Several Likud leaders have called for an investigation of the leaking of the Justice Ministry letter.

Gifts from personal friends led to the forced resignation in 1999 of then-president Ezer Weizman, pundits pointed out.

The Ha’aretz revelations elicited howls of frustration at Sharon’s campaign headquarters, which has been battling never-ending press reports of Likud corruption. Sharon’s advisers had prematurely rejoiced at the likelihood that the Tel Aviv bombing would overshadow earlier charges of wrongdoing, published only last Friday in the mass-circulation Yediot Aharonot. In a special weekend supplement dubbed “The Black Era,” Yediot had tied Gilad Sharon, the prime minister’s younger son, to yet another tale of sordid corruption. It claimed that businessman David Appel had bribed Gilad to the tune of $3 million, and in exchange Sharon, then foreign minister, had interceded with Greek authorities on behalf of Appel, who was looking to set up an expensive resort on a deserted Greek island.

Beset by the mounting scandals, Sharon and his advisers were desperately seeking ways this week to divert voter attention back to what they call “the true issues of importance,” meaning the fight against Palestinian terrorism, considered Sharon’s political strength. In televised campaign commercials, which began airing this week, the Likud ignored the corruption charges altogether. Instead the Likud commercials sought to paint Amram Mitzna and his Labor Party as weak-kneed leftists who will “sell” the country to Yasser Arafat through extravagant concessions.

Sharon was also trying by other means at his government’s disposal to divert media scrutiny away from the scandals. There was, many observers believed, an almost gleeful air to the government’s entry into a diplomatic spat with Great Britain this week, when Jerusalem barred a Palestinian delegation from attending a planned London conference on Palestinian reform. The ban was seized as an alternative response to the Tel Aviv bombings, since the government’s first choice, expelling Arafat from the territories, has been vetoed by Washington. At the same time, the row with London seemed aimed at least partly at giving the media something to talk about other than Sharon family finances.

In the same vein, government spokesmen gave unusual prominence to the talks in Washington this week between senior Israeli and American economic officials on a $12 billion aid package that Israel is requesting in direct aid and loan guarantees. Sharon’s people hope the very fact that the massive aid plan is being discussed, even if approval is still months away, will put a hopeful glow on Israel’s ailing economy, which by some key measures is at its lowest ebb in decades.

For all the Likud’s worries, political analysts are sharply divided on the ultimate ramifications of the corruption scandals. Some believe the Likud has already suffered the worst of it, and that having lost five to eight Knesset seats in recent polls, the party has hit its rock bottom of 30 to 33 seats and will still emerge a clear victor on January 28. These experts note that Mitzna and Labor have failed to gain any advantage as a result of Sharon’s woes, and that most voters abandoning the Likud are simply shifting to smaller right-wing parties allied with the Likud.

Others counter that the latest allegations, especially those concerning Sharon and his son Omri, could bring voter disaffection with the Likud to a critical mass and lead to the ruling party’s collapse. Labor activists hope the just-launched television campaign will acquaint voters with Mitzna, still largely an unknown, and let him be seen for the first time as a viable alternative to Sharon.

In the meantime, it is two medium-sized parties, Shinui and Shas, that appear to be reaping the biggest gains from the Likud’s travails and Labor’s inertia. Both parties, pitted in a fierce secular-charedi contest, are consistently gaining ground in the polls, each seeking to capture the middle ground in the next Knesset and emerge as kingmakers positioned to determine the identity of the next prime minister.

This development is ironic, given the fact that Israel reverted to its previous proportional election system this year in the hope of strengthening the two big parties and enhancing the stability of future coalition governments. But given the current troubles in the two main parties, there is scant chance that the next government will be any more stable than its predecessors.

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