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As Charges Grow, Austria Seen Aiding Sharon Probe

JERUSALEM — Austria would welcome a new Israeli request for assistance in investigating a suspicious loan to the sons of Prime Minister Sharon, according to senior sources in the Austrian Justice Ministry. A Vienna court turned down Israel’s initial request in July.

The sources said Austria would have approved the Israeli request to investigate Austrian bank records if Israeli authorities had detailed their suspicions, which include attempted bribery as well as campaign finance violations.

The Austrian sources said that if Israeli investigators suspected that any of the businessmen involved in the loan were trying to influence Sharon to promote the establishment of a casino in Israel, this should have been specified in the request for a probe.

Israel had asked Austria last winter to allow it to examine the ownership of the Vienna bank account from which hundreds of thousands of dollars were transferred last November and December to Gilad Sharon, the prime minister’s younger son. The transfers enabled Gilad Sharon to pay back a loan he took out in May 2002 from a Tel Aviv bank, which in turn had been used to repay illegal donations to his father’s 1999 Likud primary campaign.

The loan from the Tel Aviv bank, in turn, was made possible by the $1.5 million Gilad ostensibly received as collateral from Cyril Kern, a British businessman living in South Africa and a longtime family friend. However, police believe that Kern, who has no business interests in either Austria or Israel, may have been fronting for two other businessmen with business interests in both places.

In the request to Austria, Israeli law enforcement authorities detailed suspicions that the businessmen who made the initial, illegal campaign contribution in 1999 were the same people who then fronted the so-called Kern loan with which the Sharon brothers repaid the illegal contribution. They believe that the same people then transferred the money to Gilad Sharon to pay back the Kern loan. Therefore, the authorities suspect the money went from the donors to Sharon, from Sharon to the donors and from the donors back to Sharon.

The original campaign contribution came from a straw company called Annex Research Ltd. Police suspect that the financial backers of Annex are Arie Genger, an Israeli-American businessman who is close to Sharon and sometimes serves as a back-channel liaison to the Bush administration, and a second person who has not yet been identified. Both men are said to have extensive business dealings in Israel.

Another Austrian court recently approved a separate Israeli request to examine bank records in connection with a separate investigation into the campaign finances of Israeli Transportation Minister Avigdor Lieberman, head of the far-right Yisrael Beiteinu party. Lieberman is suspected of illegal business dealings with an Austrian businessman, Martin Schlaff, who is believed to own 50% of the shuttered casino in Jericho. Police suspect Schlaff stands behind a $1 million line of credit extended to Lieberman by an Austrian bank.

Lieberman, who served as director-general of the Prime Minister’s Office under former prime minister Benjamin Netanyahu before forming his own party, reportedly met in London in the spring of 2000 with Mohammed Rashid, Yasser Arafat’s financier, who was said to be a partner with Schlaff in the Jericho casino. A few months later, in February 2001, Rashid and Schlaff met in Vienna with Omri Sharon, the older son of the prime minister, as well as Tel Aviv attorney Dov Weisglass, who represented Schlaff’s interests in the Middle East and is now the prime minister’s bureau chief.

Ehud Barak, who was prime minister during both Schlaff-Rashid meetings, charged at the time that Lieberman was attempting to convince the Palestinians not to strike a deal with the Labor government but to wait for a right-wing government with which they could get a better deal. Lieberman refused then to comment on the connection between the meeting in London and the one in Vienna.

In a press conference last week, Lieberman denounced the police investigation into his business and campaign finances as a leftist plot. He also denied any involvement by Schlaff in his campaign finances.

The so-called Cyril Kern affair stems from a $1.5 million contribution to Sharon’s Likud leadership campaign that was found to be illegal in a state comptroller’s report in 2000. Sharon volunteered to repay the money rather than pay a fine for the campaign violation.

Sharon later told investigators that the money had been repaid through a mortgage on his Negev ranch, arranged by his son Gilad. However, police eventually found that the mortgage had been turned down. The younger Sharon then arranged the loan from Kern. The prime minister has publicly denied any knowledge of his son’s financial arrangements.

Gilad Sharon has undergone lengthy police interrogations, during which he has invoked his right to remain silent. Justice Ministry officials have attempted to have his right to silence overruled, arguing that he is not protecting himself but his father. Courts have so far rejected the argument.

Police have also attempted to obtain copies of Gilad Sharon’s bank records, but have been stymied by the fact that he lives with his father at the family’s Negev ranch. Attorney General Elyakim Rubinstein explained this week in a letter to a Knesset member that investigators could not search the ranch because the prime minister’s parliamentary immunity extends to the entire residence.

The prime minister’s older son, Omri, a freshman Knesset member, agreed to be interrogated in the affair this week, telling police fraud squad detectives that he was not the one who handled either the loan from Kern or the bank transfers from Austria, but that his brother Gilad dealt with them.

Sources close to the investigation said that Omri Sharon’s testimony appeared to be a continuation of the concealment tactics they have encountered throughout the investigation.

Police sources told Army Radio that Omri Sharon had agreed only to answer questions relating to the period after he was elected to the Knesset in January 2003, remaining silent on the more important questions. The radio network also reported that Gilad Sharon was expected to be questioned by police again in the coming days.

Omri Sharon, who expects to be indicted in the coming months, reportedly intends to bear the brunt of accusations about violating the campaign finance law, an offense that does not involve imprisonment but only a fine, in order to protect his father. Even so, Omri did not provide detectives with answers on this matter either and evaded their questions.

The Justice Ministry request to Austria for permission to conduct the investigation and take depositions on the Sharon affair included many details that raise suspicions about the elder Sharon’s direct and indirect involvement in all the financial elements of his campaign in 1999 and afterward. They appear to contradict the prime minister’s public statements that his sons handled all those affairs, and that he was uninvolved in the financing of his campaign.

Gilad Sharon returned the Kern loan with hundreds of thousands of dollars that were transferred to him by anonymous businessmen a few days prior to repaying the loan, from the same Austrian bank where the Kern loan originated. Senior officials in the police and state attorney’s office say the transfer strengthens their suspicions of bribery involving Sharon and his sons. The police suspect that the two foreign businessmen, who have business interests in Israel, are behind the mysterious funds that arrived twice from Austria.

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