by David Landau
In fact, though, that was Annex’s sole purpose. Weissglas had set it up on behalf of Yoram Oren, an Israeli living in California who had long been a key fund-raiser in the United States for the Likud and for Sharon. Oren instructed Weissglas to transfer the shares in Annex to four U.S. citizens. In August, a month before the primary, Omri Sharon asked Weissglas to install his schoolroom friend and army buddy Gabriel Manor as CEO of Annex. Annex’s official address became Manor’s home.
Suddenly, the hitherto dormant company sprang to life. A total of $1.5 million poured into its bank account, mainly from three nonprofit concerns in the United States: the American Israel Research Friendship Foundation, the Center for National Studies and International Relationships, and the College for National Studies. And all of this money, about six million shekels in Israeli currency, poured out again, on Omri’s orders and over his friend Manor’s signature, in payments for the primary—to political strategists, to a pollster, to a security firm, to public-relations experts, and to a legion of campaign workers who all had a part in Sharon’s victory in the primary on September 2. The three American foundations were run by two executives who—“what a coincidence,” the same caustic judge was to write years later—were among the four shareholders of Annex. The various service providers were asked by Omri to make out their invoices and receipts to Annex, for services ostensibly rendered to Annex, not to the Sharon campaign, their true client.
Under the Parties Law, the candidates in the Likud leadership primary were limited to raising and spending precisely 826,726.50 shekels.18 Candidates in primaries were required, moreover, to file detailed returns after their campaign to the party’s supervisory board, which in turn would publish them and send them on to the registrar of parties. In November 1999, Sharon’s campaign filed meticulous returns showing how it had raised the modest sum of 139,776 shekels and had spent 972,396 shekels, just a little above the legal limit. The documents were prepared by the campaign’s accountant, and Sharon himself signed them, as the law required. They were entirely true insofar as they went. Only they failed to mention the other 6 million shekels.
When State Comptroller Eliezer Goldberg, in his routine examination of the 2001 prime ministerial election, alighted on the missing 6 million, they naturally piqued his interest. He determined that of 5.9 million shekels actually paid out by Annex, 1.2 million had been paid for services provided to Sharon after the primaries, when he was already chairman of the party. That left 4.7 million that had gone for Sharon’s primary campaign—almost six times as much as the law allowed and forty-two times as much as Sharon solemnly attested in his official return to have raised. When questioned about this, Sharon informed the state comptroller, after consulting his lawyers,h that he would repay the whole 4.7 million immediately from his own pocket.
Sharon could have dragged his feet. He could have put up arguments about the sums raised and the sums spent and gotten into a long sparring match with the authorities over the facts and figures. His zeal to pay up was apparently intended to underscore, to Comptroller Goldberg and through him to the entire Israeli public, how dumbfounded and humbly contrite the prime minister was about the whole business. Sharon assured the comptroller that he, the candidate, had taken no part whatever in the running of the money side of his primary campaign. He had left all that to his son Omri, leaving himself free to focus on the politics.
Comptroller Goldberg chose not to comment on the plausibility of this depiction. He wrote that Omri was “clearly in total control of Annex’s expenditures; the CEO played merely a formal role and signed the checks.” Omri for his part, Goldberg noted, had “refused to answer the state comptroller’s questions about Annex and about the companies which transmitted funds to it, on the grounds that he did not wish to incriminate himself and on additional grounds (not entirely relevant) that ‘he did not wish to hurt others.’ ” Omri’s noncooperation with the comptroller in his investigation of the “front companies affair” explains the howl of outrage that went up a year later when Sharon peremptorily fired the popular Blumenthal for doing precisely what Omri had done: she exercised her right to remain silent.
The Cyril Kern affair took up from where the front companies affair left off. The state comptroller’s report was published on October 1, 2001. Three days later, on October 4, in keeping with his expansive pledge to repay the errant 4.7 million shekels, Sharon sent a check to Annex for 500,000 shekels from his personal account. His sons, Omri and Gilad, now set about finding the wherewithal to cover the rest of their father’s commitment. On October 22, 2001, Gilad took a loan of 4.2 million shekels from the branch of Bank Leumi, a large, nationwide bank, in the sleepy little town of Sderot, near Sycamore Ranch. As collateral, he mortgaged the ranch. The next day, Ariel Sharon sent Annex a check for 4.2 million shekels. A quick and elegant end, it seemed, to a potentially awkward affair.
Only it wasn’t. Bank Leumi belatedly realized that Sycamore Ranch couldn’t be mortgaged because the Sharons didn’t own the freehold: it was state land, farmed on long-term lease. Two weeks later, however, it seemed the Sharons really would be able to draw a final line beneath the whole episode: a sum of $1.49 million was deposited in the brothers’ account at a branch in Tel Aviv of the Israel Discount Bank. The money was sent by Cyril Kern, a resident of South Africa, from his account in BAWAG (Bank für Arbeit und Wirtschaft) in Vienna, through J. P. Morgan in New York, and on to Israel Discount Bank in Tel Aviv. On April 30, with this deposit as their surety, the brothers negotiated a loan from Israel Discount Bank of 4.2 million shekels. With this, they paid off the loan they had taken from Bank Leumi in Sderot, which was to have been secured by the mortgage but could not be.
Eight months later, and just three weeks before the election, this whole elaborate edifice came crashing down around the Sharon family with the publication, on January 7, 2003, of the Haaretz story. Ariel Sharon appeared to have tripped himself up under questioning. Interrogated by police detectives on April 22 over what was then still the front companies affair, the prime minister had trotted out the version of the loan and the mortgage in Sderot, even though, as the prosecutors explained in their letter to the South African legal authorities, everyone involved knew by then that it was impossible to mortgage the ranch.i
The evolution of the front companies affair into the Cyril Kern affair threatened to add a new and, for Sharon, dangerous aspect to the public’s perception of his and his family’s conduct. From election finance finagling, the story looked as if it were becoming one of outright bribery, or at least of illicit gift taking by the prime minister and his family. The Israeli political ethos, like that of many democracies, makes a distinction between donations to politicians at election time, even if they exceed or otherwise infringe legal restrictions, and gifts to politicians at other times—which are looked on with greater severity.
The almost comical structure of empty companies with pompous, patriotic names was assumed to have been intended to enable Sharon’s longtime patrons and admirers to continue supporting him, especially now that he was bidding for the highest office.j Granted, some of these people had business interests in Israel, which made their support unethical and possibly illegal even beyond the election finance laws infringements. But over the long years, the public had somehow grown inured to Sharon’s enduring dalliance with this moneyed circle of American backers. His ranch, which he showed off with such pride, had been paid for by these friends, and his claims that he had paid them back were always taken with a pinch of salt.
Cyril Kern was someone new, at least to the broad public. The media quickly learned that he was indeed a very old friend of Sharon’s. The two had met back in 1948 when Kern, a young British Jew, came out to Palestine to fight as a volunteer in the new state’s army. He had gone back to England and flourished in the textile business. Later he moved to South Africa. Cyril and Arik, for all their disparities, had been close for more than fifty years. And he was certainly a rich man. But was he rich enough to write a check
for $1.49 million to help a friend in trouble? Or was he, like Annex Research, also just a front? His money had been remitted through Austria, from the same bank used by Martin Schlaff. Schlaff had been growing closer to the Sharons in recent years. He’d been a guest at Sycamore Ranch. His assiduous cultivation of Israeli politicians, his involvement in the Jericho casino, his reported plans to build another in Eilat—all these were seen as more sinister, certainly more suspicious, than the activities of Sharon’s other, older friends.
The Cyril Kern affair, hugely embarrassing and potentially lethal, accounted for only half of Sharon’s woes that first week of January 2003. Another rumbling episode of alleged bribe-taking by the Sharon family came surging to the surface, this one on the pages of the mass-circulation Yedioth Ahronoth.
In March 2001, just a month after he took office as prime minister, the paper had published a seven-page exposé concerning an ambitious but disreputable building contractor and Likud activist named David “Dudi” Appel who set out in the late 1990s to buy Patroklos, a scenic and undeveloped island just off the Greek coast thirty miles southeast of Athens.19 Appel planned to build on the island a vast vacation and recreation complex with many thousands of hotel rooms and holiday apartments, huge shopping malls, golf courses, theme parks, cinemas, an opera house, concert halls, sports stadiums, and fifteen(!) casinos. To buy the island and then to develop it, Appel knew he would need the backing of the Greek authorities. There would have to be legislation to change the designation of the island from a protected archaeological site to a tourist venue. He lobbied vigorously in Athens, with the help of an Israeli-Australian-Greek businessman, Norman Shkolnik, who claimed to have close connections with the powers that be in the Greek capital.
In Israel, Appel lobbied two key figures in his party: Ariel Sharon, the foreign minister; and Ehud Olmert, the mayor of Jerusalem. In January 1999, he persuaded the Israel Labor Party, then in opposition, to invite a delegation from its Greek sister party, Passok, led by the deputy foreign minister, Yiannos Kranidiotis. Appel picked up the tab. He prevailed on Minister of Foreign Affairs Sharon to attend an intimate dinner with the Greek delegation in an apartment he owned in Tel Aviv. Other senior politicians and ex-generals completed the star-studded guest list. Unfortunately, the Greek deputy minister was killed soon after in a freak plane accident. Later in the year, Appel persuaded Olmert to invite the mayor of Athens on an official visit. Again Sharon, now leader of the opposition, graced an intimate dinner with his presence, this time in Appel’s home.
All through this period, for reason of various and sundry criminal suspicions against him, the police were tapping Appel’s telephone lines and monitoring his copious conversations. They heard him, for instance, promise generous support, both political and logistic, both to Sharon and to Olmert, who were running against each other in the Likud leadership primary in September 1999. They also heard him discuss with Sharon, albeit in rather general terms, the fact that Sharon’s son Gilad was working on the Greek island project and would, as Appel stressed, be earning very well out of it. “He’s learned how to lose money till now; now he’s going to learn how to make some,” Appel assured Sharon. Was the payment to the son in fact a payoff to the father?
Despite Yedioth’s efforts to demonstrate a prima facie suspicion of bribery against the prime minister, the “Greek island affair” seemed to fade away after the initial publication in 2001. Neither Sharon nor Gilad was questioned by the police, and no additional evidence was unearthed by the media. Now, though, as the Likud floundered in a wave of corruption stories, the Greek island suddenly surfaced again. On January 2, 2003, Yedioth splashed over its front page the contract of employment between Appel and Gilad. He had indeed earned very well for services that remained vague and mysterious. “The $3 Million Deal Between Gilad Sharon and David Appel,” the headline read.20
Gilad was described in the contract as a consultant. This arrangement had lasted until June 2001, by which time the project had finally run aground and the team working on it was disbanded. Gilad earned some $540,000.
The Yedioth reporters were particularly exercised by the bonus clauses in the contract. These provided that if permission was received from the Greek authorities and work was begun, Gilad would receive $1.5 million. Once the project was completed, he would receive another $1.5 million.
This was “hard to fathom,” the Yedioth team wrote. Gilad’s “consultancy work,” which Yedioth anyway ridiculed (he was thirty at the time, had a degree in agriculture, and had scant experience in business and none in tourism), was ostensibly connected with marketing to tourists, not lobbying governments. “On the face of it, he lacks any qualifications for persuading the government of Greece … to provide the requisite licenses. But Ariel Sharon—who lives at Sycamore Ranch, to which all the moneys in the contract were paid—he is very well-known all over the world. Even as leader of the opposition …”
The next day, January 4, the Meretz MKs Yossi Sarid and Ran Cohen formally requested the police to investigate the Sharons. “The Sharon family is a pretty good business,” the sardonic Sarid observed. “Thousands of firms around the country are folding, but they’re turning over millions.” Yedioth cited unnamed “sources familiar with the case” who said that a police investigation had in fact been conducted and the recommendation was “to indict everyone involved in the affair.”
After another day of dwindling poll figures, Sharon himself reacted, trying to reduce the flames and to direct them against his political rivals. “This publication about Gilad is very serious, and it makes me very angry,” the prime minister said. “The only reason for publishing the story anew at this time is to hurt me. It’s all political. These stories are intended to divert the public’s attention from the crucial issues of security that should be at the top of our national agenda.”21 Three days later, Cyril Kern soared out of anonymity to the top of the national agenda.
Sharon and the Likud were in real trouble. The gap with Labor narrowed to just three seats—twenty-seven against twenty-four.22 The election, from a virtual shoo-in, was suddenly wide open. Labor strategists were striving mightily to lump together all the unsavory characters and stories highlighted by the Likud faction primary with the leader himself in one sinkhole of corruption. Labor’s election broadcasts took their inspiration from The Sopranos. Sicilian music played in the background as “Sharon and his sons” were shown whispering furtively. It looked as if this might just succeed. Panic began to lap at the Likud campaign.
Sharon, at his best when others panicked, shut himself away in his study at the ranch. He summoned his adman friend Reuven Adler; his Israeli election strategist, Eyal Arad; and his American strategist, Arthur Finkelstein. Together they laid on a “simulation” of the toughest press drubbing imaginable. Sharon parried with vigor. Adler urged him to counterattack from the outset. He was being framed by his political foes. (The state prosecution service was long seen on the right as a last redoubt of the leftist “old elites.”) They were out to wrest power by subterfuge. That’s what he should say. The others agreed. Sharon sat on alone into the night, preparing the opening statement that he would deliver the following evening, January 9, at the press conference to be broadcast live on prime-time television from his office in Jerusalem.
The statement, as it turned out, was a stunning success, one of the most salient in his career. He did not have himself to thank for that, but, ironically, a justice of the Supreme Court. He began with a searing attack on Labor, which was
trying to bring down the government by lies. They’ve gone on a hunting expedition against the Likud. They’re trying to make us out as a mafia, as organized crime … When they saw that this wasn’t helping them, they decided to attack my sons with old stories that have no substance to them.
I withdrew my savings and those of Lily, God bless her memory, and in that way I paid back half a million shekels. Gilad undertook to take care of the rest. He took a loan of four and a half million shekels. I returned the
full sum. That was the end of it, from my point of view … As far as I knew, the ranch was mortgaged.
Everything was done legally, Sharon insisted, and there were documents to prove it. Gilad earned very well, and he was proud of him, he declared, in reference to the renewed Greek island revelations. As for Cyril Kern, he was a dear friend of fifty years’ standing. “He never asked for anything, and he never received anything. He’s got no business interests in Israel; he never has had, and he never will have. But he loves us … Look what you’re doing to him just because he’s my friend. So Gilad took a loan from him, which he afterward repaid and paid tax on it. So what? Is that bribery? Is that illicit benefits? What is this? Have you gone completely mad?” Here Sharon brought his fist crashing down onto the desk. “He is a lover of Israel … What are you doing to him?!”
By this time Sharon was shouting into dead cameras, though he did not know it. The justice of the Supreme Court Mishael Cheshin, who had been appointed election commissioner for the upcoming general election, ordered the three television channels to pull the plug on the prime minister on the grounds that Sharon was electioneering rather than merely answering the allegations against him. Under Israeli law, electioneering on radio and television during the weeks immediately preceding an election is strictly regulated. The parties are allocated TV and radio time for their official election broadcasts in proportion to their numerical strength in the outgoing Knesset. Other than that, the media must keep candidates off the air—unless they’re not talking politics. Sharon was supposed to have been talking forensics; when he digressed, Cheshin silenced him.
