State Comptroller Micha Lindenstrauss has sharply criticized Minister of Defense Ehud Barak for breach of the public norms expected of a minister. The special report covered the transfer of money to a company owned by Barak, who reregistered the company in his daughters' names three days before his appointment as minister in June 2007. Lindenstrauss does not recommend any operative measures against Barak and he has not sent the findings to Attorney General Yehuda Weinstein.
Lindenstrauss adds that Barak did not disclose the business activities of his wife, Nili Priel Barak when he was appointed as minister. Nor did Barak fully disclose, as required, his private businesses and financial matters to the committee for the prevention of conflicts of interest by ministers and deputy ministers, effectively avoiding oversight by the State Comptroller of his affairs.
Knesset State Control Committee chairman MK Yoel Hasson (Kadima) said, "This is one of the most severe reports ever published against a minister in Israel." He added, "Ehud Barak's attempt to defraud the public and to create the appearance of a mere technicality has collapsed in view of the ugly findings revealed by the State Comptroller."
Hasson called on Weinstein to open an investigation against Barak, his companies, and his daughters. "If nothing is done, this will testify that not all ministers are equal before the law, and what is forbidden for the foreign minister is permissible for the defense minister."
Hebrew daily "Haaretz" initially exposed the affair in October 2009, when it reported that Barak's companies received NIS 6.5 million when he was appointed minister. Barak founded Ehud Barak Ltd., an international consultancy firm, and two subsidiaries, after losing the 2001 elections to Ariel Sharon. In June 2007, after winning the Labor Party primaries, Barak joined the government of Prime Minister Ehud Olmert as minister of defense, and he transferred the companies to his three daughters.
Two weeks after the "Haaretz" investigative report, the State Control Committee instructed Lindenstrauss to investigate money transferred to Barak's companies after his appointment as minister. It was subsequently learned that Ehud Barak Ltd. received NIS 4.7 million from Israeli and foreign sources, and that one subsidiary received NIS 1.5 million.
According to the rules of the committee for the prevention of conflicts of interest, a minister or deputy minister may transfer ownership of a company to a relative only if that person worked at the company for at least one year. Barak's daughters never worked at his companies.
Lindenstrauss also criticized Barak for transferring ownership of the companies three days before his appointment as minister, even though, publicly speaking, he was a candidate for the post from the moment he won the Labor Party primaries.
In response to the argument that Barak acted legally, Lindenstrauss said that the transfer of ownership of the companies did not mean that Barak was disassociated from the companies, as required, and that Barak should have requested an arrangement for settling his business affairs.
Lindenstrauss added that Barak acted without transparency by not fully disclosing his assets, businesses, and the subsidiaries of Ehud Barak Ltd. Lindenstrauss found that, even after Barak appointment as defense minister, Ehud Barak Ltd. and its subsidiaries continued to pay expenses and that the company paid a NIS 150,000 dividend in 2009. The companies received NIS 5 million in receipts after Barak's appointment as minister.
Lindenstrauss noted that Barak did not withdraw money from the companies without permission, but the fact that Ehud Barak Ltd. owned the subsidiaries created control and relationships that raised concerns about conflicts of interest, questions which were never raised because Barak concealed the relationship.
Taurus Israel Ltd., owned by Barak's wife, which ostensibly had no connection with Barak's companies, as it was consultancy firm for foreign funds interested in investing in Israel. However, in August 2008, following media reports, the company was closed at Lindenstrauss's request. A month later, Lindenstrauss asked Preil for all receipts from the firm's clients.
Lindenstrauss said that Barak failed to follow the proper disclose rules in this case as well.
An aide to Barak said in response, "The minister of defense respects the State Comptroller's report and the institution of the State Comptroller, and has begun to implement his recommendations.
"Belying media reports, the report states, among other things, that the receipts received by the companies were paid for services rendered before Barak's appointment as defense minister; none of the companies' clients have, or had, any business relations of any kind with the Ministry of Defense, so that at no given moment was there any concern of a conflict of interests. Receipt of money by these companies is not forbidden under prevailing prevention of conflict of interest rules. Barak withdrew the money only after receiving permission from the permits committee at the Office of the State Comptroller."
Published by Globes [online], Israel business news - www.globes-online.com - on May 17, 2011
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