Sky scrapers

The Holyland apartment complex is the most high-profile case of building corruption in Israel's history, but hardly the only one.

May 27, 2010 13:53
Holyland apartment complex

Holyland apartments 311. (photo credit: courtesy)


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On May 7 a small bomb went off in the car being driven by Shota Hovel, head of the Department of Business Licensing and Building Inspection for the Tel Aviv Municipality. (No one was hurt, though Hovel’s car and others parked nearby were damaged.) In the 18 months since the last municipal elections, some 80 mayors, council members and senior municipal bureaucrats have been physically attacked or threatened with violence. “The majority of these assaults and threats have to do with decisions by municipalities involving building or business licenses,” says a security source. “This kind of violence keeps getting worse from year to year.”

Most corruption in the building industry happens at the local level – between developers, contractors and their fixers, or macherim,  on the one hand, and municipal officials on the other, says Meir Gilboa, a 37-year veteran investigator for the police, the Antitrust Authority and the State Comptroller’s Office.

Olmert Holyland probe lasts 8 hours
94% of public: Planning authorities are corrupt

“In many cases bribery is involved,” says Gilboa, “but as often as not it’s people in positions of power doing illegal favors for friends and associates. And if it’s a big-time developer who wants the rules changed in his favor, very few public officials will tell him no.”

Tzruya Medad, head of legal and economic affairs at the Movement for Quality Government, the country’s most prominent anti-corruption NGO, says: “If I could hire one more person in my office, it would be a lawyer to focus only on government decisions in planning, building and land use.”

A survey released this week by Netanya Academic College and Shiluv
research group found that 83 percent of Israelis believe corruption among planning authorities is either “extensive” or “fairly extensive.” Asked who or what was chiefly to blame, 47% cited bureaucracy and macherim, while 39% blamed cronyism between government officials and businesspeople. It turns out the public’s intuition is right on the money, say anti-corruption experts.

The scandal surrounding Jerusalem’s Holyland apartment complex is literally the most high-profile case of building corruption in the country’s history. It involves millions of dollars in bribes, suspects including a former prime minister (Ehud Olmert) and a former Jerusalem mayor (Uri Lupolianski), and a colossal eyesore in the capital, a humongous stone-and-concrete “monstrosity,” in the words of a judge in the case. But while the scale of supposed corruption in Holyland is extraordinary, the style – whereby developers and contractors allegedly sent macherim to bribe local officials to ease building restrictions on the project – is common as dirt, say observers.

In recent years, at least five former mayors – Lod’s Benny Regev, Kiryat Shmona’s Haim Barvizai, Rehovot’s Shuki Forer, Safed’s Oded Hameiri and Eilat’s Shimon Algarissi – have been convicted of taking bribes from developers and contractors in return for easing building restrictions, or in return for granting them public works contracts without a tender, which is illegal. In most cases, the bribes went to pay off the mayors’ campaign expenses.

On the corrupt developers’ side, one of the most notorious, David Appel, was convicted on April 15 for giving about NIS 1.5 million in bribes to former Lod mayor Regev, former Givat Shmuel mayor Zamir Ben-Ari and former Israel Lands Administration official Oded Tal in return for favorable building and zoning decisions.

But these are among the rare cases that ended in court convictions. In view of the true extent of building corruption, they represent the barest tip of the tip of the iceberg, say corruption fighters. “The state comptroller’s reports are filled with these kinds of stories,” says Michael Partem, deputy director of the Movement for Quality Government. And even those reports show only a small part of the picture.

The overwhelming majority of corruption in building remains secret, says Gilboa. “Even the people who know what’s going on and want to stop it are usually afraid to complain to the police. Either that or they figure it’s no use because the police – I don’t want to say they do nothing, but let’s say they’re very slow and inefficient in their response,” he says.

There are two things building developers and contractors are looking for from local authorities, and three things the corrupt among them are willing to pay bribes for, says Gilboa: (1) zoning changes on land to make it more valuable, for instance by rezoning agricultural land as industrial land or, even better, as commercial land; (2) building code “variances” that, for instance, allow developers to add more stories to their building, or to build more apartments on the lot and provide less parking space; (3) speed up the impossibly slow, Byzantine approvals process by moving a developer’s application “from the bottom of the pile to the top.”

THE HOLYLAND project is the ultimate example of zoning changes and building variances gone wild. “The project started off as a few hotels and ended up a nightmare,” says MK Ze’ev Bielski (Kadima), who gained a reputation for integrity in 16 years as Ra’anana’s mayor, and who now heads the Knesset’s local authorities caucus.

The Appel case involved a similar cocktail of corruption, also on a grandiose scale, going back to the 1990s. Appel, a longtime Likud power broker, gave then Lod mayor Regev about NIS 1.4 million for a building variance allowing him to add two apartment towers and a shopping mall to his giant Ganei Aviv residential project. Appel also owned 140 dunams of agricultural land in nearby Moshav Ginaton, and prevailed on Regev to annex the land to Lod and rezone it for residential development, a Tel Aviv court found. (As is often the case with mayors, Regev was chairman of his municipality’s planning and building committee.)

In Givat Shmuel, Appel owned a plot of land zoned for construction of 370 single-family houses, and the court found that he gave then-mayor Ben-Ari NIS 95,000 to rezone it for construction of 2,000 apartments. Finally, Appel got ILA central region head Ilan Tal to award him an urban renewal contract after promising Tal he would use his political connections to get him promoted, and even hire his wife in one of his companies.

To further his goals, Appel used the services of a macher named Benny Tabin.

 “Macherim are usually involved in these sorts of deals,” says Gilboa. “These are usually people who used to work in the government bureaucracy, and they use their old contacts in the government on behalf of developers and contractors who hire them.” Sometimes the macherim pass along bribes to government officials, but sometimes they gain favors for their employers without having to resort to bribery, just by “relying on old friendships,” Gilboa adds.

 “The macherim know how the municipality works, they know how to get things done without bribes – by taking a developer’s file to the right person at the right time, and they make money for knowing how to ‘fix’ things,” says Bielski. “I can’t say it’s illegal, but it’s very wrong. You’ve got two people coming to the municipality to apply for a permit to enclose their balcony, and the one who hired a macher gets it done in three months, while the one who didn’t hire a macher has to wait two years.”

(Bielski maintains that the macherim had little work in Ra’anana when he was mayor because he convened the city planning committee frequently and stayed on top of the bureaucracy, but he allows that they probably didn’t altogether disappear from town.)

In many large development companies, macherim have become institutionalized – they’re not freelancers, they’re on the payroll, says Gilboa. “These huge corporations make sure to employ a lot of people who were in senior positions in the Finance Ministry, the police, in government-owned corporations,” he says. “And when they show up in government offices, they send an unspoken message to the bureaucrats: ‘You see how far you can go if you play along?’”

WHILE SIMPLE human greed and deceit are certainly the main reasons for wide-scale corruption in and around the country’s building industry, there is a particularly Israeli ingredient in it, too – a huge, inscrutable, ever-growing government bureaucracy.

“In a Western country, it generally takes five or six years to get all the necessary permits for a major construction project like a residential neighborhood or an industrial complex. In Israel, it takes about eight,” says Gilboa. He adds that such an ordeal, of course, raises the motivation of developers to turn to macherim – and often to bribing government bureaucrats – to simplify and speed the process.

Ironically, the building bureaucracy has thickened in the last 15 years or so with additional layers of clerks meant to serve as a check on the corruption of others, notes Gilboa. In fact, he says, the opposite effect has been achieved.

“The more bureaucracy you have, the longer it takes to get building permits, the more leverage government clerks have over developers and contractors,” he says. “It’s a paradox – the higher you raise the bureaucratic hurdles, the more corruption you get.”

Partem puts it cynically and bluntly: “The more ‘gatekeepers’ there are, the more of them you have to pay off.”

At stake here is not only honesty in government and business, but the protection of the public interest in the approval of construction projects – and this latter principle is commonly violated in perfectly legal fashion when very rich developers are involved, says Gilboa.

“You look at these two huge hotels that were built right on the Haifa beach and the one that was built on the North Tel Aviv beach, hotels that basically blocked off the beach to the public – that’s obviously not in the master plan, but it was approved. The law was changed, the building variances were granted and, in the end, it was all legal,” says Gilboa. “If it was you or I who were asking the building and planning committee for such a variance, they’d throw us out on our ear. But the developers who want the laws changed so they can build these projects are very, very rich, and when they ask, people in government won’t say no.”

It’s simple, says Bielski: “Mayors want more residential development, more hotels, more shopping centers – and the added tax revenue they bring to the city. And they’re not happy to wait years and years for the bureaucracy to finish, either.”

BUT THEN, of course, there’s another dark side of the picture – what is liable to happen to a mayor, a local council member or a senior bureaucrat who dares to say no to a developer, contractor or other sort of businessman who doesn’t take no for an answer.

A couple of months ago a live grenade was thrown into the home of Nazareth Mayor Ramez Jeraissy, missing him but severely wounding his bodyguard. Recently the municipal building in Tuba Zangaria was shot up with an automatic weapon. A driver tried to run over Yitzhak Golvari, local council head in Kadima Tzoran. Itzik Rochburger, mayor of Ramat Hasharon, was attacked by men while getting into his car. Meir Yitzhak Halevi, mayor of Eilat, was assaulted by men on the city’s beachfront. Herzliya Mayor Yael German and Netanya Mayor Miriam Fierberg-Ikar are among the many, many mayors who’ve been threatened with murder, says a security source.

In each case, notes the source, the suspicion is that the mayor was attacked or threatened by people who weren’t granted building variances or business licenses, or who had their illegal buildings demolished by the city.

“It’s gotten to the point where about half of the country’s mayors – roughly 130 of them – are either physically attacked or threatened with violence over the five-year course of a term,” the source says. In 2003, Yermi Olmert (brother of Ehud) resigned as mayor of Givat Shmuel after receiving several threats connected to land use decisions.

It’s this sort of intimidation, combined with appalling police indifference, that keeps municipalities from carrying out demolition orders on any number of illegal buildings, says Gilboa. “In virtually every city and town, there are demolition orders that aren’t carried out because threats have been made against the mayor, against the city council, against senior clerks, against municipal inspectors, and they won’t send out a wrecking crew because it would require police protection, and the police can’t be bothered,” he says.

Bielski puts it more diplomatically, saying the police “aren’t enthusiastic” about guarding city demolition crews. But he adds that if a mayor is determined enough, he can pressure the police into doing their job.

“Once we had a situation where some rough elements were running a pirate gas station for trucks on public land. They stored fuel containers on the grounds and it was completely unsupervised, a huge danger to the surrounding residents. We expected that if we went to shut it down there would be violence, but we pressured the police and one morning at 4 a.m. we sent a crew down there with about 200 policemen guarding them, and shut down the operation,” Bielski recalls.

He says that during his 16 years as Ra’anana’s mayor, he was never threatened and never offered a bribe. “Once one of our city councilmen, who was an honest man, was offered a bribe, but he exposed it and that was the end of it. As far as I know, there was no corruption in the city. But you can never know for sure,” he acknowledges.

Asked how Israel could better fight this source of corruption, Bielski recommended cutting out the bureaucratic Via Dolorosa that developers and contractors go through so they won’t be so tempted to resort to macherim and bribery. “Now they have to go to City Hall to get one permit, then the police department for another, then the fire department for another, then the Health Ministry, then the Environmental Protection Ministry and so on. It never ends. What we need is to combine the entire building approval process into a single, ‘one-stop’ address so that it’s not such an awful ordeal simply to comply with the law.”

Gilboa suggests a major increase in police intelligence resources for rooting out corruption, or “white-collar crime.” “In Holyland, somebody who evidently wanted revenge came forward and told the police what was going on. But that’s rare – to fight bribery and corruption, you have to take the initiative, you have to seek out information, and the police do very little of this.”

Until a couple of months ago, the government was proposing to streamline the planning process to give even more decision-making authority to municipal committees and less to the regional and national planning boards. This was billed as a “reform.”

Then came the Holyland scandal, with allegations of corruption against the highest levels of Jerusalem city government, touching politicians and civil servants both. The government is now reworking its reform proposal. Meanwhile, Israelis looking up at skyscrapers anywhere in the country may be wondering what really went into building them.   

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