Israel Aerospace Industries has been funneling millions of shekels and other benefits to top officials in its workers union for years with no accountability, State Comptroller Joseph Shapira said in a report released on Sunday.
The Jerusalem Post has also learned that Shapira’s review leading up to his office’s report already led to arrests of various officials now under police investigation.
Though the report slams Labor and Social Services Minister Haim Katz, the indictment that Attorney-General Avichai Mandelblit is expected to file against Katz in the coming months for bribery and fraud in his dealings with IAI and its workers union are not connected to the report.
Rather, various IAI officials and suppliers are being probed under suspicion of a scheme in which the suppliers would let the IAI officials skim some profits off the top of certain deals if the officials ensured that the suppliers were awarded supply deals for IAI.
The report was a major move by Shapira to extend his review authority into new areas, like the relationship between the quasi-government company IAI and its union, which until now have gone without oversight for various corporate technical reasons.
In fact, Shapira ruffled so many feathers that the Histadrut labor federation filed a petition in an effort to block the report.
According to the comptroller, the Histadrut eventually withdrew the petition.
Shapira noted that with 16,000 employees and an outsized impact on the defense and related industries, misuse of funds and mismanagement at IAI can negatively impact broad portions of the market.
He wrote that for much of the time period he reviewed – from 2006 through 2018 – relations between IAI and its union were either dominated by Katz or Katz’s son.
Next, the report stated that IAI funnels the union around NIS 15 million annually without oversight, adding up to around NIS 180m. during the review period.
The lack of oversight means that IAI never reviewed the union’s financial books and cannot even necessarily identify what or who the funds are being used for.
Many of the executive council members of the union invest all of their time in union work and yet are paid substantial salaries by IAI as if they perform services for it, said the report.
Further, it said that the union’s general-secretary, Ehud Nof, is paid NIS 1 million per year without working for IAI and that the issue was never officially debated by IAI.
Shapira stated that 25 out of the 46 council members receive a car paid for by IAI without getting proper IAI approval.
Around half of the council members are also paid for 30 to 50 hours of overtime per month, despite performing no services for IAI.
In addition, Shapira wrote that IAI continues to transfer NIS 15m. per year to the union even as the union has around an NIS 100m. surplus of funds.
Moreover, the report said – without explaining why – that 97% of workers being let go as part of a kind of collective bargaining agreement were getting extra benefits when only 82% were meant to get the benefits, adding that even the 82% number was inexplicably high.
Based on these statistics, the report said there were suspicions that the persons given additional benefits and the basis of the agreement had not been based on worker efficiency, as it was supposed to be.
According to the report, another irregularity is that the S.A.L. company has essentially been running a mall for the benefit of IAI workers for around 40 years in which it takes in NIS 2m. of profits without having to pay rent to IAI.
The report also said that council members, especially union general-secretaries like Katz, appeared to have gotten preferential treatment by disciplinary boards when addressing improper activities.
Overall, the report said that IAI had failed to address the union as if it was separate from the company which meant that it had failed many of its duties as a government company.
Shapira urged IAI to correct all of the problems “without delay.”
IAI responded to the report by praising the comptroller’s findings and saying that it was already in the process of incorporating lessons it had learned from the review process.
Framing the report, it stated that it was important to recognize that the issues being criticized represented “the customary way of managing operations at the company for decades.”
It added that the company “is now in a period of dramatic change,” including a variety of organizational aspects, such as relations with the union.
More specifically, IAI said that even after receiving an earlier draft of the report, the company had extended more serious oversight over financial issues relating to the union.
IAI said that its management “would act to ensure the maintenance of proper norms and ethics for a governmental corporation as a basis for all activities.”
Katz responded to the report by saying, “Some of the criticisms have been addressed and some come from the comptroller’s lack of understanding of real world employer-employee relations.
“The report proves that my hands were completely clean in my actions and that throughout my focus was the good of the workers, the organization and the facility.”
Katz also took a shot at media leaks that painted him in a negative light even before the report was published and said he would “continue to defend his good name.”
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