Anatomy of a scandal

Holyland is the biggest case of corruption in the state's history and is also Jerusalem's largest housing project.

Ehud Olmert (right) and Uri Lupolianski. 521 (photo credit: Ariel Jerozolimski)
Ehud Olmert (right) and Uri Lupolianski. 521
(photo credit: Ariel Jerozolimski)
What seems to be the biggest case of corruption and bribery in the history of the state is also the largest – and some say the most unattractive – housing project in the city, the Holyland project. Last week the suspicions, the inquiries and the investigations that had gone on for almost two years ended with indictments against some 13 people involved in the affair. At their head was a former prime minister and Jerusalem mayor, as well as another former Jerusalem mayor and two city council members, one of whom is a deputy mayor, in addition to contractors, investors and businessmen.
The coming weeks will witness pre-trial hearings, with all the details revealed, while Deputy Mayor Eli Simhayoff (Shas) and city council member Avraham Feiner (United Torah Judaism) resigned following notice from the city’s legal adviser that they could no longer continue in their positions after being indicted by the State Attorney’s Office. A few hours before he resigned from the city council, Simhayoff was fired from his position as deputy mayor by Mayor Nir Barkat.
The 112-page indictment, filed in the Tel Aviv District Court, charges that Holyland real-estate developers paid tens of millions of shekels to public employees and elected officials to advance its project in Jerusalem, including substantially shortening planning times, smoothing over planning objections, rezoning land, extending tax breaks and increasing the size of the permitted construction.
To those familiar with the roots of the Holyland affair, and the inner workings of city hall, it was perhaps inevitable that a construction scandal would eventually occur. Greedy and easily corruptible high-ranking officials, surrounded by even greedier entrepreneurs – in addition to city council members working on a voluntary basis and who do not always have the time, capacity or, worse, the desire to protect the public’s assets from all this greed – are the basic elements that allegedly fueled the affair.
On one side there are the developers and the entrepreneurs who allegedly tried to get more from the authorities and make a bigger profit. On the other side stands public interest, in this case the interest to protect a plot of land skyrocketing in value in a city in which land is already very expensive, to preserve the landscape and to prevent any misuse of public property.
In analyzing the Holyland affair, it is necessary to understand how the system works and what allowed this situation to occur. Who was in charge, who let it happen, could it have been prevented or, as some say, was it an inevitable by-product of the system? And why, despite so much coverage in the local media during the years of the project’s approval and construction, was no one able to stop it until the police took over the case? For now, in the wake of the news of the scandal and the subsequent arrests, the second part of the Holyland project has been halted and seems to be on its way to cancellation. The city’s skyline will be spared four additional high-rises and a considerable burden on the quality of life of the Ramat Sharett residents in terms of traffic, pollution and the imposition of thousands of new neighbors. But obviously, no one at Safra Square can guarantee that such a thing will not happen again, and that is exactly what needs to be seriously addressed today.
The original plan of the Holyland project was to construct a large hotel on a slope of the Holyland hill (named after the charming little hotel that stood at the top of the hill) which, according to the municipal plan, was the only purpose for which that land was zoned. At that stage, a permit to build an 18-story and a 12-story apartment building was added.
The project (without the two towers) was first submitted in 1994, about a year after Ehud Olmert was elected mayor of Jerusalem. During the years in which the project was approved and constructed, more than 10 people – entrepreneurs and businessmen, as well as high-ranking municipal officials and city council members – were allegedly involved, all of whom have now been indicted.
Right from the beginning Hillel Cherny, the owner of the plot, knew that to change the use of the land from hotel to luxury housing, he would have to persuade a series of high-ranking officials at the municipality, starting with the municipal engineer.
According to the police investigation, it seems that not only did he obtain the zoning change but he also obtained, at an unprecedented speed, veterans at Safra Square now attest, authorization from the engineer and the local planning and construction committee to add thousands of square meters to the original project. As it turns out, the “persuading” in this case allegedly took the form of a series of bribes to various people down the line, from the first submission of the project to its actual implementation.
So the biggest question that remains is how this could happen? How is it that no alarm bells went off along the way? Why, despite numerous articles in the local press, a Ramat Sharett residents’ action committee, which raised a lot of public awareness of the situation, a legal adviser to the city council and a comptroller and opposition members on the city council, did no one put a stop to the project or at least minimize it? In fact, if it hadn’t been for some petty disagreements among the different parties within the project itself, we probably wouldn’t be aware of this enormous corruption affair at all.
“This is happening all the time, everywhere,” the state witness testified during the police investigation. It was S.D., a well-known veteran entrepreneur and builder, who decided, when he didn’t obtain some of the benefits he had expected, that things had gone too far and went to the police to tell all.
THERE IS no question that Cherny and his associates wanted to turn the whole Holyland project, or at least a major part of it, into a housing project right from the start. They knew that the land was zoned for hotels, but they wanted to make more money by building large luxury apartments and penthouses.
The fact that the land was not zoned for residential use did not deter them. They probably assumed that with the proper tools – i.e., millions of shekels – in the right places, high-ranking officials who have the authority to make such changes, they would ultimately get what they wanted. And according to the indictment, they were right.
Officially, the reason for the rezoning presented to the local planning and construction committee, headed at the time (the late 1990s) by deputy mayor (and later on mayor himself) Uri Lupolianski, was that the hotel project was not viable. Later on, and because of the second intifada, that reason became even more convincing with the dramatic drop in the number of tourists who dared to come to Jerusalem.
“But even that doesn’t explain why the project was enlarged so much, even if we could somehow accept the request to change it from a hotel project to a residential one,” admits an employee of the municipality’s permit and construction department.
The first road block in the path of the initiative should have been the municipal engineer, the official who has the authority to approve changes in the city’s plan (though still requiring city council approval). According to the indictment, the engineer, Uri Sheetrit, who was brought into the municipality through Olmert’s personal initiative, had a debt of more than NIS 2.5 million at Bank Hapoalim that he could not repay. Special arrangements were then allegedly made between S.D. and Sheetrit to help him meet his financial obligation (also thanks to the fact that Dan Dankner, then vice president of the bank, was an associate of the organization created by Cherny and his partner, Avigdor Kelner, for the Holyland project). And thus they began to scale the slippery slope that became the Holyland affair.
“That was the first alarm bell that was ignored,” says the source at the administration.
Still, at quite an early stage of the project’s being submitted to the local planning and construction committee, rumors of the monumental project reached some of the Ramat Sharett residents. One of them, Rivka Shaked, deputy director-general of the Civil Service Commission, reacted quickly and was the driving force behind the residents’ action committee.
It was soon headed by Prof. Shlomo Hasson, a distinguished urbanist and geographer and a researcher at the Florsheim Institute. At the end of an interview this reporter had with Shaked in 1998 about her task as head of the state committee for the status of women in the Civil Service, she suddenly added, “The press should do something about this Holyland project. It’s too big, too wide, and it is working out too smoothly at the planning committee. This sounds suspicious to me.”
The local press did publish a series of articles on the matter, but most of the articles focused on the Ramat Sharett residents’ opposition to the project, and none of it was included in the city comptroller’s reports during those years.
Shaked died soon afterwards and didn’t live to see the immensity of the project and the scandal it ultimately created. But she was right. The project was too big, and it breezed through all the bureaucratic red tape much too quickly.
“That aspect alone, the rapidity with which this whole project was approved and implemented, should have alerted attention. It’s hard to believe, but the writing was on the wall right from the beginning, and yet nobody raised a hand to ask the most elementary questions,” says Deputy Mayor Pepe Allalu, who was chairman of the city council controlling committee during part of that period. In fact, Allalu did ask some important questions at the time. “In the early 1990s, long before the Holyland project was born, I already said that it is problematic that the president of the planning and construction committee [Lupolianski] is also the chairman of a nonprofit association that is fueled by donations [Yad Sarah].”
One of the investigation’s findings is that Cherny allegedly gave NIS 3 million to Lupolianski for Yad Sarah, and the police claim that these donations paved the way to allow for a large part of the additional areas to be added to the original project.
However, it is important to note that Lupolianski is the only suspect, for the moment, who is not accused of personal profit, since all that money went straight to Yad Sarah, an institution that helps the elderly and the infirm nationwide.
Allalu says that, nevertheless, the problem does not lie in that committee or that organization but in the fact that those who are tasked with checking up on the decisions that are made don’t have the necessary tools or the knowledge and capacity to perform such a task.
“I think this is too big for the municipality’s administration,” concludes Allalu. “Not the municipality’s comptroller or the city’s legal adviser, not the control committee – none of these have the capacity to realize that there are frauds. These things are so sophisticated today. Look at the police investigation – they needed hundreds of experts in construction, in business management, in taxes, to discover what was unlawful. We can’t do that at the municipality; it’s way beyond our capacities.”
BUT THERE are other voices. Yossi Tal-Gan, the municipal director-general in former mayor Teddy Kollek’s days, says he still doesn’t understand the silence of the overseeing parties in charge, such as the municipal legal adviser or the comptroller. “You can’t expect the city council members, even those who voted against the project – and there were quite a few – to follow up and check on it. That’s not their job or their professional capacity. That’s the legal adviser’s and the comptroller’s task.”
Tal-Gan, who resigned immediately after Olmert was elected mayor in 1993, adds that problems start when political and professional parties join forces. “As soon as the municipal engineer and the president of the planning and construction committee agree on a project, there’s a problem to prove that there is something wrong with that particular project.
After all, these are the top of the pyramid. If they agree on a project, how can you stop them without the tools of professional oversight and legal checking?” Nevertheless, Tal-Gan is relatively optimistic about the future, saying that after the revelations in the press with all the details, the public shame and the indictments, “I would be surprised to see such an affair happening again. But, of course, we all have to remain vigilant.”
As for the results of the trial of the suspects, Tal- Gan warns against too many restrictions. “After all, we all want to develop the city and to build. We shouldn’t go to the other extreme.”
Anat Hoffman, head of the Israel Religious Action Center and a city council member for 14 years, says that the Holyland affair is the biggest scandal right now, but she wouldn’t be surprised to find out that equally large and dramatic affairs are still happening today. “In the New York municipality, such affairs are exposed almost every month. That is the best proof that the best methods are used to check and deal with corruption. The fact that since the Holyland affair was exposed here we haven’t heard about any other affair is, in my eyes, the sad conclusion that we haven’t learned how to deal with corruption.”
Hoffman also thinks that the municipality’s checksand- balances system – such as the legal adviser and the comptroller – was not able to prevent or at least mitigate the results of the Holyland affair in time.
That being said, she believes that much of the responsibility can be attributed to the conditions under which the city council members operate. “You can’t expect people who are not paid, who represent their constituency on a voluntary basis, to be on the alert at all times, to be on top of things and to follow up. This is not possible.”
For these reasons, an attempt to change the law and introduce salaries for all city councillors was made during Olmert’s second term as mayor (1998-2003) by then city council member Rony Aloni (Meretz), but there weren’t enough Knesset members who agreed to support the proposal.
“As long as there are people on the city councils, not only in Jerusalem, who are either rich and involved in businesses or who expect their position as city councillors to bring them some benefit instead of the salaries they don’t receive, we will not get rid of the threat of corruption. People who are not paid for their work are exposed to repeated attempts of bribery by entrepreneurs – it’s only human. Paying the councillors for their work is the first improvement that should be implemented,” says Hoffman.
And perhaps beyond paying the city councillors, hiring experts to check projects submitted, and avoiding too much linkage between the city’s business and projects and nonprofit organizations, one should expect the Interior Ministry’s district planning and construction committee – which is responsible for checking and approving the local committee’s projects – to strengthen its control.
“After all,” says Tal-Gan, “that committee has stronger controlling tools. It could certainly help.”
Joanna Paraszczuk contributed to this report.