The Liberman file

The Foreign Minister has one more legal hurdle to negotiate on his drive to the top.

Foreign Minister Avigdor Liberman - Our word is our Bond 390 (photo credit: Flash 90)
Foreign Minister Avigdor Liberman - Our word is our Bond 390
(photo credit: Flash 90)
From modest beginnings as a penniless bouncer in a student night club, Avigdor Liberman, a burly immigrant from Soviet Moldova, rose by playing on immigrant insecurities and wider national fears to become one of Israel’s richest and most powerful politicians.
His admirers put his success down to sheer talent; his detractors attribute his meteoric rise largely to rabble-rousing hate speech and crooked financial shortcuts. For more than a decade, the leader of Yisrael Beytenu, the far-right party, catering mainly to immigrants from the former Soviet Union, served as an increasingly senior minister in successive Israeli governments while under investigation for serious crimes.
Liberman dismissed the police probe into his affairs as a witch-hunt by jealous old elites. The investigators pointed to a sophisticated web of deception based on interrelated shell companies and front men, which over the years allegedly earned Liberman millions of dollars – illegally because under Israeli law, elected officials are barred from engaging in or profiting from outside business dealings.
In mid-December the case came to a head when, after six years of extensive investigations in nine different countries, Attorney General Yehuda Weinstein announced he was dropping the more serious charges pertaining to the shell companies, but that he intended to indict Liberman on a lesser, related offense that was, nevertheless, grave enough to threaten his public career.
In a 95-page report, Weinstein explained that he was closing the main case not because he believed Liberman was innocent, but because he did not have sufficient hard evidence for a conviction. The fact that he had decided not to proceed was by no means a vindication or a “kosher certificate,” he wrote.
The lesser charge involves Zeev Ben- Aryeh, a former Israel Ambassador to Belarus.
In October 2008, Ben-Aryeh had tipped Liberman off about company activities and a bank account in Belarus the Israeli authorities wanted to investigate. Liberman claims he did not read the note Ben- Aryeh passed on to him. But he did not report Ben-Aryeh’s attempted obstruction of justice either. On the contrary, when Liberman became foreign minister a few months later, he employed Ben-Aryeh as a senior adviser.
Worse: When Ben-Aryeh later applied for the ambassadorship to Latvia, Liberman kept mum about his crony’s abuse of his previous ambassadorial position. According to the attorney general, in what could be construed as favors for services rendered or to be rendered, Liberman worked to advance the career of a man he should have had barred from the civil service. As a result, Weinstein decided to indict the foreign minister for fraud and breach of public trust.
Following the attorney general’s decision, Liberman resigned as foreign minister, calling for a quick trial in the hope of an early return to government.
The stakes could not be higher. If convicted, and if the court decides to attach moral turpitude to its sentence, Liberman could be barred from holding public office for seven years. If acquitted, or if there is no moral turpitude, as foreign, finance or defense minister and No. 2 in the joint Likud-Yisrael Beytenu hierarchy, the radical right-winger, persona non grata in the Arab world and out of step with Europe and America, could resume his drive to succeed Benjamin Netanyahu as prime minister of Israel.
The attorney general’s decision to drop the main case against Liberman was greeted by legal experts and media pundits with a degree of unease. Indeed, opinion within the State Prosecution itself was divided. A leading defense lawyer before becoming attorney general, Weinstein focused on minutiae and saw potential holes in the evidence. Others, including Weinstein’s No. 2, State Attorney Moshe Lador, looked at the big picture and saw a clear pattern of systematic wrongdoing that warranted going to trial.
According to the Weinstein report, what they saw in a nutshell was this: Between 1997 and 2004, Liberman and/or his lawyer Yoav Mani formed five companies ostensibly used to funnel money to Liberman from rich friends and associates, some with business interests in Israel. The tycoons involved included Martin Schlaff, Mikhail Chernoy, Dan Gertler and Daniel Gittenstein. The suspicion was that Liberman was being paid to further their interests in Israel while serving as a minister in the government.
There was also prima facie evidence of fictitious sales and deliberate covering of Liberman’s tracks to enable him to continue benefiting from the companies while in public service. Two companies were supposedly sold to Joseph Schuldiener, a close friend of Liberman’s based in Antwerp, on the strength of a flimsy memorandum. Two others were registered offshore in the Virgin Islands in the name of Igor Schneider, Liberman’s former driver. And the registered owner of the fifth company was his daughter Michal, then in her early 20s.
In these dealings, Liberman’s right-hand man was his lawyer Mani. According to the Weinstein report, Mani set up the companies, handled their affairs and covered Liberman’s tracks. For example, he allegedly gave instructions to the Cypriot law firm handling three of the five companies not to send faxes to Israel, never to mention Liberman’s name and to refer to him only as “the client,” “our mutual client” or by his initials “A.L.”
On the strength of the mounting evidence against Liberman, the prosecution prepared a heavy initial indictment on charges of fraud, breach of trust, money laundering, receiving something fraudulently under aggravated circumstances and witness tampering.
The following more detailed account of what happened in each of the five companies is based on the investigation and State Prosecution findings as documented in the Weinstein report. The saga began when, soon after resigning as director general of the Prime Minister’s Office under Netanyahu in 1997, Liberman went into the foreign currency and lumber businesses, dealing largely with Eastern Europe. He formed his first two companies Paths to the East (Israel) in 1997 and Paths to the East (Cyprus) in 1998.
On April 22, 2001, a month after becoming minister of national infrastructure, as required by law, he sold both companies. There was, however, evidence to suggest that the sale to his friend Joseph Schuldiener was fictitious.
There was no full-fledged deed of sale; Schuldiener paid only part of the stated price; Daniella Mourtzi, the employee in the Cypriot law firm Andreas Neocleous handling the company account testified that she continued to regard Liberman as the owner, even paying private Liberman expenses from company funds. Against this, Schuldiener did act as if he were the new boss. He attended board meetings, invested $450,000 in the company and was the registered owner. Schuldiener, who clearly could have been the key witness in this case, died in 2006 before being questioned.
In January 2000, Liberman allegedly acquired Mountain View Assets Inc., an offshore company registered in the Virgin Islands.
On March 8, 2001, the day after he was appointed minister of National Infrastructure, his ex-driver Igor Schneider was registered as the controlling shareholder. Again Israeli investigators suspected a fictitious transfer of ownership. Liberman as “the client” allegedly took part in a key board meeting in September 2004 on the company’s dissolution; before that, his friend Chernoy transferred $500,000 to Mountain View, $250,000 of which went to the Cyprus bank account of Gershon (Grigori) Trestman, a Russian language poet and Liberman’s neighbor in the West Bank settlement of Nokdim, for an alleged truck deal in Belarus.
In November 2001, a fourth company, Mayflower Capital Premium Ltd., was registered in the Virgin Islands with Schneider as the controlling shareholder.
Again the Israeli investigators suspected that Schneider was fronting for Liberman.
Mayflower inherited Mountain View’s business after it was dissolved, and between July 2003 and March 2008, $12,490,000 flowed through its bank account, including large sums from Liberman’s friends and associates.
Under interrogation Liberman claimed to know nothing about this company. His lawyer Mani, involved in the establishment and running of all the companies, invoked the right to remain silent on this and all the other Liberman-related affairs.
In July 2004, when he was out of government, Liberman set up a fifth company, ML1, with his daughter Michal Liberman-Galon listed as the controlling shareholder. Its sole business was providing consultancy services for a Russian company, MVF Megatis, partly owned by Liberman’s childhood friend Daniel Gittenstein. For this service, Megatis paid ML1 $65,000 a month until January 2008, a total of $2,540,000. Then, for a further 11 months, another Gittenstein-owned company, Levingstone Investments, made monthly transfers totaling $405,000. Liberman claimed to have cut all ties with ML1 when he returned to public service in 2006. The question investigators and some members of the State Prosecution asked was would Gittenstein have gone on transferring these large sums if Liberman was truly out of the loop? In April 2007, investigators located 1,200 documents pertaining to all five companies’ affairs in Mani’s law office. Mani, arguing lawyer-client privilege, refused to hand them over. He only did so 16 months later after his appeals to the Tel Aviv Magistrate’s Court and the Supreme Court were rejected.
Despite the appearance of systematic criminal conduct, Weinstein argued that the case against Liberman would be virtually impossible to prove. Most of the evidence was circumstantial and would not hold up in a court of law; key witnesses like Schneider, Gittenstein and Mourtzi would almost certainly refuse to come to Israel to testify; Liberman’s lawyer Mani, had invoked the right to remain silent; without courtroom testimony from Mani and Mourtzi, it would be difficult to validate the documents taken from the Andreas Neocleous and Yoav Mani law offices; two other key witnesses had died and a third had disappeared. Moreover, Mourtzi’s key testimony linking Liberman to the companies was based on impressions, not direct knowledge. Worse, in a follow-up interview in November, she backtracked, claiming she no longer remembered anything.
In the pre-trial hearing, spread over three sessions in January and February 2012, Liberman’s lawyers accentuated the evidentiary difficulties. This together with Mourtzi’s “memory loss” convinced Weinstein that going to court would be futile.
State Attorney Lador disagreed. He insisted that despite the holes in the evidence, there was more than enough to suggest that Liberman retained an illegal interest in the companies and reaped profits while in public service.
For example, the companies received huge round sums from Liberman friends with business interests in Israel; on the face of it, Liberman used off-shore companies with front men to cover his tracks through lawyer Mani; monies received by Liberman were not declared to the State Comptroller as the law requires; no one on the Liberman side had come forward to tell all they knew about the way he transferred his interests to people living abroad, whereas if it was all above board, they certainly would have rushed in to prove his innocence and, unlike Mani, chosen to remain silent; Daniella Mourtzi’s initial testimony in September 2008 was highly significant and, in Lador’s view, her later “loss of memory” only served to add weight to it; there was a correspondence between Liberman flights to Cyprus and key corporate meetings, with tickets paid for by ML1.
With Liberman off the legal hook in the main case, it remains to be seen how he fares in the lesser “ambassador’s affair” and in the court of public opinion. Strong public outrage at perceived criminal conduct could knock him off his elevated public pedestal and hurt the Likud-Beytenu ticket in the January election.
So far, however, there is no sign of either of these things happening. On the contrary, chances are if Liberman gets past the “ambassador’s affair,” his political star will continue to rise.
Instead of being embroiled in a long legal battle over the main case that he could have lost, the former bouncer could still make it to the very top.