Search JTA's historical archive dating back to 1923

Even if It Doesn’t Hurt Him Now, Sharon May Pay for Scandal Later

January 14, 2003
See Original Daily Bulletin From This Date

Even if he is re-elected, the financial scandal dogging him could spell the end of Ariel Sharon’s political career.

Sharon is accused of taking an illegal loan from a South African friend to pay off other illegal loans to his past political campaigns. The prime minister has not been able to explain away the allegations against him — and more potentially embarrassing details keep surfacing.

The latest polls indicate that Sharon’s Likud Party may be able to hold its lead over Labor in the Jan. 28 election. But if additional revelations about how Sharon and his sons raised funds catch up with him later and force him to resign, the beneficiary might well be former Prime Minister Benjamin Netanyahu, rather than Labor Party Chairman Amram Mitzna.

Polls taken in the wake of the initial revelations last week showed Likud plummeting to as few as 27 seats and Labor climbing to as many as 24. That seemed to indicate that what had once seemed a one-horse race was now wide open.

Sharon called a news conference to defend himself against the allegations, but the chairman of the Central Elections Committee, Supreme Court Justice Mishael Cheshin, forced radio and television stations to cut Sharon off in mid-sentence when he judged that Sharon had veered too far into election propaganda.

That might have redounded to Sharon’s favor. The latest polls, taken after Cheshin’s action, showed the Likud rising again to 32 seats and Labor falling to 20.

Moreover, with a right-wing-religious bloc winning an estimated 63 seats in the 120-member Knesset, Sharon not only would win the election but would be able to dictate coalition terms, according to the polls.

Some pundits accused Sharon and his advisers of deliberately forcing Cheshin’s hand by switching from a response to the allegations to a clear political attack on Labor and Mitzna.

That tactic, they said, allowed Sharon to portray himself as a victim of Labor, the left-wing media and the liberal-leaning judge, while avoiding the need to answer tough questions.

Whether it was a deliberate strategy or not, events worked in Sharon’s favor.

“Sharon was able to rekindle the Likud tribe’s fire,” as one pundit wrote.

The public slighting of Sharon induced Likud activists to offer their support, and the poll results seemed to reflect the Likud’s newfound energy.

The problem for Sharon is that he has yet to answer any of the potentially incriminating questions arising from the affair.

Briefly, the facts of the case are these: As part of his report on the 2001 elections that brought Sharon to power, the state comptroller located an illegal contribution of more than $1 million to Sharon’s 1999 campaign for Likud leadership.

Rather than face a fine of four times that amount, Sharon undertook to pay the money back to the donor, an American-based company called Annex Research. It should be noted that Israeli election law sets strict limits on the size of Israeli campaign donations, and does not allow donations of any kind from abroad.

To repay Annex Research, Sharon’s son Gilad secured a bank loan and offered to mortgage the family farm as collateral. When that proved impossible, Gilad Sharon used a $1.5 million loan from his godfather, South African businessman Cyril Kern, to raise a loan from a second bank to repay the loan from the first bank.

Gilad Sharon paid back Kern’s loan seven months later, while the outstanding loan from the second bank is due on April 30.

On the basis of these facts, police opened an investigation of Sharon and his sons on suspicion of bribery, fraud and breach of trust. The state prosecution asked South African authorities for cooperation in investigating Kern.

For his part, Kern said the money was a personal gift, not a political donation. “I can do what I like with my money. I helped a good friend, and I have been paid back. I am happy I did that,” Kern told the Sunday Times of Johannesburg. Sharon reportedly telephoned Kern last week to apologize that he had been dragged into the scandal.

Some questions that investigators and journalists are asking:

Who is involved in Annex Research, and why won’t Sharon say? Is Annex Research a shell company for channeling funds from dubious sources?

Why did Gilad Sharon use Kern’s money to raise a loan from a second bank to pay off the first bank, rather than using it as collateral or capital for the first bank?

Why was the Kern money transferred to Israel via banks in Austria and the United States? Did Kern really make the loan, or was he a conduit for funds from more dubious sources?

Was the use of the Kern loan a case of using one illegal donation to pay back another?

Does Kern have business interests in Israel, in which case the loan could be seen as a possible bribe for preferential treatment?

What collateral remains for the second bank loan after Gilad Sharon repaid Kern’s money? And how did Gilad Sharon make enough money in seven months to repay the loans, when his business had been suffering from cash flow problems and the Israeli economy was going through a period of deep recession?

Did the prime minister mislead Israeli authorities when, as part of the investigation, he failed to mention the money from Kern? Did he mislead the Israeli public when he said he didn’t know how his sons had repaid Annex Research?

On Monday, the Ma’ariv newspaper added a new twist, claiming that Kern had tried to interest Israeli businessmen in huge gold and diamond deals in South Africa, and had kept Gilad Sharon informed.

That might imply that Kern has business interests in Israel, making his financial aid to the Sharons suspect. There is a precedent for such suspicions: One of the main reasons for President Ezer Weizman’s resignation in mid-2000 was the revelation that his benefactor, Edouard Saroussi, a French businessman, had business interests in Israel.

The Labor party is campaigning heavily on the corruption issue. Ironically, though, if Sharon wins the election but ultimately is forced to step down because of the scandal, it’s not Labor that will benefit.

Under the recently abandoned system of direct election of the prime minister, the prime minister’s resignation would have sparked new elections.

However, under the current system of voting only for parties, Sharon would simply be replaced by another Likud member who has the confidence of the Knesset — such as his party rival Netanyahu, for example.

Exchanging Sharon for Netanyahu, who is more hard-line and less inclined to cooperate with Labor, would be a net loss from the point of view of the left.

From a purely partisan point of view, then, Labor’s corruption-based campaign against Sharon and his sons may prove to be counterproductive.

Recommended from JTA