Shari Arison, Israel’s Wealthiest Woman, Questioned as Suspect in Bribery Probe

Aug

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Shari Arison, the wealthiest woman in Israel, was questioned as a suspect by police in a corruption probe, Israel Police and the Securities Authority said Sunday.

Police are investigating possible corruption in Housing & Construction, Israel’s largest construction firm that builds projects all over the world. Housing & Construction is being probed by the Israel Police for allegedly paying bribes to African officials to win construction contracts.

After the investigation was launched earlier this year, Arison sold her controlling stake in the firm to American-Israeli businessman Naty Saidoff for 1.1 billion shekels ($301.5 million). The transaction was completed last week.

Efrat Peled, the CEO of Arison Investments, was also questioned.

Arison has an estimated worth of over 20 billion shekels ($5.5 billion). She is also the controlling shareholder of Bank Hapoalim, which is under investigation by U.S. authorities on suspicion of aiding American clients in evading taxes, forcing it to set aside 500 million shekels ($135 million) to date for expected penalties and legal costs.

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Arison was not detained for questioning; the session had been coordinated in advance. The police statement did make it clear, however, that she was questioned under caution (that is, as a possible suspect), indicating that it was decided to issue that warning to Arison during her questioning.

The Arison Group said in response: “Shari Arison and Efrat Peled were invited in advance to the offices of Lahav 433. They cooperated completely and are certain that there was no flaw in their conduct, and that will also be the conclusion of the enforcement agencies. The Arison Group has zero tolerance for any improper behavior.”

‘Be like the Africans’

The investigation centers on suspicions that Housing & Construction regularly paid bribes to representatives of foreign governments – particularly in African countries – to win construction projects worth hundreds of millions of dollars. The investigation became public in February with a series of arrests and interrogation of senior company officials. The second stage of the investigation began in July, and was accompanied by another wave of arrests. Israel only began enforcing the ban on bribing foreign public officials two years ago.

To date, several current and former senior executives in the company’s international infrastructure arm, Housing & Construction International, have been questioned as possible suspects, along with senior executives, past and present, of the Arison Group. These include former Housing & Construction CEO Ofer Kotler; his replacement, former CEO Yaron Karisi; former chairman Ravit Barniv; the company’s auditor, Ruby Lazarov; current chairman Moshe Lahmani, and CFO Tal Raz.

The suspicions were raised by a lawsuit filed by Shay Skop, a former financial officer for Housing & Construction in Kenya. In the suit, he claimed that the firm was withholding his salary and pressuring him in various ways after he had exposed serious acts of alleged wide-ranging corruption by the managers of various companies in the group that had been going on for many years.

Skop’s lawsuit revealed the existence of a notebook kept by Binyamin Arbit, the company’s manager for East Africa, who has also been questioned. The notebook allegedly documented various bribes paid to different senior officials in African countries.

Skop was told about the notebook by Dan Shaham, the head of the company’s Kenya branch. When he examined the documents, he learned that Shaham and Arbit had kept a detailed list of “cash payments that the branch director had been passing himself to various beneficiaries for years,” without Skop being informed. When Skop protested, Shaham called him a “sissy,” and said, “In Africa, be like the Africans.”

When he tried to report the methodical bribery to Lazarov, the latter told him that bribery was the way Housing & Construction International got things done in countries like Nigeria, Uganda, Guatemala, and previously Ivory Coast. Lazarov insisted that the bribes were known to senior company officials, including the board of directors’ control committee, and that he, Skop, should just turn a blind eye.

The claims by senior Housing & Construction officials that in certain countries they had no choice but to pay bribes are an accurate depiction of reality. Many businessmen operating in Third World countries will testify that this is the case, especially in the field of infrastructure and construction, which involves agreements with governments.

Until 2008, Israeli companies openly bribed officials in Third World countries. Not only did they pay bribes, they asked for receipts from the bribed recipients and submitted them to the Israel Tax Authority to claim deductible expenses.

All this stopped in 2008, when an amendment was passed to the Penal Code that forbids paying a bribe to a foreign public official, and with a ruling by the Supreme Court which confirmed a change in tax authority policy rejecting attempts to claim such bribes as expenses.

Many years passed, however, before the ban was enforced. The first Israeli company to be prosecuted for paying bribes to foreign officials was Nikuv International Projects, which was convicted of paying a bribe to the Interior Ministry’s director-general in Lesotho in return for being chosen to supply the ministry with software for its population registry.

Since then there have been a number of other investigations into such bribes: Businessman Benny Steinmetz was questioned on suspicion of bribery in Guinea in exchange for a mining concession; senior officials at Shafir Engineering were questioned on suspicion of bribery in Romania in return for advancing construction projects, and Israel Shipyards is suspected of bribing government officials in African countries to promote the sale of its vessels.