Last month, Israel's attorney general, Yehuda Weinstein, announced that he was closing a 12-year investigation into Avigdor Lieberman, who until mid-December was the country's foreign minister. The investigation focused on the suspicion that the minister had used foreign corporations with fictitious owners to hide private funds that he had received while in office. "If brought to court," Weinstein explained, "the case would likely end in an acquittal." The attorney general did, however, decide to indict Lieberman for a relatively minor offence -- breaching the public trust.

The effect that the indictment will have on Lieberman's political career is still uncertain. If he were found guilty, the court would still have to make a special declaration that he acted immorally in order to force him to take a hiatus from political life. And for now, even though Lieberman resigned from his post as foreign minister, election polls still suggest that his right-wing Yisrael Beiteinu party, which merged forces with Prime Minister Benjamin Netanyahu's Likud and formed the Likud-Beiteinu list, will share the leadership of the next coalition government. Assuming he receives a mild verdict, Lieberman will yet again be a senior minister in the Israeli government.

Off the record, officials in the Ministry of Justice admit that the watered-down outcome of the Lieberman investigation is an alarming sign that law enforcement may be losing ground in the battle against corrupt politicians. "There are three types of Knesset members," Mali Polishuk-Bloch, a retired Knesset member with a record of anticorruption activities, remarked recently. There are "those to whom envelopes with cash are offered and they take them, those who reject the offer, and those to whom no one dare make such an offer." The two latter groups seem to be becoming endangered species. Last month, three parliamentarians to whom no one would think of proposing a bribe -- Dan Meridor, Benny Begin, and Michael Eitan -- were shoved out of political life in the Likud Party primaries.

Are politicians in Israel more corrupt than others? At least to an outside observer, that might seem to be the case. The Israeli government has no official data on the number of investigations dealing with political corruption, but the count has undoubtedly surged in the last decade, particularly during Menny Mazuz's tenure as attorney general, from 2004 to 2010.

The number of politicians indicted and convicted during Mazuz's term surpassed that of all his predecessors. They included Avraham Hirschson, a minister of finance jailed for embezzlement; Welfare Minister Shlomo Benizri, who was convicted for bribery; Homeland Security Minister Tzachi Hanegbi, charged with giving false testimony; Member of Knesset Omri Sharon, the son of former Prime Minister Ariel Sharon, jailed for election finance offences; and at least four additional Knesset members.

To top off the list, in 2009, Mazuz indicted then Prime Minister Ehud Olmert for corruption, leading to the leader's resignation and paving the way for Netanyahu's election. Olmert was convicted last July on the charge of breaching the public trust, but he was acquitted from the other allegations, even though the court found that he received, while a minister in the government, undocumented envelopes with large sums of cash from a Jewish-American businessman.

Not surprisingly, given this slew of indictments, Israelis tend to think corruption is on the rise in their country. Transparency International's 2012 corruption index, which is based on opinion polls of how much graft the public perceives, placed Israel 24th out of the 37 OECD countries -- 37th being the most corrupt. Over a decade ago, its ranking was as high as 15th.

Optimistic government officials suggest there is a bright side to the deterioration in the ranking, since it is based on public opinion. The more authorities fight corruption, the argument goes, the greater the media coverage and public awareness. If this theory were true, however, the countries at the bottom of the list, marked as the most corrupt, would actually be the cleanest and fairest of them all. But North Korea and Somalia, both ranked 174th, are not exactly paragons of good governance.

To be sure, there is some merit to the argument that corruption in Israel only seems particularly bad because of the state's aggressive prosecutors and a vigorous and open media. But that does not mean the problem is merely a matter of public perception. For a country with such a dynamic economy, much of Israel's private sector remains heavily regulated, making kingmakers out of politicians. With several previously convicted officials set to return in the next Knesset, Israel still has a ways to go in fighting corruption.


In the past, most corrupt Israeli politicians seemed motivated by the desire to get reelected and the need to overcome burdensome legal restrictions on campaign financing to do so. For instance, in 2000, the police investigated then Prime Minister Ehud Barak's election campaign under the suspicion that it bypassed regulations by funneling millions of shekels in political contributions to independent associations that supported the campaign. A similar investigation was launched against Yisrael Beiteinu that same year. But the politicians and aides involved in those investigations invoked the right to remain silent, and the cases were all closed for lack of evidence.

At the same time, the primaries system adopted by most large Israeli parties has entrusted the fate of politicians to a relatively small group of party members. Getting elected at the top of the list in the primaries guarantees a politician not only a seat in the Knesset but also a fairly good shot at a prestigious ministerial office if the party joins the governing coalition. For much of the last decade, ministers rewarded their party's most loyal voters by placing them in civil service jobs. In 2004, for example, the state comptroller reported that Hanegbi appointed more than 80 relatives of Likud Party members to various positions in the Ministry of Environmental Affairs. Mazuz began to rein in this problem by indicting Hanegbi for these improper political appointments. Although Hanegbi was acquitted of most charges, the court did find him guilty of false statements, and he was forced to leave politics. So far, this step has significantly curbed such appointments.

More recent corruption investigations have revolved around a much simpler motivation: greed. As Israel's economy has grown by leaps and bounds in recent years, corruption has become more and more lucrative. Certain areas of the economy have been privatized, but the government continues to oversee national resources (such as land, water, gas, and mineral production), utilities, telecommunications, broadcasting, insurance companies, and the financial sector. So influence over politicians has become a gold mine.

A government commission examining the concentration of wealth in Israel found that fewer than 20 families control the country's largest conglomerates and, through them, most of the economy. Some of these businesses rely on the government for their profits. As a result, a revolving-door phenomenon has taken root across the government. Many senior officials in the Finance Ministry, for example, go on to work for corporations in industries heavily regulated by and dependent on the government. Since the Finance Ministry oversees all major state contracts -- the conglomerates' oxygen -- these businesses have every reason to recruit former officials.

To see how potential profit spells potential corruption, look no further than the real estate market. Israel has some of the highest urban housing prices in the world, so in the beginning of his term, Mazuz directed the police to investigate the problem. What they found was evidence to back another indictment against Olmert, on the charge that as mayor of Jerusalem he had received bribes to increase the number of apartments in a huge housing complex -- "the Holyland project" -- in one of the residential districts of the capital. This bribery trial is still in its early stages, and Olmert will likely keep out of Israeli politics until it wraps up,  which will not be for another one or two years.


Israel is a small country with a tight-knit web of political and business interests. Not much can be hidden. But what is visible to the public eye may not be provable in front of a judge. Average conviction rates in Israel are above 90 percent, but politicians fare much better than that. Because the community of powerful Israelis is insular, it is hard to find credible witnesses willing to testify against politicians. In the Holyland trial, the prosecution against Olmert is relying on a self-proclaimed crook who only agreed to testify after being paid large sums of money. The foreign fictitious corporations case against Lieberman, meanwhile, was closed after two witnesses died, one disappeared, and the fourth refused to travel to Israel.

Compared with Mazuz's tenure, the parade of politicians being investigated has slowed during Weinstein's term. This is in part because some politicians learned their lesson and now reject bribes. But others simply figured out how to hide their corrupt activities better. And the state prosecution, for its part, has suffered blows to its confidence after Olmert's partial acquittal and is now taking a significantly less aggressive posture.

Three years ago, around the time Weinstein assumed office, an Italian professor approached an Israeli lawyer at a conference in Europe. "You have to help us," he said. "We want to learn how to fight corruption from you guys." Today, the tables have turned. Silvio Berlusconi has fallen from power in Italy, while in Israel, Lieberman's star still shines and Olmert is being discussed as a potential comeback-kid savior of the left and center. At least two former ministers previously convicted for corruption -- Hanegbi and Aryeh Deri -- are about to be reelected to the Knesset and will likely assume cabinet positions. Even worse: no one seems to care.

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  • IDO BAUM is the legal editor of the financial newspaper The Marker and Professor of Law and Economics at the Haim Striks School of Law at the College of Management -- Academic Studies.
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