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Growing Corruption in Israel

Ex-Israeli Prime Minister Ehud Olmert stands in court after being charged for corruption, in Jerusalem, Israel, 2 February 2016. Photo Ynet/REX/Shutterstock

As the latest corruption scandal hits Israeli headlines, this one involving Prime Minister Benjamin Netanyahu, there is a general feeling that corruption is seeping deeper into state institutions. The Israeli leader was questioned by police at his official residence on 2 January 2017 on suspicion of receiving unlawful gifts. Netanyahu has consistently denied any wrongdoing. A year earlier, a Supreme Court decision sent former Prime Minister Ehud Olmert to prison for 18 months for bribery. In addition, there have been revelations of alleged conflicts of interest regarding a huge military deal involving a German company represented in Israel by Netanyahu’s personal lawyer.

International corruption rankings have been far from flattering to Israel in recent years. According to the 2015 corruption perceptions index published by Transparency International, Israel ranked 24 out of 34 countries in the OECD, putting it in the bottom third. Yet despite a feeling that corruption is worsening at both the national and municipal levels, the public appears to be largely indifferent. There is little pressure to change the situation; indeed, public officials suspected or convicted of corruption even seem to be tolerated.

A notable example is Aryeh Deri, leader of the Orthodox Shas party and Interior Minister. In 1993, while also serving as Interior Minister, he was charged with bribery, fraud and breach of trust and spent two years in prison. Former Bat Yam mayor Shlomo Lahiani was sentenced to eight months in prison for corruption. Yet he continues to be one of the more popular mayors in the country.

Some believe the public’s indifference represents nothing less than an existential threat to the state. According to anti-corruption activists, the damage done by corruption is far more serious than any military or terror threat over the past decade. Eli Suman, CEO of The Movement for Quality Government in Israel, emphasized the repercussions of public sector corruption, warming that Israel may be heading in the direction of a developing country. “Our movement believes that the real existential threat to the state is posed by corruption, which is liable to unravel the social fabric,” he said.

Why is there such tolerance of corruption? Experts admit that in Israel, corruption is perceived as a way to bypass bureaucracy. Those who are not aware of the dangers of corruption consider it legitimate.

A phenomenon also exists whereby those convicted of corruption are not publicly denounced but rather welcomed back as celebrities and in several instances, as in the case of Aryeh Deri, reinstated in public office.

In its report “Democracy in Israel”, the Israeli Democracy Institute highlights the corruption perception index. The index is compiled by Transparency International and reflects the opinion of experts on abuse of power in the public sector. The higher the score, the less corruption is perceived. Israel received 61 out of 100, an increase from 60, putting it in the 80th percentile of 167 countries.  As mentioned above, however, when compared to OECD members, it is in the bottom third of the ranking.

Moreover, corruption is also found in the private sector. Several examples have recently surfaced. In December 2016, Nochi Danker, an influential business tycoon and former controlling shareholder of IDB Holding Corp, was fined NIS 800,000 and sentenced to two years in jail after being found guilty of stock manipulation.  Five months earlier, in July 2016, he was convicted of manipulating IDB’s share price days before a securities issuance in February 2012.

Also in December 2016, Benny Steinmetz, an Israeli diamond mogul, was arrested for his involvement in a massive African corruption case.  He was suspected of paying millions of dollars to Guinean officials in order to advance his business interests in the country’s mining industry. His arrest followed a huge undercover investigation which spanned several countries, including Switzerland, the United States and Guinea. The case focused on the purchase by Steinmetz’s company (BSGR) of an iron ore mine , on which it allegedly spent $165 million in exploration costs and later sold half of its stake in for $2.5 billion.

With the latest allegations surrounding Netanyahu, there is growing public sentiment that enough is enough. However, as Netanyahu continues to dismiss the charges as wild allegations by political rivals and with no real opposition in his own Likud party , the likelihood of public sentiment bringing about any substantive change at present seems small.

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