Thursday, August 31, 2006


More on Olmert's Connections

Friends in high places

By Gidi Weitz and Uri Blau

"Uri Messer?" exults the businessman Gabriel Sebbag. "He's a brand name. He's the real thing. Pure gold. Takes no money until he issues a receipt, implementation in practice. It's good that we have machers like that." In the same conversation, he explained, "Civil servants, you go to them, it takes you a year. With him, it takes you a month."

Attorney Uri Messer would certainly be happy to forgo the compliments that Sebbag is heaping on him. Messer, who has been close to Prime Minister Ehud Olmert since they established a law firm as young attorneys, is used to working in the shadows, quietly, away from the spotlight. Part of his livelihood, the "macher" part, as Sebbag puts it, depends on the goodwill of his good friend, Olmert.

Sebbag, who owns the manpower company ORS and is a former mayor of Dimona, decided, with other investors, to establish an aircraft maintenance plant, in cooperation with Israel Aircraft Industries (IAI), close to the airfield at Nevatim. "My son [Doron Sebbag], who worked with Messer, told me, 'Come on, there's an expert here through whom you can speed up the whole subject of IAI.' Because IAI made me run around to all the different government ministries."

Messer was, in fact, hired to promote the interests of the Sebbag group. At the time, Olmert was minister of industry and trade and deputy prime minister. Sebbag has only praise for the two former partners, Olmert and Messer, for the quick handling of his requests.

Olmert promoted your project?

Sebbag: "Very much so. Supported it and looked after it. He set up an interministerial committee."

Did the committee do anything?

"Sure. It met and approved the project."

The grateful Sebbag also remembers how Olmert invited him to a Friday meeting in his bureau. "I went to the meeting in Jerusalem alone. I remember that I wore a suit and tie, and Olmert told me, take off the jacket and tie, the office is closed, I wanted to meet with you because I have very high regard for your subject." Messer was also at the meeting. A communique issued 10 days later by the ministry stated that Olmert "directed the experts in the ministry and in the Israel Lands Administration to expedite the preparation of the tender to allocate land for the project."

From the outset Sebbag thought that approaching Messer would help him. "Messer is a contractor," he explains. "You want [to get to] the Investment Center - you go to him, he helps you. That's his job. A civil servant, you go to him, he gives you an answer in another two months. What's their hurry?"

People say he can get things done with Olmert.

"Okay, he worked with him in his firm. They were partners in a law firm. He also has access to the Investment Center. He's an expert. Everyone has his own expertise."

Did you feel that it was easy to get to the Industry and Trade Ministry through him?

"Yes. If there was a positive response from IAI, he would move everything ahead: obtaining land, rezoning agricultural land into industrial land."

That's because of the connections?
"Skills. Why do you say connections? Skills. He doesn't get more than the law states, but he speeds it up. That's natural. You're a journalist with Haaretz, and through you I can arrange quickly to write an article in Haaretz. And I deal in manpower - through me you can get work for your girlfriend tomorrow."

Sebbag was not the only entrepreneur who benefited from the friendship of Messer and Olmert. An investigative report by Haaretz Magazine found that during Olmert's tenure as industry and trade minister and as board chairman of Israel Lands Administration (ILA), he worked to advance Messer's interests after the latter provided him with various services for years. Olmert, as the article shows, pushed the ministry's Investment Center and other bodies under his authority to invest millions of shekels in state funds in Messer's clients, even when the ministry's experts objected.

Since the trial of Shimon Sheves, things have been clear. (Sheves, who was director general of the Prime Minister's Office during Yitzhak Rabin's second term as prime minister, was accused of having taken steps to expedite and advance a tender dealing with construction. He was acquitted by reason of doubt by the Supreme Court in January 2003. The state attorney at the time, Edna Arbel, now a Supreme Court justice, appealed and in January 2004 the Supreme Court overturned its previous decision and convicted Sheves.)

According to the court and to the rules of the Asher Commission to prevent conflicts of interest, Olmert was barred from dealing with his friend's business matters. He should have reported to the state comptroller before starting to handle requests that Messer sought to move ahead through him (see box). Even if there was the slightest doubt, he should have gone to the attorney general and asked for guidelines as to whether to transfer the matter to a different minister or at least to make a decision together with another minister. Olmert did not do that.

Messer-Olmert-Zaken & Partners

Messer and Olmert met in the mid-1970s in the law firm of Uzi Atzmon. In 1977 they left Atzmon's firm together with attorney Baruch Adler and also took the secretary, Shula Zaken. The law firm of Ehud Olmert & Partners came into being. Olmert left the firm in 1988, but to this day Messer and Zaken are the two central figures in his political life. The three are heart-and-soul friends.

Messer, 55, was born in Haifa but over the years became an integral part of the Jerusalem judicial elite. His wife, Davida Lachman-Messer, is a deputy attorney general. Messer's office is far more modest than the ornate places of some of his Tel Aviv colleagues. He will not be caught smoking a Cuban cigar or wearing a suit that cost thousands of dollars.

Messer takes part in the prime minister's intimate forums, which correspond to Ariel Sharon's "ranch forum." Last week Olmert invited him to a discussion in his home with his closest advisers about creating a commission to examine the second Lebanon war.

At the same time, Messer is also Olmert's lawyer in private real estate deals. A few months ago, he testified before the state comptroller in the affair of Olmert's purchase of a home on Cremieux Street in Jerusalem's trendy German Colony neighborhood. According to the investigative journalist Yoav Yitzhak, Olmert allegedly was given a large discount on the price from the entrepreneurs in return for advancing a stalled project through his connections in the Jerusalem Municipality. The matter is still under investigation.

The services that Messer has provided to Olmert are not confined to buying or selling homes. Since 1998 Messer has headed an association called United Jerusalem, which ran Olmert's campaign for mayor, and dealt, on a volunteer basis, with the association's affairs, donations and financial deficits. Given the fees that a lawyer like Messer charges his clients, the services he provided to Olmert within the association framework are worth a great deal. Messer continued to operate in the name of this association even after Olmert became industry and trade minister, in 2003. He sent letters and economic reports on its behalf to the registrar of associations.

"Uri and Ehud are really close," says a person who knows them both. "Uri dealt with Ehud's most sensitive political affairs: the association for his election, the donations. They are intimate partners to secrets."

The Haaretz investigation found that before Olmert became industry and trade minister, Messer had nothing to do with previous ministers there. After Olmert became minister, Messer began to visit the ministry as a lobbyist for businessmen and industrialists. "Three years ago we hardly knew who he was," a senior ministry official says. "But look what happened in the period when Olmert was industry and trade minister."

In some cases the two, Olmert and his loyalist Messer, took part in the same meetings, without any of those present being bothered by the possible conflict of interests. "Messer wandered around the ministry plenty of times," says a senior official there. "The officials always had an uneasy feeling about dealing with his affairs."

How did it work in practice?

"The method is simple," another official says. "As soon as a difficulty arises having to so with the ministry's bureaucracy, one turns to Mr. Messer, tell him that so-and-so is the problem, get on the case. Apart from him no one gets treatment like that, certainly not ... When a company has a problem in connection with the ministry, Messer sits with them and says, 'Don't worry, I'll take care of it for you.'"

What sort of 'taking care'?

"Everything, everything. Problems with the directors, with the units, in the bureau of the minister or the director general, with the Investment Center. If the state comptroller investigates it, he'll find much that is interesting here."

A $25 million decision

Just a few kilometers from Dimona, in the heart of the desert, the dream of the Be'er Sheva entrepreneur Ephraim (Pima) Feinblum is being realized. Feinblum dreamed about building a factory to produce silica, a material used mainly to manufacture "green" tires for vehicles. The experts in the industry and trade ministry were not persuaded of the economic feasibility of that dream, but it is going to cost the state $15 million.

For a decade, Feinblum, formerly chairman of Mekorot, the national water company, fought a legal battle against Israel Chemicals Ltd. over the production of silica. In 2001 arbitration between the sides concluded with Israel Chemicals agreeing to pay Feinblum millions of dollars (a loan with no returns, Feinblum says) if he were to receive from the Industry and Trade Ministry an "approved plant" citation within three years. The deadline was set for February 2004.

At the beginning of 2003, Feinblum submitted a request to the Investment Center for financial grants for a factory to be built in Dimona. One of the strongest government bodies in the economic sphere, the Investment Center deals with the intention of entrepreneurs to establish or expand industries in development areas. The status of an approved plant gives the entrepreneur tax benefits and grants of millions of shekels from the state.

One of the key criteria examined by the Investment Center is the economic feasibility of a project. The Investment Center is supposed to ensure that the state's funds will not be put at risk in wild-eyed adventures of failed businessmen or be turned over to crooks in sting operations. In the past the state invested huge sums in plants that the entrepreneurs never intended to build in the first place.

According to Feinblum, his plan encountered opposition from the expert level in the Industry and Trade Ministry. The director of the ministry's unit for chemicals and the environment, Ohad Ornstein, a leading professional authority in the field, raised many objections to providing the grants for the silica plant, and to this day he remains completely unconvinced of its economic viability.

Ornstein, who is considered a professional civil servant and served under other ministers as well, argued, in part, that there is no proved market for the plant's product. "In one of the meetings I got upset with him, because he doesn't understand anything about chemistry," Feinblum recalls. "He repeated that the material doesn't work and that it can't be sold and so on ... It's the first time I had difficulties like this in establishing a plant."

Ornstein declined to be interviewed for this article, but Haaretz Magazine has learned that he was backed by the Investment Center director at the time, Shmuel Mordechai. According to Feinblum, if it had been up to Ornstein and Mordechai, the plant would not have been authorized. When Feinblum realized that his life's project (and the millions from Israel Chemicals) were both liable to go down the tubes, he made no secret of his anger.

On one occasion, he also told Ornstein that he should be fired. Feinblum: "He told me, 'Run to the ministers, try to do something.' I told him that if I had to go to the ministers, I would have no need of his approval. I would get it anyway." In a visit we paid to Dimona, Feinblum told us that on another occasion he told Shmuel Mordechai, "You just think I can't open doors to get to the minister."

Feinblum found the key to the minister's door in the person of Uri Messer. Feinblum: "I have known Messer for a long time ... He helped me explain the importance of the project, that's all." Afterward he added, "He does work for me - speeding up a meeting, coming with me to a meeting."

He could arrange meetings with Olmert faster than other people could?

Feinblum: "Yes, but is there anything wrong with that?"

After hiring Messer, Feinblum was treated with the kind of respect that many businessmen can only dream of: personal and close treatment by the minister and his aides in the procedures involved in building the plant. Some of the meetings in Olmert's bureau were conducted with the participation of Olmert himself, Messer, entrepreneurs and officials from the ministry and from the Investment Center. In a meeting held in Olmert's office in July 2003, Messer explained to those present that what was at stake was not only the grant from the Investment Center but also the millions from Israel Chemicals.

Ornstein detailed his reservations and explained that 90 percent of this world market is controlled by five bodies, which operate as a sort of cartel, and therefore "we demand proof of the product's marketability." Messer said that it would be difficult to show proven marketability as long as there was no approval in principle for the project.

Olmert summed up the meeting. He said that, taking into consideration the tight schedule for starting to build the plant - by February 2004 - he was instructing the Investment Center to conclude within six weeks the examination relating to the request to approve the project. He also explained that attorney Messer and Doron Levy, one of Feinblum's staff, would provide the Investment Center with all the material required to conclude the examination and would present to him the track chosen by Feinblum to receive grants.

This meeting was followed by others at the ministry about the project. Says Ronen Peled, deputy CEO of Dimona Silica Industries, "Olmert said he believes in the plant and that in his understanding it has economic ability and that there was no reason to say an unequivocal no here ... He said he wanted this plant to be built."

A month later, in December 2003, the Ministry of Industry and Trade informed Feinblum in writing that his silica plant had been approved. Investment Center director Shmuel Mordechai eventually authorized the project in the center's directorate. The decision translated into a $15 million grant from the state, plus another $10 million from Israel Chemicals - a total of $25 million for a project about which senior officials in the Industry and Trade Ministry have reservations or object to altogether, but one which the minister's friend and private lawyer was hired to promote.

Olmert's baby

After the minister gave the push, Mordechai authorized the generous grant for the silica plant in the Investment Center directorate, but appended to the authorization a restrictive document containing many obligatory conditions. One of the conditions was a marketing plan to include contracts with future customers for 75 percent of the production. Mordechai also insisted that the new company conduct an industrial pilot on a significant scale (effectively amounting to the construction of a small plant) to prove that the material would work.

Those were only part of the restrictions. "We didn't object to the reservations, because we didn't have time," Peled relates. "The rope was around our neck."

"His conditions were absurd," Feinblum complains. "It's impossible to conclude marketing contracts without knowing when I will complete the plant."

Olmert removed Shmuel Mordechai as head of the Investment Center in the middle of 2004. Press reports said that the two were in disagreement over the Capital Investments Encouragement Law. Mordechai told confidants that he had been subjected to political pressure to assist projects that were close to the minister and to the officials in his bureau. After a period of a few months during which Industry and Trade Ministry director general Raanan Dinur - who is now director general of the Prime Minister's Office - took over as head of the Investment Center, a new permanent director, Hezi Zeig, was appointed. Under his tenure, all the restrictions that Mordechai had imposed on the plant were gradually lifted. Some were replaced by easier conditions. "They removed nearly all the nonsense," Feinblum himself sums up.

"This plant is Olmert's baby," Peled says as we drive south to see the project. "We voted for Kadima in part to express thanks for the help he gave us. He promised that he will come to cut the ribbon when the plant opens."

In January 2004, Olmert took time off from the burning issues on his agenda to be driven to the dunes of Dimona and lay the plant's cornerstone. He came to Dimona with his friend and lawyer, Uri Messer. Olmert said at the ceremony that he considered it very important to create new jobs in Dimona and that the plant's establishment would help the Negev develop. He added that he hoped the plant would be the harbinger of momentum in the south. The media quoted the executives' declarations that the plant will employ 300 people and that its development cost would be $80 million. Olmert had his photograph taken with Feinblum and returned to Jerusalem.

Four days later, Olmert appeared before the Knesset Economic Committee at a meeting dealing with the activity of the Investment Center. He told the committee, "Just four days ago I laid the cornerstone for a plant in Dimona. I'm fighting to establish a plant there - the silica plant of Pima Feinblum - which was authorized by the Investment Center."

At the ceremony, the Industry and Trade Ministry announced that the plant would open in two years. It has yet to open. Feinblum maintains that the delay is due to foot-dragging in the Investment Center and in the ministry.

A spokesperson for the Ministry of Industry and Trade said in response: "In essence the Investment Center is a body which at the end of the day is meant to take risks, like any body that chooses to invest in a company, such as banks, private investors, venture capital funds and so forth ... It is possible that the great caution taken by the center led to delays, in part, as it carried out checks concerning the identity of the investors and their financial capability, and reviewed the production process."

The ministry added that in 2005 the restrictions imposed on the company were reexamined, and after satisfactory replies were received from the entrepreneurs they were lifted in a decision by the directorate which "was approved unanimously, including by the representative of the treasury budget division."

The help provided by Olmert and his officials did not stop with laying the cornerstone. Olmert instructed the ministry to fund 75 percent of the land development costs. The ministry also helped pay for building the access road to the site. Uri Messer was also present at the meeting in Olmert's bureau that dealt with the access road. Olmert's advisers pressed officials in the Investment Center to promote the project and assist Feinblum as much as possible. A spokesperson for the Industry and Trade Ministry: "The entrepreneur received the land and construction of the plant has now begun. The ministry took part in funding the access roads to the plant. A western access road has been completed and an eastern access road is being built."

Feinblum is convinced that the bureaucrats will eat their hats and that the plant will be a spectacular economic success. He has recruited three foreign investors - Russian businessmen. The most prominent of them is Dimitri Bossov, formerly on the staff of the oligarch Lev Chernoy, the brother of Mikhail Chernoy, and today the right-hand man of the exiled oligarch Boris Berezovsky. "These are not guys who just throw money away," Feinblum asserts.

Pouring oil on troubled levies

Another intervention in decisions of the Industry and Trade Ministry in which Ehud Olmert and Uri Messer were involved concerns the import levies placed on cooking oil. This issue has been the subject of wrangling between Israeli industrialists and major importers for years. At the end of the 1990s the Industry and Trade Ministry decided, after requesting expert opinions, to gradually lower the levies on oils and unprocessed soybeans, from which oil is extracted (with the byproducts used as animal fodder) until their total abolition.

On July 7, 2003, the newly installed minister of industry and trade, Ehud Olmert, decided to adopt the recommendation of his director general, Raanan Dinur, to reduce the levy to just three percent. This would result in a reduction of the price of imported oils - good news for consumers and perhaps especially for food companies such as Osem, which use oil to manufacture a large part of their products.

The main objectors to this move are the Israeli oil companies and especially the largest of them, Shemen Industries. Shemen is owned by businessman Haim Fink. In July 2003, the company decided to appeal against the ministry's decision. Even before this, the company organized 13 MKs to pass a private bill to raise the levy.

The oil importers and the chambers of commerce wanted the levy canceled altogether. The latter stated at the time that nothing had been done, owing to "pressures exerted by those with vested interests, headed by Shemen." The high price of the oils, they explained, was seriously hurting consumers, especially the disadvantaged groups, because they were used as raw materials in the manufacture of many foods.

Shemen now brought in reinforcements in the person of attorney Messer. At the end of July, a meeting was held in the office of Industry and Trade minister Olmert with the participation of Fink, Shemen managing director Boaz Zafrir, ministry experts, a Shemen lobbyist and Messer. Zafrir stated that the oil industry merited government protection. However, Zvia Dori, responsible for domestic commerce in the ministry, recalled the promise that Shemen had given the antitrust commissioner that it would not oppose the lowering of the levy.

In 2001, when Shemen wanted to buy another company, the transaction was approved on condition that in the two years following the merger Shemen would not object to the reduction of the levy on oil and unprocessed soybeans by 1 percent. Accordingly, the levy on oil should have gone down from 4 percent to 3, and the levy on soybeans from 4.5 to 3.5 percent. At the end of the meeting, Zafrir asked for a quick decision, as the levy was about to expire.

Olmert promised to consult with the officials and update the participants about his decision. The result was not long in coming. After the meeting, the ministry issued an amended press release stating that "deputy prime minister and minister of Industry and Trade Ehud Olmert this week signed an order imposing a levy on the import of oils, which will stand at 4 percent." One meeting in Messer's presence was enough to persuade the minister.

Zafrir: "Olmert took matters into his hands and said that industry is more important to him than commerce, or no less. We tried to prevent the reduction of the levies and we succeeded in leaving the existing situation, more or less." Zafrir believes that from Shemen's point of view it was especially significant that the levy on soybeans from South America remained high, at 7.5 percent.

According to Zafrir, Messer represented Shemen not only in this matter but also in "real estate affairs." The high levies on oils are still intact. Says Haim Oz, deputy director general of the organization of chambers of commerce: "The levy was supposed to be canceled in 2000. The Shemen company exerted very strong pressure on Olmert regarding the levy, which is harmful to consumers, who pay a very steep price for imported oil."

Staff members of Olmert's bureau handled personally additional matters having to do with the ministry and the Investment Center in which attorney Messer was involved. In 2001, a high-tech company called Asicom received authorization from the Investment Center for assistance to a company plant in the south of the country. The company did not make use of the funding for about two years. It then asked the Investment Center to amend the agreement to make it apply to a different plant. Here, too, Messer was hired to help.

A senior official of Asicom explains that because of the bureaucracy in the Investment Center, "you have to keep operating through machers, people who re experts in every iota of the law, who know how to get your paper from the bottom of the pile to the top ... The fees the machers ask for are based on the amounts they say they will save you ..."

This time, at the advice of the company's accountant, the CEO went to Messer to get the request dealt with, and paid him an advance of about NIS 80,000. "At the meeting he gave the impression that he has connections of one kind or another that we don't have, and thanks to that, he will advance our cause," the senior official said. "There is no trace of this in writing, but as I recall he described himself as someone who can get things done in the Investment Center, and that's why he received the advance."

What did he tell you about his connections?

"In the meeting it was noted that Shmuel Mordechai didn't like the authorization we received in 2001 and did all he could to void it of content. What Messer said is that 'it will come to him from above.' How many people are there above the director of the Investment Center?"

The upshot was that Asicom got the benefit it requested, but the senior company official maintains that it was not Messer who helped and therefore he did not get anything more than the advance. "It turned out to be just talk, and in the end I did the whole process with the Investment Center by myself. The center's authorization came through only in 2005. It was very naive to think that one person with a few connections would succeed in this task."

Response by attorney Uri Messner

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