Israel's Illegal Campaign Funds Problem

Feb. 5, 2001 -- When Israelis go to the polls Tuesday, they do so against the backdrop of an issue familiar to most Americans — forbidden foreign campaign donations.

Donations have steadily grown over the past two decades, experts say, and may have even started standing Prime Minister Ehud Barak on the road to the current snap election, less than two years into a four-year term.

In Israel's 1988 elections, Shimon Peres raised $1.6 million from Canadian distiller Charles Bronfman and French tycoon Jean Friedman.

In the 1992 elections, $4 million came from foreign sources, campaign insiders told U.S. News and World Report.

In the 1996 contest that saw Benjamin Netanyahu become prime minister, up to $8 million was raised from American Jews, according to the Jerusalem Post.

And in the last election, between Netanyahu and Barak in May 1999, some estimates said that number rose to as high as $10 million.

But in early 2000, Israel's state comptroller fined Barak's One Israel party more than $3 million — after revealing that One Israel had funneled large amounts of foreign money through nonprofit organizations set up to support Barak.

"His political troubles started with that scandal," says Menachem Hofnung, a professor of political science at Hebrew University in Jerusalem. "Before that, he was regarded as honest and dependable."

The Israeli Election Showdown

Manipulating the System

The exact amount of money given to Israeli candidates by foreign donors is difficult to estimate. Many of the transactions are completed behind closed doors, and are sometimes billed as policy briefings to Jewish organizations abroad, instead of fund-raisers.

In 1994, Israel passed a campaign finance reform law prohibiting foreign contributions to Israeli parties and partisan political campaigns.

In the past, foreign money has also circumvented the 1994 law in the same way that "soft money" does in the United States — by going for advertising that supports a candidate's agenda, but not a candidate by name.

It has also been used to pay for transportation — to the extent of flying in Israeli voters from overseas on election day — and, some sources say, to pay for campaign advice.

But Hofnung, who helped write the 1994 law, says there will always be ways for foreign money to get into elections.

"If you are willing to do complicated transactions, it can be done in any country," he says."It depends on how much effort and how much money you have and how much you would like to pay the middleman."

The Major Taps

There has been a trend toward more foreign money since 1996, experts say, when Israel changed how it elects a prime minister. Before 1996, the prime minister was determined by the majority in the Knesset, the Israeli parliament, but since then, voters have elected the prime minister directly.

Politics are now more personality-driven, and a campaign is much more expensive, experts say.

One political operative told the Jerusalem Post: "None of these guys start without knowing someone in the United States."

Some of these people the candidates know, Americans may know — or know their products, at least.

S. Daniel Abraham, the owner of Slim Fast and a major player in the dieting aides market, is reported to be a significant donor to dovish candidates, and is even said to have arranged a dinner between Barak and Palestinian leader Yasser Arafat in late 2000.

Another dove backer is Haim Saban, chairman of Fox Kids Worldwide and known as one of the most powerful Israelis in Hollywood. Saban, who produced such hits as Teenage Mutant Ninja Turtles and Mighty Morphin Power Rangers, threw a reception before the last Israeli election in 1999 that netted $600,000 for Barak, according to a Los Angeles paper.

On the other side is Ron Lauder, the son of Estee Lauder and heir to her $8.2 billion cosmetics company. He is a well-known supporter of the right-wing Likud party and a good friend of Netanyahu.

But one of the most controversial figures is Irving Moskowitz, a retired obstetrician who has made huge sums from a legal gaming business near Los Angeles.

Moskowitz strong opposes land-for-peace deals, and has put his money toward buying homes for Jews in the Palestinian neighborhoods of Jerusalem and in the Arab territories occupied by Israel.

An article in the Jerusalem Post described Moskowitz, along with Lauder and Abraham, as one of the "first tier" of foreign donors, whose contributions can exceed $100,000.

The Pressure Eases — This Time

Despite Barak's troubles, the campaign finance issue was raised again in early January, just weeks before this election.

Hundreds of thousands gathered for a rally at Jerusalem's Jaffa Gate on Jan. 8 to protest a plan floated by Barak to hand East Jerusalem to the Palestinians as part of a peace deal.

The event, which included hundreds of chartered buses to bring in participants and a sound and light show, was financed by donations from abroad, organizers admitted.

One Israel has asked authorities to take a closer look to see if any campaign finance laws were broken, considering the event's proximity to the election, and its association with the Likud leadership and positions.

However, the issue of foreign money isn't expected to be as crucial of an issue in this election as in years past.

People have learned, especially after scandals like the one that befell Barak, experts say — and the circumstances of this election don't allow for it. The snap election means there was no primary, and there are only two candidates in the running, so there are fewer candidates on which to spend money.

Plus, the margin between Sharon and Barak is quite big, says Hofnung. "From what I know and hear, I suspect it doesn't play as much in this election as in the past."

Malcolm Hoenlein, executive vice chairman of the Conference of Presidents of Major American Jewish Organizations, agrees. "People have been sensitized to it," he says. "There is a greater understanding that it distorts the democratic process."

Still, election-watchers are wary. In a country of 6 million people, a few million dollars can make a great difference.

"I feel very strongly about this and I'm hopeful it will not revert back to the way it was," Hoenlein said.