Uri Blau Not Just Subs: Italian Jets, the Libyan Government and the Israelis Who Profited From a $2.8b Deal
Some of those being investigated about Israel's purchase of subs
from Germany have also been asked about a huge 2012 transaction
involving jets in exchange for Israeli-made materiel
In
2012, Israel agreed to buy 30 training jets from the Italian air force.
The last plane was delivered a year ago. But in recent weeks the deal
has resurfaced in the Israel Police's Lahav 433 fraud investigation
unit, which is currently investigating alleged corruption in Israel’s
acquisition of German submarines, as part of what is being called Case 3000. At least some of the people questioned about the subs have also been asked about events behind the scenes in the Italian deal.
Last January, when
stepping down as accountant-general at the Finance Ministry, Michal
Abadi-Boiangiu remarked that she had blocked the payment of commissions
related to a huge arms transaction. She declined to elaborate but had
been referring to the 2012 planes deal.
The training jets,
M-346s, had been bought from Aermacchi (a subsidiary of Finmeccanica,
which merged in 2016 with the technology group Leonardo). In total the
deal was worth 10 billion shekels ($2.8 billion), including Israel's
purchase of the planes from the Italians, and a reciprocal procurement
arrangement.
The commission in question
was apparently supposed to reach a former top Israel Defense Forces
officer, for services as a mediator in the transaction.
When approached by
TheMarker about the fee, the individual in question denied everything.
For its part, the Defense Ministry commented that it “did not pay and
was not asked to pay any commission on the deal.”
Yet
the transaction raised eyebrows in 2012, too. When it was presented to
the Knesset’s Finance Committee, its chairman, Moshe Gafni, snarled that
the Defense Ministry and cabinet wanted the committee to blindly accept
that they had made the best deal and approve it. “Why? Because the
director general of the Defense Ministry called me and said that
otherwise a crisis with Italy will ensue,” he said at the time.
Gafni
also complained about how the deal had been presented before his
committee. “When it comes to transactions like this, I want the
accountant general and director general of the Defense Ministry to show
up, and for people to explain the financial process,” he said then.
“With big money involved and we would have questions. Imagine that in
two or three years something goes wrong and then they start
investigating to see who approved it.”
Yet Gafni's committee gave the green light to finance the 6.4 billion-shekel purchase anyway.
The Israel Air Force
called the Italian training aircraft “Lavi” – the name given to the
Israeli-made fighter plane that never received approval for mass
production in the 1980s.
Odd process
As part of the 2012
transaction, Italy agreed to buy $1 billion worth of military equipment
from Israel. But the deal was plagued by a complex and unique financing
process.
According to one
person who was involved, because of Italy’s low credit rating, the
Israeli Defense Ministry said it would guarantee the loan Italy took to
carry out the mutual purchasing arrangements. Asked about it, the
ministry stated that it had "accompanied" the entire pricing process and
had made sure Italy was charged the lowest possible financing costs. It
wouldn’t elaborate on what accompanying the process actually meant, but
noted that it did not provide guarantees.
One person involved
in the deal was the enigmatic British businessman Patrick Landau, whose
name has been associated with international transactions, including some
involving Iran. At the time of the Italian aircraft deal, Landau was
representing Finmeccanica in Israel.
Another person
involved was Yehu Ofer, Israel’s military attache in Rome, at the time.
In 2013 IAF magazine reported that a lot of people had participated in
“developing the deal,” but that Ofer had been involved in every stage of
the transaction and had forged ties between the Italian and Israeli
defense establishments.
Upon his subsequent
discharge from the IDF, Ofer got a high-ranking job at the military
company El-Op, a subsidiary of Elbit Systems. It was Elbit Systems that
won the job of maintaining the Italian planes for more than $600
million, together with Israel Aerospace Industries, through a joint
company called Thor.
Yehu Ofer’s wife,
Orna Simhoni-Ofer, has been spokeswoman of the Defense Ministry since
2016, a job she received (in acting capacity, initially) when the family
returned from Italy, following stints as spokeswoman for the mobile
operator Cellcom and the Cal credit card company. The rub is that the
Defense Ministry had put its tender for spokesperson on ice for over two
years; a number of qualified candidates had sought the job. There were
complaints at how the whole thing was handled.
The ministry says now
that the process of hiring the spokesperson had been done according to
proper procedures and that Simhoni-Ofer met all the criteria and had
outshone seven other candidates.
“The transaction [in
2012] was led by the ministry, by means of its procurement
administration, not by the military attache in Italy,” it said in a
statement, adding that Ofer does not work for Thor and is not associated
with it. After his discharge Ofer joined Elbit, the ministry added, and
“he has had nothing to do with the planes deal, Italy or the Defense
Ministry.”
Libya and Leonardo
At the time of the
transaction, Libya was the registered owner of 2 percent of Leonardo,
the parent company of the aircraft manufacturer, which is a publicly
traded company; the maintenance was done by means of a body called the
Libyan Investment Authority. Based on today’s values, the shares in
question are today worth about a quarter-billion euros.
Israel knew about the Libyan holding, which apparently was not an obstacle.
The Defense Ministry
says now that many complex considerations were involved in striking the
deal to buy the jets from Aermacchi, and that it was "economically one
of the best transactions ever made by Israel's defense establishment."
In exchange for 30
advanced training jets, Rome bought a satellite and two advanced-warning
planes from Israel, at a cost of over $1 billion – more than the
training planes cost – and helped to boost research and development on
behalf of the IDF and military industries in Israel.
Finally, the ministry
says, it regrets any attempt to smear the good name of those working in
the service of Israel's defense industry.
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