Global Policy Forum

By Ron Kampeas

Jerusalem - A criminal inquiry launched Thursday into Prime Minister Ehud Barak's campaign finances threatened to erupt into a scandal that could hinder his efforts to secure a comprehensive peace by year's end. The investigation, based on recommendations in one of the toughest comptroller reports ever released in Israel, led opposition lawmakers opposed to Barak's revived peace efforts to call on police to investigate the prime minister himself.

Eliezer Goldberg, the comptroller, fined Barak's party $3.2 million - almost three times the $1.2 million he says they raised illegally. Barak denied any wrongdoing and said he would appeal the fine. Goldberg's report details transfers from overseas sources - banned under Israeli law - into nonprofit groups set up to back Barak's candidacy for prime minister in last May's election.

In some cases, the overseas donors apparently did not know where the money was headed. The Camilla fund was set up by Swiss millionaire Oktav Buettner to relieve poverty and promote education in Israel. Instead, one of the alleged beneficiaries was the "The Association to Advance Taxi Drivers," which printed pro-Barak bumper stickers.

Buettner died in 1998, and the fund has since been administered by Yitzhak Herzog, a lawyer who led Barak's campaign and who is now the Cabinet's secretary. According to Goldberg, Herzog similarly transferred funds from a Canadian charity that employed him into Barak's campaign. Goldberg did not name the charity.

It is the first major breach in Barak's credibility, and has discomforting echoes of the scandals that plagued - and helped Barak defeat - his predecessor, Benjamin Netanyahu, who is under police investigation for bribery and theft allegations. "He knew about the system," Ariel Sharon, the leader of the opposition Likud party, said of Barak. "Perhaps not all the details, but he knew about the system."

That remark drew derision from government ministers, who noted Likud's repeated brushes with scandal, including Sharon's disastrous 1982 invasion of Lebanon. "When Sharon speaks of `truth,' I get queasy," said Absorption Minister Yuli Tamir.

The scandal also comes as President Ezer Weizman, another prominent peace-process supporter, is under police investigation for allegations that he improperly accepted money from a French businessman in the 1980s and 1990s. Attorney General Elyakim Rubinstein said it was not known whether Barak would be personally targeted in the probe, but that "every relevant person will be investigated."

In addition to illegal fund raising, police may also investigate the possibility of fraud and deception, Israel TV reported. Goldberg says he found nothing in his investigation to contradict Barak's claim that he knew nothing of the apparently illegal fundraising - but said that was no excuse for not seeing the "red light" before him. The prime minister may not face a court of law, but faces the "court of public opinion," Goldberg said.

In a hastily organized press conference, Barak said he had not known of any illegal practices by his party, but said that he did not have "any problem with an investigation." Barak had been counting on Herzog to coordinate the campaign to win a referendum on an eventual peace treaty with Syria, a deal that will likely involve ceding strategic land.

The prime minister is mired in disagreements with the Palestinians and the Syrians that could kill his hopes of coming to a comprehensive peace with all of Israel's neighbors by the end of this year. The investigation was already having an effect. Barak had planned to spend Thursday touring the northern border with Lebanon and preaching peace on Israel's last active front line; instead he was parrying Goldberg's thrusts.

Goldberg seethed at the lack of cooperation from Barak's One Israel party, noting some of the overseas donors remain anonymous. Goldberg said the large fine levied against the party was needed to stem a tide of corruption. "There must be a very clear, red line between capital and governance," he said.

He cited several other major parties for similar irregularities, including Likud, which he fined $120,000. They also face criminal investigation. Regardless of the investigation's conclusion, the episode is likely to leave a lasting stain on the career of a man who campaigned on "integrity" and described Netanyahu's government as having delivered "too many lies for too long."

"It is the first time (Barak's) legitimacy and credibility has been attacked," said Menachem Hoffnung, a campaign-finance expert at Hebrew University. "It's what brought Netanyahu down." Some wondered if the house-cleaning was now going too far. "We're turning the whole country into a nation under investigation," Amnon Zichroni, a leading trial lawyer, told Israel television.