A confidential Israeli source has expanded on this report (Hebrew) that officials in an unnamed “government security agency” constructed a scheme with an outside vendor allowing them to cover budget shortfalls by misappropriating $300,000 in State funds. My source tells me that the agency in question is the Mossad. Cases of corruption involving ministerial officials and IDF officers are somewhat common in Israel. But you almost never hear of such cases involving the intelligence agencies (Shabak, Mossad). First, they are sacrosanct. Second, these agencies are supposed to uphold a higher standard as protectors of the nation. Third, whenever there is a scandal they simply sweep it under the carpet with an internal investigation that covers the bosses’ asses. Despite all this, it appears they are not immune.
In reporting the story, Walla! took a dutifully patriotic approach: “the case involved a series of irregular steps that do not characterize either the security agency or the judicial system.”
It involves some of the oldest forms to corruption and embezzlement: the accused created inflated invoices to be paid to an external vendor. In a conventional case, the vendor would kick-back a substantial portion of the stolen money to the thief who worked within the company. But that’s not what happened here. Apparently, a group of senior officers ran a division that oversaw project development. As part of their responsibilities, they developed budgets for projects, monitored spending, and oversaw relations between the Mossad and external vendors.
The project in question is described in exceedingly vague, but tantalizing terms:
The unit head explained during the sentencing phase of the trial that the background for the case involved a significant event which led to endangering someone’s life in such a way that it required the immediate replacement of documentation [i.e. passport] system, a project that was assigned to her. Because of the urgency of the matter, she turned to normal channels and requested to divert funds from one account in her budget to another. Her request was denied because it would require putting out another tender.
Using the standard system of deciphering opaque national security jargon, this passage likely likely refers to either one of two major failures involving the Mossad. One was the Mahmoud al Mabouh assassination and the other Ben Zygier. You’ll recall that the Mossad developed a system to “clone” passports of real Israeli dual citizens, adding a fake picture. It could be that this project was rushed in order to coordinate with the project to assassinate al Mabouh, for which all 27 agents needed such cloned documents. Zygier had several different passports in the names of various aliases. He also traveled widely to Europe, possibly Iran, and Cyprus on “company business.” So it’s possible that the project involved his assumed identities.
Another fascinating part of this case is that when she asked how to fund the project properly, she was told essentially that she couldn’t do it in a conventional manner because there would be a need for a new RFP. Presumably, the higher-ups wanted to maintain strict secrecy over everything connected to either the assassination plot; or Zygier’s spy capers. This unfortunately, led to the morass in which she eventually sunk. So it appears that either Zygier’s tragic case or the embarrassing al Mabouh killing continues to ensnare unwitting participants.
Returning to the financial fraud case, the accused didn’t steal the funds for themselves. Instead, they’d gotten themselves into hot water with at least one project that went far over budget. The vendor, whose building project developed cost overruns, initially promised that he would cover the overages. Later, he refused. That left the Mossad unit to devise some way to enable the project to be completed without alerting fiscal monitors to the problem.
So the vendor and unit head reported to the fiscal oversight committee that the vendor was reducing his fee to compensate for the overrun. But in actuality, the unit paid him the full amount of the contract. But it told him it expected him to return the funds to the Mossad when they were requested.
So they developed ways to create revenue “off the books.” They billed consultants for work they never performed. Then they funneled those funds back into the project so it could be completed without supervisors discovering the problem.
They discovered that a separate project had not used $250,000 that had been allocated. If the funds were not spent in that fiscal year they would revert to the agency’s general account and be lost. So the unit sent more inflated invoices that equaled the $250,000 amount and directed the vendor to hold on to the money till it was needed. Then it would be plowed back into the project that was over budget.
If it sounds like an exceedingly odd way of doing business, it is. Naturally, the vendor held on to some of the funds permanently and never returned them to the Mossad unit.
At least four officers are accused of engineering the conspiracy between 2009-2011, among them the chief of a major Mossad unit and his deputy, very high-ranking officials, who were sacked by outgoing agency chief, Tamir Pardo. It was Pardo himself who filed a complaint with the police in 2011 and requested their investigation of the charges.
One has to ask how such a large sum can simply disappear without the agency’s fiscal controllers being aware of it. This is one of the oldest corporate scams in the book. How can there not have been procedures in place to prevent such dealings? Is there such a level of trust (or dysfunction) that such acts aren’t anticipated by employee-wrongdoers?
On the other hand, Pardo could’ve buried this matter with an internal investigation and punishment which would’ve prevented Israelis from ever learning about its existence (not that they do, even now, know the full extent of the matter). He chose a more transparent route by bringing in the police. That is to his credit and reveals a major cultural change in the organization which has been beset by scandals which have been covered up going back decades.
The case reached the media after an Israeli court has rendered verdicts in the matter. There had been a prior plea deal with the unit head, would’ve offered her a more stringent sentence than eventually handed down: two months in prison and a $10,000 fine. But the judge was angered that the other conspirators had received no punishment for their deeds, so he rejected this arrangement and sentenced her to no prison time, a $4,000 fine, and 200 hours of community service.
Imagine, one of the most senior officials in Israel’s élite intelligence institution steals 1.5-million Israeli shekels and gets off with no jail time. The excuse is that they engaged in this fraud for the sake of the institution and not for their own enrichment. This is an open invitation to others to try again and do it better next time.