Ariel Sharon wealthiest PM due to "Real Estate"

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Last update - 02:01 29/12/2004

Is Ariel Sharon the wealthiest prime minister in Israeli history?[/size]


By Rotem Starkman

In sharp contrast to conventional wisdom, Israel's wealthiest prime minister is not one of the has-beens. It's not Ehud Barak who makes millions consulting and running the lecture circuit and who built a luxury home in Kfar Shmariyahu. Nor is it former prime minister, Finance Minister Benjamin Netanyahu, a close associate of some of the world's wealthiest Jews and who has advised several local technology companies.

Actually, it is the present premier, Ariel Sharon - the farmer from Kfar Malal - who is the wealthiest prime minister to serve Israel ever. According to an appraisal ordered by Haaretz, Sharon's primary asset, Sycamore Ranch, is now worth $11.3 million or a cool NIS 50 million. The value of the farm has risen virtually miraculously since the early 1970s, when he paid only $500,000 for it.

Sharon didn't make his fortune just from buying the farm, and it isn't his only property. The rest of his famous properties - the estate in Kfar Malal and the home in Jerusalem's Old City - are both worth more now that Sharon is prime minister. In business jargon that is called "goodwill". People will always pay more for the home where the prime minister used to live.

Sharon's ranch is not merely a ranch. It's an icon. It symbolizes Sharon the warrior, farmer and man of the land. The pair - Sharon and the farm - are almost completely identified with each other. Not for naught, the Palestinians are trying to build a rocket that can "reach the farm" and not for naught, Sharon's associates, who meet at the farm every Friday to talk strategy for the coming week, are known as the "farm forum".

The appraisal was conducted by property assessor Guy Oz, based on zoning plans from 1989, on which Sharon's late wife, Lily Sharon signed off as developer. Lily Sharon signed the plan in the name of a company called Sheep Plants for Israel. Oz also used aerial photographs, comparisons to the values of similar properties in the area and discussions with real estate sector players.

An appraisal is not exact science. The price of a special property of this sort can only really be determined when it is actually sold. Our appraiser did not have access to all the documentation on the ranch, so he assumed Sharon has a long-term lease on the land. Also, some of the land is mortgaged to Sharon family creditors, including companies owned by businessman Eliezer Fishman, so some of the proceeds of any sale of the ranch would not go to the Sharons. They would also be likely to pay a substantial tax payment, were they to sell up.

The estate includes three houses. Ariel Sharon's home was built on the foundations of the old farmhouse and includes a 14-meter water tower. Son Gilad Sharon's home is especially large and was built at a large investment. The third, smaller, house used to be home to the farm's foreman.

The farm includes 4,000 dunams, most of it zoned for agriculture. Oz valued the farmland at $2,000 per dunam, putting its value at $7.8 million. It also includes 13.7 dunams zoned residential and valued at $1 million. Building permits for the three homes were each up to 500 square meters, three stories, including large porches and swimming pools. There are also a number of agricultural structures and infrastructure such as a security system.

Oz estimates a potential buyer would pay a 20-100 percent premium for the goodwill. Apparently, saying "I live where the prime minister used to live" is worth a lot of money.

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The Short List for Bank of Israel

Victor Medina
He's the bankers' candidate, having run United Mizrahi Bank for some nine years. He is also supported by key accountants and lawyers who represent some of Israel's wealthiest men.

The pressure to appoint Medina therefore arose from the business world. Medina also has good relations with Netanyahu.

Medina made a bad mistake, though. Until a year ago, it was common knowledge that he was the favored candidate. He even resigned as chief of Mizrahi in order to "cool himself off" before taking the job. And that was the mistake.

He should not have behaved as though the job were his for the taking. He skipped the stages of kowtowing to the political echelon, of pretending to hold intellectual debate with them about monetary policy in the 21st century.

There was a second miscalculation, in the form of the storm of bad publicity about his enormous golden parachute from Mizrahi. That created some discomfort. At first people thought Sharon would feel uncomfortable about Medina as governor, but after what happened, people think Netanyahu would feel uncomfortable too.

David Klein

Soon he ends his five-year first team as Bank of Israel governor, during which his relations with Netanyahu were decidedly tense. Klein was traumatized by the deal struck in December 2001 with Sharon and then finance minister Silvan Shalom, which led him to slash interest rates by 2 percent in one fell swoop. The results were disastrous. He subsequently ignored government promises to maintain fiscal restraint and pleas that he reduce rates, heeding only his own heart.

He was a stubborn governor. None cast aspersions on his professionalism, or on the esteem in which the world holds him. But Klein missed several opportunities to rescue the economy from the recession. Just last month, after endless pleading, he agreed to lower interest rates. His goal was to strengthen the dollar against the shekel and encourage exporters, while reducing the state's financing costs. And he did it just before 2005, which is not expected to be an easy year, economically speaking.

He has many opponents. Netanyahu's people claim the economy could have rebounded faster if not for his stubbornness. Bankers and business blame much of the credit crunch on his policies, and Bank of Israel directives on provisioning for doubtful debts and dividends all but wiped out bank profits in 2001 and 2002. But he has supporters, a key one being former central banker, Jacob Frenkel, recently of Merrill Lynch, and Frenkel has Netanyahu's ear, too.

Avi Ben-Bassat

The former treasury director general is the darling of the media, mainly. Netanyahu's people get the picture: his appointment would make good press. He could well be the default candidate if the prime minister and Netanyahu can't agree on anyone.

Leo Leiderman

He had been the consensus candidate until a few weeks ago. Sharon's office likes him because he has no political aspirations. The Finance Ministry likes him because of his analytical skill, and his articulateness. His ability to explain policy to the public would relieve the finance minister of many a burden. He is also a cooperative personality, and holds consultations, rather than going it alone. Under his leadership, the Bank of Israel's research department had one of its best periods.

The foreign banks like Leiderman, too. He has worked at Deutsche Bank, and would know well how to mesh Israel into the changes the world marketplace is undergoing.

But his candidacy is suffering from the very eagerness the prime minister's people feel about him, which has soured his candidacy in the eyes of Netanyahu's entourage.

Amir Barnea

He would seem to be the last default candidate left standing. He has no opponents. Even the Jerusalem circles of the media might support him. The bankers might like him because he works closely with them, mainly because of his corporate appraisal business. He won't get the support of big business, the accountants or the lawyers, but they don't oppose him, either. Mainly, they feel he's open to dialog.

[Moses]

Israel Banks Called Lax on Holocaust Fund Returns
By STEVEN ERLANGER

JERUSALEM, Jan. 18 - Israeli banks holding assets from European Jews killed in the Holocaust failed to make a determined effort to return the holdings to their heirs, and when they were returned, they were not returned at their proper value, according to a report of the Israeli Parliament, or Knesset, released Tuesday.

The Israeli government, as custodian for a large part of the assets, also failed to make a serious effort to maintain their value or to return them to survivors or heirs, the report said.

"What we have discovered, in particular the attitude of the banks, has filled us with disgust," said the chairwoman of a parliamentary committee, Colette Avital, a Labor Party legislator.

"Neither the state nor the banks paid enough attention to this problem," Ms. Avital said. "We don't think the state of Israel should act differently from what we've demanded from other countries."

Under pressure from the United States and Israel, the banks and governments of Switzerland and Austria have worked to disclose the accounts of those believed to be Holocaust victims and survivors, so assets can be returned to relatives. Switzerland, for example, agreed to pay compensation of $1.25 billion after more than 54,000 dormant accounts traced to World War II or earlier were found in Swiss banks.

The Israeli report, after four years of investigation, found that 9,000 people or their heirs were eligible for compensation from the Israeli government and the banks, amounting to an estimated $31.5 million. Of those 9,000 names, about 6,000 were listed as victims of the Holocaust by Yad Vashem, Israel's Holocaust museum.

Members of the committee called on Parliament to approve the report and pass legislation to put into effect the return of the assets to heirs, where they can be found, at a fair value.

Where heirs cannot be found, the committee recommended using the money to benefit Holocaust survivors.

The committee still intends to look into the real estate holdings in Israel of Holocaust survivors or victims. Some of the property, bought before the state was founded, would now be worth a great deal.

The history of the Israeli assets is different from that of Switzerland, for example. Jews in Europe bought land and opened bank accounts in British Mandate Palestine from the 1920's on, to invest in the Zionist enterprise or to establish a nest egg for possible immigration by them or their children. The Anglo-Palestine Bank, for example, was founded in 1903 and later became Bank Leumi, which held by far the largest number of the accounts in question.

After the outbreak of World War II, land and bank accounts held by Jews from countries under Nazi rule were seized by the British mandate government in Palestine as enemy property, and most of it was transferred to England and held by the British Custodian of Enemy Property. But the banks also hid some of their accounts, trying to protect their account holders.

After the war and the establishment of the state of Israel, Britain paid back some $1.4 million in 1950 as compensation, and records of the accounts were turned over to the Israeli government, which set up its own custodian general's office.

Some accounts were returned by the custodian, mostly at values that were not realistic. But many were not, and neither the custodian nor the banks, according to the committee, made serious efforts to find survivors or heirs. Nor did they manage the accounts properly, and their value eroded. According to the committee, the banks did not take sufficiently assiduous action to locate accounts even when asked to do so by Holocaust survivors or the heirs of Holocaust victims.

The committee valued the accounts in two different ways: the initial assets indexed to inflation since World War II, plus either 3 percent interest or 4 percent interest through Sept. 30, 2004. With 3 percent interest, the committee found the state liable for $23 million in frozen accounts under its custodianship and the banks were responsible for a further $8.5 million. At 4 percent, the state's liability is about $133 million and the banks' liability is some $73 million.

Bank Leumi, Israel's second-largest bank, is responsible for about 95 percent of the banks' liabilities. Four other banks are responsible for the rest.

Bank Leumi issued a statement saying that it had cooperated fully with the committee's efforts to trace the accounts. Yona Fogel, an executive vice president, told The Jerusalem Post that if the report was based "on factual evidence, we will not fight it."

The bank has not held any such accounts for decades, Mr. Fogel said. "We will cooperate with every legal process aimed at aiding Holocaust survivors," he said.

Ms. Avital, the committee chairwoman, said: "There was no intentional act to keep people from getting their money. But there was callousness and insensitivity."

Efraim Zuroff, the Israel director of the Simon Wiesenthal Center, called the report "a sad commentary on the inability or unwillingness of Israel to deal with these issues, while demanding that other countries do so."

He criticized the attitude of the state's business and political leaders. "The powers that be have been stonewalling this again and again," Mr. Zuroff said. "This is only a committee report, a revelation of the scope of the problem. This is not the Knesset passing a law forcing the banks and the custodian to return the money. For that, there has to be political will."

A copy of the report and a list of the account holders is online in English at: http//www.knesset.gov.il/committees/eng/docs/shoa_finalreport_eng.htm.