Unravelling bribery claims in troubled Shari Arison’s firm

After her father died in 1999, the world of Shari Arison simply changed for the better.

She not only inherited part of her father’s multimillion dollar empire, but also became Israeli’s wealthiest woman.

For the last few months, however, Ms Arison’s world has been rocky. She has been in the news — for the wrong reasons — after her company was accused of giving bribes to some Kenyan officials to get government tenders, some for World Bank-funded road projects.

Ms Arison is the owner of Solel Boneh International (SBI), the oldest engineering and construction company in Israel, which has been winning major contracts since 1960s — the latest being the World Bank-funded Mau Summit-Kericho-Kisumu highway at a cost of Sh14 billion, the 33km JKIA-Machakos Road and the 46km Meru-Mitunguu Road.

Solel Boneh is a subsidiary of Arison’s Shikun & Binui, also known as Housing and Construction, and its Nairobi offices were four months ago raided by the police, perhaps, among other things, looking for the “red file” containing names of Kenyan officials who had been taking bribes from the company.

BRIBERY SCANDAL

This scandal starts with the arrival of a new accountant in Nairobi, Mr Shai Skaf, who has now turned into a whistle-blower.

After being introduced to the company, he says in court papers, he was summoned to the office of Dan Shaham, the then manager of Solel Boneh in Kenya.

After locking the door, Mr Shaham is alleged to have pulled a red file which Mr Skaf hadn’t seen before.

The file contained all the working secrets of SBI in Kenya and it was a documentation of bribes paid to Kenyan officials, according to journalists who have seen the lawsuit against the company filed last year.

When it rains, it pours. Though Israeli police at Lahav 433, the anti-sleaze headquarters, have not yet named the Kenyan officials who were bribed, it is now known that the identity, or identities, will be revealed at the hearing of a case in which Shai Skaf, a former employee, has sued Arison’s company, Housing & Construction, for wrongful dismissal but which has ended up spilling beans on how the company pays bribes in order to win contracts.

It is a case that should interest the Ethics and Anti-Corruption Commission, but they don’t seem to have an interest in it, so far.

MEDIA COVERAGE

The investigations by Lahav 433 anti-corruption unit should worry all those who were involved in these Kenyan tenders and for a reason.

Of late, the Jewish state has been investigating senior officials including Prime Minister Benjamin Netanyahu who is being probed of possibly entering a deal with Arnon Mozes, the publisher of Yedioth Ahronoth, the largest newspaper in Israel by sales and circulation, in which the publisher was to give Mr Netanyahu favourable coverage in his newspaper and in return, the government of Mr Netanyahu would undermine Yedioth’s main rival, Israel Hayom, a free newspaper that initially supported him.

Mr Netanyahu and his wife Sarah are also being investigated for taking bribes from various businessmen — an indicator of the level of corruption in Israel.

Two years ago, former Prime Minister Ehud Olmert was convicted of fraud for concealing from the state comptroller the cash-filled envelopes he received as bribes from American-Jewish businessman Morris Talansky.

And that is how high corruption has been running in Israel and why the Kenyan case is of immense interest.

ARISON ON THE SPOT

Back at the offices of Soleh Bonel in Nairobi, Mr Shaham is alleged to have told the accountant to keep the file under lock and key and to, perhaps, play by the rules. “Welcome to the family,” he was told.

But after going through the file, he returned it to his boss who was rather surprised and termed him a “spineless sissy”, according to Israeli papers.

“When in Africa, be African. They all give and take bribes,” Mr Shaham yelled according to Mr Skaf. “(Or) why do you think profitability here runs at 40 percent and in Israel four percent?”

At the moment, Shikun & Binui is exciting the Israeli media, not only because it is the largest construction company in the country but because the anti-corruption drive in Tel Aviv appears to have netted a big fish: billionaire Shari Arison, who has an estimated fortune of $5.8 billion.

This fortune is equivalent to Sh580 billion — enough to finance, even with the stealing, the ongoing construction of the Standard Gauge Railway from Mombasa to Naivasha.

So damaging are the Kenyan allegations that Arison’s investment arm, Arison Group, has decided to sell her control of Shikun & Binui to Israeli-American diamonds dealer and real estate investor Naty Saidoff for $310 million (Sh31 billion).

CRUISE MARKET

While her firm Arison Holdings said that the decision to sell “was in line with the group’s global operational strategy and aims to diversify its investments and have an impact on different fields around the sector”, this was disputed by Israeli journalists who are following the case.

“The fact that she was prepared to sell at a discount is likely out of concern about the fallout from the probe against its African unit,” wrote Michael Rochvarger in Haaretz newspaper, the oldest in Israel.

The other reason why Israel is interested in the Kenyan case is because Arison’s father, Ted Arison, was one of the known financiers of Benjamin Netanyahu besides being one of the pioneers of the modern cruise ship industry.

He owned Carnival Cruise Lines, now run by Shari Arison’s billionaire brother Micky and which commands more than half of the cruise market with 10 brands and more than 100 ships around the world. Ms Arison owns a significant stake too.

That Ms Arison, listed many times by Jerusalem Post as one of the Top 50 most influential Jews, is now caught in a bribery probe is a new low for the family which has also been asked to shed its majority stake at Bank Hapoalim, which is being investigated by U.S. authorities on suspicion of aiding American clients in evading taxes.

The bank has now been forced to set aside $135 million for expected penalties and legal costs.

STIFF PENALTY

Back to Kenya, the story that former Arison finance director in Nairobi Shay Skop will tell the court shall, perhaps, give us a pointer on how foreign companies win lucrative tenders in this country.

Before 2008, Israeli companies could legally pay bribes to public officials in foreign countries, ask for receipts and submit them to Israel Tax Authority as claims for deductible expenses.

That is how some Kenyan politicians made their money.

But this was changed in 2008 when Article 291A of the country’s penal code was amended to outlaw paying of bribes to foreign public officials — an offence that can attract up to seven years in jail.

KENYAN OFFICIALS ACCUSED

This clause not only prohibited offering or paying a bribe to a foreign public official for the purpose of obtaining business activity but also outlawed obtaining a direct advantage in the conclusion of a deal or tender.

More so, unlawful disclosure of information to give the briber an advantage in obtaining a deal is also considered as a bribe and allows foreign countries to prosecute such businessmen.

Police believe that Arison’s Shikun & Binui violated the law and that is why they have questioned four former senior managers on suspicion of having been involved in the affair of bribery of public officials in Kenya.

Those who have been questioned include a former CEO of the company Ofer Kotler, Nairobi branch manager Mr Alexander Yashish, and Yehuda Elimelech, who managed Solel Boneh Overseas until 2011.

GAGGING HADAR

Some few details have emerged from remand hearings where a detective handling the case said the entire affair concerns the years 2008 to 2012.

“A miserable picture arises of Soleh Bonel systematically bribing government officials with tens of millions of dollars for years, and more, around the world, all to increase its profits.

"In some cases S & B defrauded banking institutions affiliated with the UN, institutions established for noble purposes such as developing infrastructure in developing countries. If the suspicions turn out to be true, the damage caused to the State of Israel’s image will be hard to estimate.”

Some five years ago, another case in Nairobi involving Ms Arison’s company revealed how subsidiaries were registered by its officials who made a kill from them — and why the company wanted to gag Amos Hadar, an Israeli national who worked as Head of Finance, from revealing the inside story of SBI Holdings.

It appears that the officials in Nairobi were allowed to register separate companies which were later sub-contracted by SBI or its other affiliates, but when Mr Hadar fell out with his seniors, he was taken to court to stop him from disclosing “confidential information and trade secrets to third parties".

TRADE SECRET

The company alleged that it had terminated Mr Hadar’s employment because of “threatening to make false allegations against the company to government bodies … including the Kenya National Highways Authority, Kenya Revenue Authority and Ministry for Roads”.

Some of these companies, where Mr Hadar had interests, included Housing Solutions International Limited and Silver Taltal Holdings Limited; and he told a Nairobi court that any business negotiations undertaken between the Soleh Bonel was done by branch manager Alexander Yashish (who was recently questioned in Israel) and the Managing Director of Silver Taltal Construction Limited, Manachem Yaniv.

Other companies associated with Arison in Nairobi include Reynolds Construction Company (NIG) Limited, which has been doing the delayed Lunga Lunga Road in Industrial Area in Nairobi.

It was the Kenyan court that ruled that trade secrets that include wrongdoing cannot be protected.

“An employer cannot use trade secret laws or confidentiality agreements to conceal wrongdoing. Further, confidentiality agreements are not meant to hide evidence from the Court,” Justice Linnet Ndolo said.

“Information relating to illegal activities undertaken by the employer either independently or in cahoots with the employee does not qualify for protection under the duty of confidentiality. On the contrary in such cases, the employee is under a duty of disclosure.”

DOUBLE SALARIES

Alexander Yashish had told the Nairobi Court that the information over which protection was sought related to negotiations with clients, financial statements and pricing policy. He could not however identify any particular trade secret.

It also emerged that Israeli officials working for these companies had two salaries: one in US dollars and a lower one in Kenya shillings to evade payment of taxes.

Actually, the Nairobi judge noted that Mr Hadar, “working in cahoots with the (Soleh Bonel), was engaged in manipulation of salary figures with the aim of denying the Kenya Revenue Authority and by extension the Kenyan public much needed taxes”.

And as the lid starts to open on the operations of Ms Arison’s company in Kenya, one of the question that Kenyans are seeking an answer is: Which Kenyans took bribes from Shari Arison’s company and how do these foreign companies operate in the country.

Meanwhile, the PR firm that handles the Arison Group said says the firm has zero tolerance for any improper behaviour.

[email protected] @johnkamau1