For the first time since the investigation began of the forbidden contributions that Prime Minister Ariel Sharon allegedly received in the 1999 Likud primary, the police have announced: “We have evidence of the involvement of James and Martin Schlaff in a transfer of USD 3 million to the prime minister’s family, some of which served to finance the return of the illegal contributions that the prime minister had received, and some of which remained in the hands of the Sharon family.”

Some two weeks ago, James Schlaff, Martin’s brother, came to Israel to visit their 80-year old parents. The National Fraud Squad took advantage of the visit to raid the parents’ home in Jerusalem and seized from there a large quantity of documents, two laptop computers, cell phones and palm computers that belong to James. Thus far the material on these has not yet been checked, mainly since Schlaff has turned to the Magistrates Court in Rishon Lezion with a demand that his property be returned.

The police response to the court noted that the confiscated equipment is important for investigating the bribe that Prime Minister Sharon allegedly received from Martin Schlaff. As mentioned above, in this document the police “dropped a bombshell” and admitted for the first time that it has prima facie evidence demonstrating that Schlaff had transferred USD 3 million to Sharon. “We have found the connection between Schlaff and Sharon,” said police sources yesterday. However, the detectives underscored that at the present stage it is “much ado about nothing, and there is still no evidence linking the prime minister to taking bribes.”

Sharon’s associates responded yesterday dismissively to the turn in the investigation, calling the latest development “warmed over leftovers.” “The affair arose for the first time before the previous elections, and has miraculously surfaced before the current elections. As far as we are concerned, there is nothing new in this report.”

James Schlaff’s attorney, Navot Tel Zur, said last night that his client has no connection with the affair. “We have agreed to withdraw the request to return James’s computers, in exchange for [a commitment] that the information on them will not be passed on to anyone,” said Tel Zur, “following the publication we will now consider how to take action against the police.”

For over five years, the police have been investigating the suspicions against Sharon and his sons. The affair began with the establishment of the Annex Research company by figures linked to Omri Sharon. Annex Research is suspected of having served as a straw company, from which funds were transferred to finance Ariel Sharon’s party primary campaign in 1999.

Following the exposure of the affair in Yediot Ahronot some five years ago, the state comptroller launched an investigation, and instructed Sharon to return NIS 4.7 million to the state treasury, which he had received from illegal contributions. In order to return the money, the prime minister’s son Gilad was forced to ask for a loan from Bank Leumi. Businessman Cyril Kern of South Africa came to the help of the Sharon family, and deposited a similar amount in a bank account in Israel as a guarantee against the loan. But Kern did not stop there, and in total transferred USD 3 million to the Sharon family-approximately NIS 13.5 million at that time.

About two years ago, Ha’aretz published a report that the police requested to carry out a judicial inquiry against Kern, and suspected that he had served as a front man for Austrian billionaire Martin Schlaff. According to the suspicions, Schlaff transferred the millions from his account in Austria to Kern in South Africa, and from there to Israel, in order to cover up the trace. The police also asked to hold a judicial inquiry in Austria, but this did not materialize.

The police suspected that Schlaff had transferred the money to Sharon in order for the latter to help him with his casino business. The Austrian billionaire, who was one of the owners of the casino in Jericho, wanted at a certain stage to receive authorization to operate a gambling ship in the Gulf of Eilat. The detectives assessed that Schlaff may have been trying to enlist Sharon on his behalf.

Schlaff has refrained in recent years from visiting Israel, and senior police officials have already conceded that the investigation has hit a dead end. The requests for judicial inquiries in Austria, Canada and the United States were not granted by these countries, and the investigators said that without permissions from them, “even if there is evidence that Schlaff transferred the money, it still doesn’t mean we will be able to prove bribery.”

This ran in Yediot Ahronot on January 4th, 2006