January 27, 2000
Web posted at: 11:29 p.m. EST (0429 GMT)

In this story: Report: Financing practices 'trampled the law' Other alleged violators named Herzog's peace process role Season of scandals RELATED STORIES, SITES

From staff and wire reports

JERUSALEM -- A campaign fund-raising scandal involving Israeli Prime Minister Ehud Barak may hinder his plans to reach a comprehensive Middle East peace agreement.

Israel's attorney general, Elyakim Rubinstein, announced Thursday he had ordered a criminal investigation into Barak's One Israel political coalition, based on an Israeli comptroller's report naming questionable fund-raising methods for Barak's 1999 election campaign.

"I wasn't involved in fund-raising," Barak said Thursday, denying any wrongdoing and insisting he had told campaign staffers to follow the law.

The report could affect the Israeli-Syrian track of the Mideast peace process, which already has been put on hold.

The talks are in further jeopardy because the fund-raising report names Yitzhak Herzog, a lawyer who led Barak's campaign and who now serves as a Cabinet secretary. Barak has been counting on Herzog to coordinate a campaign to win a national referendum on any future peace agreement with Syria.

INTERACTIVE Israeli politicians under scrutiny     INTERACTIVE MAP Golan Heights: A tug of war for peace   MESSAGE BOARD Mideast peace Scandal in Israel

Report: Financing practices 'trampled the law'

The financing practices of Barak's One Israel coalition in the elections "trampled on the law," said Israeli Comptroller Eliezer Goldberg, whose report prompted the investigation.

Goldberg's report says Israel set up several nonprofit organizations to funnel large contributions from non-Israeli donors to Barak's successful campaign last May against Prime Minister Benjamin Netanyahu. Such campaign contributions are illegal under Israeli campaign financing law.

The report recommended that One Israel be fined $3.5 million. Barak said at a news conference that he "honored" the report but added that "in light of the large fine," the coalition was considering an appeal to the Supreme Court.

Other alleged violators named

One Israel was not the only alleged violator of campaign laws, but the report said it was the main violator.

It charged that Barak associates in addition to Herzog, including the prime minister's brother-in-law, Doron Cohen, used money from the international fund-raising groups for surveys, campaign material and door-to-door recruiting.

	. . . . News: Wye River Memorandum Background: Mideast Timeline The West Bank in Brief Key Players Maps: Middle East Israel Land-for-peace deal Interactive: Message board

The nonprofit groups allegedly channeled funds from a Swiss millionaire and a Canadian charity group -- both run by Herzog -- to allow them to make contributions larger than allowed by law.

Opposition leader Ariel Sharon chided Barak, saying the prime minister has broken a promise to provide credible leadership.

Herzog's peace process role

The accusations against Herzog throw doubt on whether he would act as Barak's chief campaigner for a possible Israeli referendum on any future Syrian peace agreement.

Future meetings between Israeli and Syrian officials were put on hold earlier this month following talks near Washington that yielded little progress.

One of the key and most controversial issues of any Israeli-Syrian treaty is Syria's demand that Israel withdrawal from the Golan Heights, a water-rich plateau Israel captured from Syria during the 1967 Middle East War.

Herzog had been tapped to lead Barak's fight to convince Israeli voters to approve an eventual agreement with the Syrians -- and the expected trading of the Golan for Damascus' promise of peace.

Weizman

Season of scandals

While this is Barak's first public scandal, it and a string of recent troubles raise serious questions about integrity in Israeli politics.

Israeli President Ezer Weizman was accused this month of improperly accepting more than $400,000 from a wealthy French businessman in the 1980s and 1990s.

Former Barak opponent Netanyahu and his wife Sara have been repeatedly grilled by police about suspicions they kept tens of thousands of dollars' worth of gifts belonging to Israel, including silverware and carpets.

Former Interior Minister Arieh Deri is appealing a four-year prison sentence for a bribery conviction.

Former Israeli Justice Minister Tshahi Hanegbi has been charged with fraud, and even top members of the police fraud unit have been disciplined for inappropriate contacts in another felony investigation.

Jerusalem Bureau Chief Walter Rodgers, The Associated Press and Reuters contributed to this report.