Case File

Case 3000: the “Submarine Affair”

Author
Jack Cinamon
Published on
July 16, 2024
Image
Image Source: IDF.IL
Image Source: IDF.IL

Contents

Contents

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Introduction

Introduction

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Like many submarine sales, the planned sale of three Dolphin-2 submarines by German shipbuilders ThyssenKrupp to Israel, potentially intended to carry nuclear weapons, appears to have involved significant bribes. The suspected recipients in this case are close associates of Israeli Prime Minister Binyamin Netanyahu. The sale was provisionally agreed upon in late 2016, against the wishes of senior military commanders and without a competitive process.

These new submarines are intended to replace existing German-made Dolphin vessels previously supplied to Israel. The German government is subsidising the deal, covering approximately one-third of the initial $2 billion (€1.8 billion) contract, with Israel covering $1.4 billion (€1.2 billion), reflecting Germany's sense of responsibility for Israel's security; the submarines have since doubled in price. Also included in the deal was the purchase of four corvettes for $482 million (€430 million), deemed unnecessary, by none other than Netanyahu himself. The ships, originally intended to protect gas drilling platforms in contested waters off the Gaza coast, have since been utilised in the blockade and bombing of Gaza.

Former Israeli Defense Minister Moshe Ya’alon (2013-16), who opposed the acquisition during his tenure, urged Attorney General Avichai Mandelblit to investigate the negotiations and following this call, corruption suspicions emerged leading to an Israeli police investigation that resulted in numerous arrests and interrogations. ThyssenKrupp's Israel agent and key suspect in the deal, Michael Ganor, initially turned state witness, although he later retracted his statements and witness status.

Case Details

Case details

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Seller country
Germany
Seller company
ThyssenKrupp
Buyer country
Israel
Goods category
Submarines
Equipment sold
3 Dolphin-2 diesel-electric (Dakar-class) submarines 4 Sa'ar 6 Corvette warships
Deal value
Submarines $3.4 billion (€3 billion) Corvettes $482 million (€430 million)
Sum involved in corruption
At least US$11,840,117.60 (currency exchange from NIS and EUR as of October 2016).
Start year
2016
Outcome status
Legal Investigation Ongoing

Actors

Actors

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  • ThyssenKrupp: Headquartered in Essen and Duisburg, Germany; industrial engineering and steel production multinational conglomerate.

  • ThyssenKrupp Marine Systems (TKMS): Subsidiary of ThyssenKrupp; headquartered in Kiel, Germany; shipbuilders, developing and manufacturing naval surface vessels and submarines; allegedly paid bribes through its Israeli agent, Ganor.

  • Howaldtswerke-Deutsche Werft (HDW): Subsidiary of TKMS; purchased in 2005; German shipbuilders constructed submarines at the HDW shipyard in Kiel.

  • Keren Hayesod-UIA (United Israel Appeal): Branches in 45 countries; official fundraising organisation for Israel; works to further the national priorities of the State of Israel.

  • Benjamin Netanyahu: Prime Minister of Israel (1996–1999, 2009–2021, 2022-); in office during negotiations; cleared of criminal wrongdoing.

  • Michael Ganor: Israeli businessman; main agent for ThyssenKrupp in Israel since October 2009; allegedly received at least $11.4 million in commissions from ThyssenKrupp; indicted in the latest case.

  • Avriel Bar-Yosef: Former Deputy head of National Security Council; accused of promoting Ganor's appointment as ThyssenKrupp agent in Israel while anticipating financial reward; indicted in the latest case.

  • Shay Shaykeh Brosh: Close associate and mediator between Yosef and Ganor; suspected of facilitating bribe payments between Ganor and Yosef for ‘consulting services’; indicted in the latest case.

  • David Shimron: Netanyahu’s personal lawyer and second cousin; allegedly received money from Ganor due to his proximity to Netanyahu; cleared of wrongdoing.

  • David Sharan: Director of the Prime Minister’s Office during negotiations; former aide to Netanyahu and former Energy Minister Steinitz; allegedly received money from Ganor to promote the deal; indicted in the latest case.

  • Eliezer (Modi) Sandberg: Chair of Keren Hayesod (2010-2018); alleged to have received money from Ganor to promote the deal and gather information on personnel negotiating the deal; indicted in the latest case.

  • Eliezer “Cheney” Marom: Former commander of the Israeli Navy (2007-2011); allegedly received money from Ganor in return for ‘consulting services’; cleared of wrongdoing.

  • Rami Taib: Political advisor to former Energy Minister Yuval Steinitz (2015-2021); close friend to Sharan; suspected of bribery, conspiring to commit a crime and money laundering; indicted in the latest case.

  • Tzachi Lieber: Media advisor; Mor's business partner; suspected of mediation in bribery, conspiring to commit a crime, and obstruction of justice; named in latest indictment.

  • Nati Mor: Strategic advisor; suspected by police of bribery and the transfer of money to a public servant; not named in latest indictment.

  • Atalya Rosenbaum: Former deputy national security advisor; questioned on suspicion of mediation in bribery, and of leaking information to Ganor from the National Security Council's discussions; not named in latest indictments.

  • Yitzhak Molho: Attorney and former adviser to Netanyahu and also married to his cousin and Shimron’s sister; suspected of aiding Shimron who represented Ganor; received significant expense payments to promote the deal; cleared of wrongdoing.

Allegations

Summary of Corruption Allegations

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Following the police investigation, several indictments were filed in the Tel Aviv District Court for charges including bribery, money laundering, fraud, breach of trust, and tax offenses against various suspects. Investigators believe that Ganor promised fees worth millions of dollars to key procurement decision-makers in Israel. The police investigation prompted the establishment of a commission of inquiry into the submarine corruption scandal.

According to the memorandum of understanding (MOU), paragraph 10, “Before the submarines can be delivered, all investigations must be stopped and all suspicions must be dispelled.” The finalised 2022 Dakar deal is worth approximately $3.4 billion (€3 billion), with delivery set to begin in 2031.

Timeline

Timeline

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2016
  • OctAt that time, Israel's fleet already included five German-made Dolphin and Dolphin-II submarines, acquired in the 1990s and 2000s. A sixth submarine from a 2012 order is still pending after a delay (as of May 2024). The Israeli cabinet approved a framework agreement to buy three further Dolphin-II submarines from German submarine-maker ThyssenKrupp in October 2016, for a price of $1.4 million (€1.2 billion). It is possible that the submarines will be armed with nuclear weapons. The deal was controversial and opposed by sections of the military, as Israel's current submarines will not start approaching obsolescence until 2025, and as no attempt seems to have been made to explore alternative suppliers (e.g. France's DCNS). Former Defence Minister Moshe Yaalon, who resigned in May 2016, criticised the deal and claimed that he had vigorously opposed it prior to his resignation. The deal was nevertheless pushed through by Prime Minister Binyamin Netanyahu.
2017
  • JulA planned MoU between Israel and Germany, due to have been signed in July 2017, was halted by the German government due to the ongoing investigations, even though the German Cabinet had approved the sale as recently as the end of June 2017.
  • 23 OctThe MoU was eventually signed in October 2017. According to media reports, the final version of the MoU has a clause which allows Germany to cancel the deal if criminal acts are established.
2018
  • In spring, the Israeli navy was foreseeing signing a procurement contract for the submarines in 2020.
2022
  • 20 JanIsrael's Ministry of Defense officially contracted TKMS to construct the three diesel-electric attack submarines at the HDW shipyard, at a cost of $3.4 billion (€3 billion). The Israeli Defense Ministry and TKMS announced the deal. It was later revealed that the deal was supported by a “unique grant” from the German government, the price of the contract was to be subsidised by $673 million (€600 million), reducing from the original price of $2 billion (€1.8 billion). This deal also includes an industrial-strategic cooperation agreement that will see Germany invest $953 million (€850 million) in Israeli industries.
  • 18 JanThe submarines are believed to be equipped with a vertical launch system (VLS), which has significantly increased the purchase price to $2.7 billion (€2.4 billion), double the initial estimate. Reports indicate that these submarines provide Israel with nuclear second-strike capabilities by carrying long-range cruise missiles armed with nuclear warheads.

Outcomes

Investigation Outcomes

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2016
  • NovIsraeli police started an investigation into the deal within months of it being announced, in November 2016, following revelations that Netanyahu’s personal lawyer, Shimron, had acted as a representative for ThyssenKrupp in relation to the deal. The investigation was ordered by Attorney General Avichai Mandelblit.
2017
  • FebA criminal probe was opened in February 2017, led by the National Unit for Economic Crime of the Lahav 433 serious crimes police department (the anti-corruption unit), and in July seven people were arrested, with some detained or placed under house arrest. They were suspected of crimes including bribery, tax fraud, and money laundering, in relation to the submarine deal and another to buy corvettes from ThyssenKrupp.
  • JulIn the first wave of arrests, Cheney, who allegedly advocated for Ganor's appointment as an agent in 2009, Bar-Yosef, the former Deputy Chief of Israel's National Security Council “Malal” and a key supporter of the deal, and businessman Ganor, ThyssenKrupp's principal agent in Israel and a participant in numerous arms deals since 2012, were all questioned.
  • Ganor reportedly informed the police that Shimron was promised fees amounting to 'tens of millions' of New Israeli Shekels, which constituted 20% of the fee Ganor himself was to receive from ThyssenKrupp. This suggests that Ganor's fee would be in the tens of millions of dollars. These negotiations involved Netanyahu's personal attorney, Shimron, who was retained by Ganor's offices, the representative of ThyssenKrupp in Israel.
  • Cheney is suspected of receiving money from Ganor when Commander of the Navy acting together with Bar-Yosef, to confirm Ganor as the ThyssenKrupp agent in Israel. Cheney is suspected of receiving sums of money from Ganor under the guise of ‘consulting services’, allegedly provided to Ganor, in the sum of $160,000 (₪600,000).
  • 21 JulIt was reported that Ganor had agreed to become a state witness, and had accepted a sentence of 12 months in prison and a fine of $2.6 million (₪10 million). Until the start of the investigation in 2017, Ganor received at least $11.4 million (€10.2 million) from ThyssenKrupp. For receiving these amounts, Ganor is charged with the offense of taking action with prohibited property according to the Money Laundering Prohibition Law. In addition, Ganor is accused of a series of tax offenses and charged with bribery, breach of trust and money laundering.
  • SepIn a second wave of arrests, former Minister and Keren Hayesod Chairman Modi, Israeli businessman Brosh, and Sharan, the former Chief of Staff to the Prime Minister, were also questioned.
  • NovA third wave was carried out when attorney Shimron and attorney Molho were arrested and brought in for questioning.
  • Mor, strategic advisor; suspected by police of bribery and the transfer of money to a public servant; had also been charged and called in for questioning. Also pulled in for questioning and suspected of mediation in bribery, conspiring to commit a crime, and obstruction of justice is Lieber, Media advisor and Mor's business partner Rosenbaum, former number two of Malal (2009-2010) was also arrested and questioned on suspicion of leaking information from Malal meetings to Ganor.
2018
  • MarPolice have stressed that Netanyahu himself is not at present a suspect in the case, although Moshe Ya'alon insists that Netanyahu must have known about the corrupt dealings. Indeed, investigators weighed the risks of Germany canceling the deal before deciding to question the prime minister. Netanyahu is currently under investigation by Israeli police over three other corruption cases, Case 1000, Case 2000, and Case 4000.
  • 12 JunNetanyahu was interviewed by police for several hours in relation to Case 3000, also known as the submarine affair, and continues to be treated as a witness, not a suspect. During the interview he said ‘I don’t know who Ganor is and what ThyssenKrupp is.’
  • Israeli police have recommended that bribery, fraud, and money-laundering charges proceed against Shimron, Bar-Yosef, Cheney, and three other suspects: Sharan, Brosh, and Modi.
2019
  • Ganor withdrew from the state witness agreement with the prosecutors office and his immunity was revoked, stating that he ‘did not bribe anyone, I gave consulting services.’
2020
  • 5 AugThe Israeli Knesset rejected a bill to create a commission of inquiry into the submarine corruption scandal, voting 48-19 against the attempt. The junior party in the government coalition were absent from the vote, despite supporting an investigation before entering the coalition. An anti-corruption advocacy group, the Movement for Quality Government, has also separately petitioned the Israeli High Court to conduct an investigation into Netanyahu's role in the submarine affair.
2021
  • 21 OctNevertheless, indictments were filed at the Tel Aviv District Court for a variety of charges including bribery, money laundering, fraud, breach of trust and tax offenses against several suspects. The full list of Indictments includes: Ganor, Bar-Yosef, Sharan, Modi, Brosh, Taib, and Lieber. Not named in the indictment and therefore cleared of wrongdoing is: Netanyahu, Cheney, Shimron, Molho, Rosenbaum and Mor.
  • Modi is accused of receiving $27,000 (₪103,000) from Ganor from 2012 to 2016, with the payments disguised as consultation fees while he served as a public servant as chair of Keren Hayesod. Modi took advantage of his past and present role and position to "open doors" for Ganor. He also allegedly passed vital information to Ganor from employees and both public and elected officials in connection with the submarine transactions.
  • Brosh allegedly received $112,000 (₪420,000) in bribe payments from Ganor, disguised as consulting service invoices. As a private businessman, Brosh was introduced to Ganor by Bar-Yosef to facilitate the transaction and maintain close ties between Ganor and Bar-Yosef. It is suspected that Ganor and Brosh signed an agreement for $135,000 (€120,000) to cover the bribe money transfer.
  • Sharan received $35,000 (₪130,000) from Ganor between 2013 and 2016, spread across three separate payments, according to the indictment. In return, he promoted the submarine deal through his various public office roles. These payments were funneled through intermediaries Leiber and Taib to conceal the connection between Sharan and Ganor. Consequently, Sharan has been charged with bribery, breach of trust, and money laundering.
  • Molho and Ganor, in a suspected meeting, discussed Germany's request to eliminate political obstacles as a condition for advancing the submarine and future vessel deals. It is suspected that Molho failed to report this meeting to the legal advisor of the Prime Minister's Office, violating the conflict of interest arrangement governing his public role. Following the police investigation, it was determined that there was insufficient evidence to charge him with any crimes.
  • Shimron is suspected of acting on Ganor's behalf by leveraging his status and close connections to Netanyahu (cousin) and other public officials. According to suspicions, Shimron received payments labeled as a "reward for success." These payments, totaling $72,000 (₪270,000), were made in several installments for "opening doors" and influencing public employees to advance Ganor's business in the submarine purchase. Additionally, Shimron is suspected of promoting a $100 million investment of the Germany-Israel Fund in a Swiss bank to disguise Ganor's involvement, which posed a conflict of interest with the fund's chairman, Atalia Rosenbaum. Shimron allegedly misrepresented his true involvement in the investment to banks in Israel and abroad. In return, he supposedly received a 20% commission from the investment money, which he then transferred to Ganor.
2022
  • 23 JanIsrael's government under Yair Lapid and Naftali Bennett announced the launch of a state investigation committee into the acquisition of submarines and other warships from Germany. The commission is to be headed up by former Supreme Court president Asher Grunis. Mostly conducted behind closed doors, despite declaring it a public inquiry.
  • 3 OctModi admitted to an amended indictment as part of a plea deal. He confessed to receiving $27,000 (₪103,000) from Ganor between 2012 and 2016 for promoting the submarine deal. According to the indictment, Modi arranged meetings for Ganor with the director of Netanyahu's office, Sharan, while holding public office as Chair of Keren Hayesod, creating a conflict of interest. The conviction has led to a penalty of $13,000 (₪50,000) and a sentence of several months of community service.
2023
  • 14 SepThe state commission of inquiry into the submarine affair published documents related to its ongoing investigation, revealing that Netanyahu was among several people who gave testimony to the panel. The state prosecution has since cleared Netanyahu of involvement.
2024
  • 24 JunThe commission of inquiry investigating the procurement of submarines from Germany sent warning letters to five senior officials whom they believe are the key figures responsible for flawed conduct in the deal. These individuals included Prime Minister Benjamin Netanyahu, former Mossad chief Yossi Cohen, former Minister of Defense Moshe Yaalon, Israel Navy Commander (2011-2016) Admiral Ram Rothberg, National Security Council employee Avner Simchoni. After examining all the evidence, the commission believes upon disclosing its results that various parties may be harmed by the investigation and its results in relation to procurement decision making posing a security risk to the country, harming Israel's foreign relations and economic interests. Therefore the commission of inquiry decided to issue warning notifications intended to provide them with an opportunity to make their case to the commission before it reaches its final conclusions.
  • In the next phase, the five senior officials and their lawyers will present their defense before the commission, addressing the allegations outlined in the warning letters.
  • The trial is far from over; the case is ongoing.

References

References

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  • Note: This case underwent a major rewrite as of July 16th, 2024. For the previous version please refer to: https://web.archive.org/web/20240716095008/https://corruption-tracker.org/case/german-submarine-sales-to-israel

  • Andrew Carey and Mick Krever, “Israel’s former defense minister thinks Netanyahu will be indicted,” CNN (online), July 12, 2017, http://www.cnn.com/2017/07/11/world/israel-amanpour-yaalon-netanyahu/index.html.

  • Anna Ahronheim, “Report: Germany approves sale of 3 more submarines to Israel,” The Jerusalem Post (online), June 30, 2017, http://www.jpost.com/Israel-News/Report-Germany-approves-sale-of-3-more-submarines-to-Israel-498439.

  • Barbara Opall-Rome, “Israel signs MoU for 3 German submarines amid shipyard investigation,” DefenseNews (online), Oct. 23, 2017, https://www.defensenews.com/naval/2017/10/23/israel-signs-mou-for-3-german-submarines-amid-shipyard-investigation.

  • Ben Knight, “What links Benjamin Netanyahu’s corruption probe and ThyssenKrupp?” DeutscheWelle (online), Feb. 14, 2018, https://www.dw.com/en/what-links-benjamin-netanyahus-corruption-probe-and-thyssenkrupp/a-42584927.

  • Gili Cohen, “Submarine Scandal: Germany Postpones Deal Due to Israeli Corruption Probe,” Haaretz (online), July 18, 2017, http://www.haaretz.com/israel-news/1.801881.

  • “Investigators weighed whether questioning PM would hurt submarine deal — report,” The Times of Israel (online), Mar. 1, 2018, https://www.timesofisrael.com/investigators-weighed-whether-questioning-pm-would-hurt-submarine-deal-report.

  • “Israel arrests Netanyahu allies over German submarine deal,” DeutscheWelle (online), July 11, 2017, http://www.dw.com/en/israel-arrests-netanyahu-allies-over-german-submarine-deal/a-39639044.

  • “Israel premier Netanyahu defends German submarine deal,” DeutscheWelle (online), Nov. 20, 2016, http://www.dw.com/en/israel-premier-netanyahu-defends-german-submarine-deal/a-36457114.

  • “Israel Submarine Capabilities,” NTI (website), July 30, 2015, http://www.nti.org/analysis/articles/israel-submarine-capabilities.

  • Morag. “Lazily, with bumps in the road: how is the trial progressing in the "submarine affair"? | Update”, YNet (online), Apr. 29, 2024, https://www.ynet.co.il/news/article/hy0mjbrea

  • “Netanyahu testified in submarine affair, but ‘no suspicions arose’ for probing him” The Times of Israel, (online), SEP. 14, 2023 https://www.timesofisrael.com/submarine-affair-probe-chief-suspicions-never-arose-to-justify-probing-netanyahu/

  • Peter Beaumont, “Israeli police to probe alleged Netanyahu submarine scandal,” The Guardian (online), Nov. 23, 2016, https://www.theguardian.com/world/2016/nov/23/israel-police-to-probe-alleged-netanyahu-submarine-scandal.

  • Raoul Wootliff, “In first, Netanyahu gives testimony in submarines probe,” The Times of Israel (online), Jun. 12, 2018, https://www.timesofisrael.com/in-first-netanyahu-gives-testimony-in-submarines-probe.

  • Yaakov Lappin, “Israeli submarine chief outlines future requirements,” IHS Jane’s Defence Weekly, Mar. 14, 2018, https://web.archive.org/web/20180316041919/http://www.janes.com:80/article/78588/israeli-submarine-chief-outlines-future-requirements

  • Yaniv Kubovich, “Businessman With Ties to Netanyahu’s Lawyer Turns State Witness in Israeli Submarine Scandal,” Haaretz (online), July 21, 2017, http://www.haaretz.com/israel-news/.premium-1.802696.