The Great Gasoline Scam

Fueling Coexistence

by Michal Schwartz

More than a year ago the Israeli Customs Authority discovered four big tanks of gasoline sequestered among the orchards of Israel's coastal plain. According to claims the inspectors made in court, the gas was supposed to have been sold within the areas controlled by the PA. Indeed, the PA had even presented receipts to Israel's Treasury showing that the filling stations in its areas had bought it. And why did the PA present the receipts? The answer has to do with the 1994 Paris Protocol of the Oslo accords. The two sides agreed that there would be no customs barriers at the border between them, and on goods coming from abroad, the same duties would apply. Whenever a Palestinian in the PA areas buys something from beyond them, the commodity either originates in or enters through Israel. The latter collects any taxes due, but it refunds this money to the PA. In effect, it is as if the PA taxed the goods which its people import. In the case of the fuel, therefore, the PA presented the receipts from the gas stations in its areas in order to get the refund due it on the excise tax. There was one awkward detail, however. The customs inspectors raised the suspicion that the PA had indeed collected the refunds, but on receipts for gas that had never left Israel. Just to get this straight: The theory is that the filling station owners in the PA areas ordered (i.e., were instructed to order) more fuel than they actually intended to buy. An owner would request, say, 2400 gallons, though in fact he would receive and pay for 2000, as well as the excise tax on those 2000. (The tax is 7.20 shekels per gallon.) He would get a receipt, however, to the effect that he had paid for 2400 gallons, as well as the excise tax on this larger amount. Such false receipts then served as the basis for the PA's claims on Israel's Treasury. The money went into a bank account (of this more below) to which certain PA officials have access. Other officials need not have known there was anything strange going on.

Israel's Treasury, of course, might look to the company that issued the receipts, asking, "Hey, did it pass on to us that much excise tax?" If the company in question, however, had lots of expenses for which it too had (supposedly) paid taxes – in other words, if it too could present bloated receipts – it could deduct the taxes it had (supposedly) paid from the amount it had (supposedly) collected, i.e., from the amount it was obliged to give the Treasury. At some point, of course, someone would have to have started the chain of phony receipts. But what if that person was in the PA areas, where Israel couldn't get at him? Or what if he was in the PA areas and was precisely a person Israel would not want to get at? Suppose, for example, that he was none other than Jibril Rajoub, the head of the PA's Preventive Security in the West Bank? Suppose that using his own security company, Rajoub provided protective services for gas tankers entering the Territories. Such services, as everyone knows, can be awfully expensive.* As to the fuel that wasn't actually sold in the PA areas (the extra 400 gallons in the example above), this cannot exist merely on paper, if the scam is to work. The distributor must have bought it wholesale. The theory continues: it sits in the tanks in the orchards, until it is sold "under the table" – untaxed – in Israel. The profits from the tax refunds and the black-market sales then get shared among the partners, to the tune so far, say the customs inspectors, of 150 million shekels ($36 million). The false tax refunds alone have been costing Israel's Treasury 100 million shekels per year.( Yediot, op. cit., pp.12, 16.) Much of the above must remain, for now, under the heading of suspicions voiced in court. The investigation is ramified, and it may turn up additional or different combinations. Arrests have been made, people are being questioned. The affair may turn out to be the biggest fraud perpetrated in this land since Jacob tricked Laban. The question remains, however, as to how much the Customs Authority will be able or permitted to prove.

Coexistence, Oslo-style
The details of the story reveal another dimension: An enterprising Israeli tanker driver with a criminal record named Ovadiah Koko made friends one day with Jibril Rajoub. It was one of those beautiful friendships, like that between Rick and the police captain at the end of Casablanca. Rajoub happens to be overlord of the West Bank – get him on your side, and all doors open. Next (in 1994) Koko went to a fledgling Israeli company named Dor Energy and proposed that it become the sole supplier of gasoline to the Territories. Dor was competing against the big old giants, Paz, Delek, and Sonol, which together under the name "Pedesco" had till then been supplying the West Bank (and separately, Gaza). Owned largely (60%) by Shmuel Dankner, one of Israel's leading financial moguls, Dor did not resist temptation. It agreed to let Koko's own tanker company, called Shefer & Levy, have half the profits off this new enterprise. (Globes [Israel's Business Arena in Hebrew], Dec. 24-25.) Many in Israel's business community raised their eyebrows at the Dankner-Koko connection. Despite his past problems with the law, at the time he made his proposal to Dankner, Koko was already doing well. He had risen from a single tanker, which he used to drive, to a fleet of thirty. The Dor deal, though, made him the fastest climber in the land since David the Shepherd Boy. According to a prospectus that the fuel company published when it floated its stocks in London last June, it had paid to a "third party" no less than 56 million shekels of its earnings within fifteen months. (Nathan Lipson in Ha'aretz, June 21.**) This lucky "third party" was Koko (Yediot, p. 12). In addition, his firm somehow got the contract to do all the trucking.

Koko's company has another job too. They are so good at accounting that the PA commissions them (in more senses than one) to take its gas receipts to Israel's Treasury and secure the aforementioned refunds, which they duly deposit in Arafat's once secret account at Bank Leumi on Hashmona'im Street in Tel Aviv. (Yediot, p. 16. On the account, see Challenge # 43.) Except for Arafat and his cronies (including Rajoub and Rashid), no one in the PA – not even its own Treasury – has access to the sums there, which come from Palestinians and are supposed to be spent for the good of all. There is one exception, however: Koko's company has power-of-attorney in the account. How else can the money be properly shared? (David Hayoun in Israel's Business Arena [Globes], Oct. 29.)

Passing Pedesco
Before Koko cut the deal with Dor, Pedesco had the contracts to supply about seventy West Bank filling stations until after the year 2000. In October 1994, one after another, the station owners informed Pedesco that they could not buy from it any more, because Rajoub's men were demanding that they take gas only from Dor. At one point Pedesco's drivers were told at gunpoint – by Rajoub's forces in the West Bank and Muhammad Dahalan's in Gaza – that they were personae non gratae in the Territories. From a source close to one of the fuel companies, we have it that the PA explained to Pedesco: "You're too closely identified with the Occupation." A proud and patriotic statement, indeed – when we recall that in the days of direct Occupation, the concession on a filling station was a special reward that the occupier gave to its bootlickers. Pedesco says it lost millions. The Territories consume (actually) ten million gallons per month. A spokesperson for Paz told Challenge that gas sales there amount to $300 million yearly, a tenth of Israel's consumption. Moreover, Pedesco had rented out a great deal of costly equipment to the owners of the filling stations, and after being ousted it had no way to collect. Its owners went to the High Court, seeking compensation from the State of Israel, but to no avail. The Court did not want to interfere in a matter involving "two ruling authorities".

A Human Touch
The key to Koko's recent success is Jibril Rajoub. According to Yediot ( p. 14), the two spend a great deal of time on the phone together, as well as "tête à tête". One of their favorite spots is the kosher Chinese restaurant on Yarkon Street in Tel Aviv, where their personal table awaits them weekly. On Fridays Koko frolics with Rajoub's children in the mall at Rishon-le-Zion. It is, in short, a heartwarming example of Arab-Israeli coexistence, the sort of thing to which all who dwell in this riven land must surely aspire. A Shin Beth officer told Yediot the tale of how it began. "Koko was in debt to a Palestinian. One day Rajoub arrested him, put him in a Palestinian jail, and told him he would stay there until he paid up. He went on to accuse him of bribery too. Given the hardships associated with such circumstances, many people would have caved in. Not Koko. He slipped off the moccasins that are his trademark, lay back on the bed, and told Rajoub: 'I could use a vacation. Suits me fine.' That was the beginning of a beautiful friendship."

Muhammad Rashid and Yosi Ginnosar
Challenge interviewed a European official who works for the donor nations in the Territories. He says that Koko was not alone in the decision to grant Dor the exclusive concession there. Credit must also go to Yosi Ginossar, who gained notoriety as the head of Shin Beth interrogations in the mid-eighties and later served Prime Minister Yitzhak Rabin, mediating various issues with Yasser Arafat. Ginossar, says our source, went to Muhammad Rashid, who volunteers as economic advisor to Arafat, and recommended that he give preference to Dor. It was also Ginossar, he claims, who made the connection between Koko and Rashid. These assertions receive further backing from an article called "The Man Who Swallowed Gaza" (Ha'aretz, April 4, 1997), which exposed the power of monopolies within the PA. According to this piece, Pedesco asked the State Comptroller to investigate the role in this matter of two senior figures from Israel's security apparatus: Shmuel Goren, former coordinator of activities in the Territories and today the manager of Dor Chemicals, and the same Yosi Ginossar, who had become known by this time as the coordinator of Rashid's business interests in Israel. Ginossar, says the article, had also mediated between the PA and an Israeli company named Nesher Granite, as a result of which Nesher got the monopoly for selling cement to the Territories. After the revelations involving Dor Energy, Israel's Treasury has begun to check Nesher's connection to the PA as well. (Israel's Business Arena, December 24.)

Koko, Rajoub, and the Casino
The areas of cooperation between Ovadiah Koko and the PA branch go beyond gasoline. In a raid on Koko's office, customs inspectors discovered – apart from a cupboard full of liquor, expensive after-shave, cigars, cigarettes, and chocolate – a credit-card processor, as well as credit-card slips amounting to $1.5 million. The cards, it turned out, belong to Israelis who had used them at the casino in Jericho, which is known as Oasis. The connection between Koko's company and the casino is under investigation. The Oasis is presently flourishing. Gambling fever has spread through Israel like fire in a dry field of thorns. Our European source estimates that the turnover is $1.5 million per day. Others put the number of daily visitors between three and five thousand. A fifth of the stocks belong to the PA. Rajoub's forces take time from their great task of protecting the Palestinian people in order to escort Israeli guests from the border of Jericho to the casino. Oasis also boasts an extremely sophisticated security system, planned and operated by former Shin Beth-niks. Thus Rajoub's men guard outside and Israelis within. You can't be too careful, what with all that money floating around. The PA is wary lest a suicide bomber scare off the Israelis, closing this fun place – whose profits flow smoothly to the Arafat account in Tel Aviv.

No one knows whither the Customs investigation will lead. The Pedesco people think Koko will emerge unblemished. As his friends point out, now that Israel has ceded more territory, it needs the PA to keep the peace. Neither Customs nor the police will dare touch Koko on any matter that could embarrass Rajoub, Rashid, or Arafat himself. Although Koko was arrested (and at once released on bail), his friends think he'll land on his feet. "What a country!" says one. "The right hand doesn't know what the left is doing. ... The Shin Beth has been careful for years, I know, that nothing should happen to him, in gratitude for the vital information and help he gives them. I think someone in Customs is going to pay heavily for the decision to let all this out." (Yediot, p. 13.)

Whatever the results of the inquiry, we see here a frightening phenomenon: The PA welcomes former Israeli security agents, who managed the Occupation and perpetrated outrageous crimes against the Palestinian people, to take part in the post-Oslo economy of corruption. The European official quoted above claims that Europe, the US, and Israel all tolerate the PA's Tel Aviv bank account, "because Arafat needs money to buy off Hamas and the other dissidents, and to maintain those who remain loyal to him in Lebanon, Syria and Jordan." Meanwhile, most Palestinians look on in disgust. Far from the gasoline deals and the roulette tables of their nouveau riche officials, poverty and humiliation are breeding rage, and rage must find its outlet.

* For Rajoub's involvement, see Shlomo Abramovich and Mordechai Alon, Yediot Aharonot, Shiv'a Yamim (Weekend Supplement), Nov. 6, p. 16, in two places. Henceforth, Yediot. ** Concerning the stock flotation, Lipson notes that the PA bought several million dollars' worth. If so, this was the first time, apparently, that it has purchased interest in an Israeli company.