Haunting Netanyahu

Submarine Case Is Haunting Netanyahu at a Critical Time

By ISABEL KERSHNER

Amid a swirl of police investigations and ethics probes enveloping Prime Minister Benjamin Netanyahu of Israel and his inner circle, a budding scandal over contracts for new submarines and other warships appears to be gaining momentum as another potential threat to his political future.

For weeks, the police have been carrying out an inquiry into the circumstances surrounding Israeli contracts with a German shipbuilding company for the purchase of submarines and new missile ships that Mr. Netanyahu championed. His personal lawyer, David Shimron, also represents the Israeli agent for the company, which has led to accusations of a conflict of interest in contracts that involve billions of dollars of business and the shape of Israel’s defense strategy.

Moshe Yaalon, whom Mr. Netanyahu ousted as defense minister last year and who was against adding the new submarines, is reported to have recently given testimony.

Adding gravity to the case, Israel’s Supreme Court has agreed to hear a petition calling for the shipping affair to be the subject of a full criminal investigation. On Wednesday, Mr. Netanyahu filed a 45-page response to the court ahead of a hearing scheduled for March 8. In it, he argued, through a different lawyer, that the petition should be dismissed on grounds it had been brought by “publicity hungry” politicians with ulterior motives who based their claims on questionable press reports and were trying to usurp the attorney general’s authority.

Even as a weakened Mr. Netanyahu has been making concession after concession to far-right politicians on the issue of West Bank settlement in recent weeks in a bid to retain his conservative constituency, some within his coalition see the pileup of cases involving him and his close associates as a political liability. A criminal indictment against him in any of them would most likely force him to resign and prompt early elections.

Mr. Netanyahu, the leader of the conservative Likud Party, who is in his third consecutive term in office, has vehemently denied wrongdoing in all of those cases and has accused the news media and political opponents of a conspiracy to topple his government.

The so-called submarines affair first surfaced more than two months ago, but was quickly overshadowed by two more conspicuous graft investigations. One involved accusations of improper gifts of cigars and pink champagne to the Netanyahu family by a Hollywood producer. The other revolves around taped conversations in which Mr. Netanyahu and a long-hostile Israeli newspaper baron negotiated a deal to benefit the newspaper in return for better coverage for the prime minister. It never came to fruition.

Initially, Israel’s Channel 10 television reported a potential link between the German shipbuilding company, ThyssenKrupp Marine Systems, and Mr. Netanyahu through his personal lawyer, Mr. Shimron.

Soon came more reports of the seemingly strange circumstances surrounding Israeli procurements of other warships. There was the sudden cancellation in 2014 of an international bidding process for the construction of four missile corvettes in favor of the same German shipyard. The ships are meant to protect Israel’s natural gas rigs in the Mediterranean against threats, particularly from Hezbollah, the Lebanese militant organization.

In another twist, the firm subcontracted by ThyssenKrupp Marine Systems to build the four missile boats for Israel is controlled by Privinvest, a holding company registered in Beirut, Lebanon — technically an enemy state of Israel’s. The subcontractor, German Naval Yards Kiel, is listed on Privinvest’s website as a member of its major international shipbuilding group, which has a presence in 40 countries.

Mr. Netanyahu and Mr. Shimron, who is also the prime minister’s second cousin, have denied any impropriety or collusion over the shipping deals.

It is unclear whether Mr. Netanyahu is suspected of any personal misconduct in the case. But his critics say that the deals were made on his watch, and that if he did not know about his lawyer’s involvement, he should have.

One central question is whether Mr. Netanyahu worked to cancel the bidding process for the missile ships. Asked about it in January, his office replied: “Prime Minister Netanyahu’s decision on this matter was based solely on the security of Israel and was recommended by Israel’s defense experts. It was also completely consistent with the law.”

Days later, the office issued a statement that appeared to distance Mr. Netanyahu from the cancellation. Describing the decision-making process in a detailed timeline, the office attributed the decision to the Foreign Ministry, the Defense Ministry and the navy after the German government offered a 27.5 percent discount.

Mr. Shimron confirmed that he represented Michael Ganor, the Israeli agent of ThyssenKrupp Marine Systems, and has represented Mr. Ganor “in certain aspects of an agreement” related to Mr. Ganor’s consultancy for the German company.

Declining to provide details of his role in specific deals, Mr. Shimron added: “Our relationship is governed by a client/attorney relationship. Therefore, all information regarding my relationship with Mr. Ganor is privileged under law.”

Mr. Shimron said that as Mr. Ganor’s lawyer he had “no business in looking into the subcontract” for the corvettes, and both he and the prime minister’s office said inquiries about any Lebanese connection to the contract should be directed to the Israeli Defense Ministry.

The Defense Ministry refused to comment. But in a statement to the Yedioth Ahronoth newspaper in December, it said the contract had been signed “with a German company, with the direct involvement of the German government — which even funds a third of the deal.”

The ministry added: “Ahead of the deal signing, the director of security of the defense establishment checked with German government officials to ensure no classified information from the project is given to unauthorized bodies. It is important to note that the German shipyard only builds the hull of the warships, with the rest of the systems being installed in Israel.”

German Naval Shipyards Kiel said that it was contributing to the engineering and construction of the warships, and that it was in contact with the Israeli side only through ThyssenKrupp.

Privinvest declined to comment.

The petition that is now before the Supreme Court was filed by Erel Margalit, an opposition member of the Knesset, or Israeli parliament, who is running for leadership of the center-left Labor Party, and by Eldad Yaniv, a left-leaning political and social activist. By now, about 26,000 Israeli citizens have signed the petition online at a site founded by Mr. Margalit and Mr. Yaniv called bbwanted.co.il.

Mr. Margalit, a member of the parliamentary committee that approves budgets for military acquisitions, was a technology entrepreneur before he entered politics.

“I am used to hearing about big deals,” he said in a recent interview in his office at the Knesset. “I developed an ear for listening for when things add up and when they don’t.”

He said the shipping deals sounded “very fishy,” so he traveled to Germany in December to do what he called some “due diligence.” On his return, he sent a letter to the attorney general. In it, he detailed the Lebanese connection to the contract. And he asserted that another Privinvest group member, Abu Dhabi Mar, had changed its name to German Naval Yards Kiel in 2015, while the deal with Israel was being formulated, under pressure from three prominent Israelis who wanted to obscure the company’s Arab ownership.

Days after the letter was sent, he said, the Israeli police raided the Defense Ministry, possibly in search of material about the canceled bidding process.

“I would rather beat Netanyahu in democratic elections,” Mr. Margalit said. “But this is not about ice cream,” he added, referring to a 2013 uproar about the Netanyahus’ substantial ice cream budget paid from state coffers. “This is about the security of the country.”