Reparations As Fraud

In September 1952, West Germany signed an agreement with the State of Israel and Jewish organizations that began reparations payments by Bonn that eventually totaled billions of dollars. The Luxembourg Reparations Agreement, with an initial budget of $715 million for Israel, was rocky from the start as West Germany repeatedly threatened to stop the money flow. The German funds also created an Israeli nouveau riche that worked with a corrupt government of Prime Minister David Ben-Gurion, who overlooked the neo-Nazi government of Chancellor Konrad Adenauer and blocked missions to capture major Nazi war criminals.

From "Robbing the Victims"

From the start, Ben-Gurion made sure that reparations went to his people in Mapai. His friends became rich by becoming sole importers of German goods at the expense of Holocaust survivors. In 1955, a magazine published by Mapai dissidents provided details of the corruption. In two editions, Shurat Hamitnadvim, or Volunteer Line, disclosed that the Jewish Agency had received millions of marks from a German state-sponsored organization, IRSO, established to relay assets or compensation as part of reparations to Israel. Rather than help Holocaust survivors, the agency decided to invest the German compensation in Israel’s tourism industry. The agency oversaw the purchases of equipment used in hotels, including tablecloths, bed sheets and food trays.

Shurat reported that the Jewish Agency had handed over the tourism venture to four Israeli businessmen. They had worked out a scam in which German suppliers would charge at least 25 percent above the market price. The Israelis, who actually paid the regular price, would submit the overcharge to the agency. Israeli police launched an investigation and even sent officers to Germany to gather evidence.

Suddenly, the probe was shut down. It had reached dangerously close to Ben-Gurion. One of the targets of the investigation was Yeshayahu Yarkoni, a friend and business partner of Amos Ben-Gurion, the son of the prime minister and deputy chief of the national police force. Amos, also accused of being wined and dined by another wealthy businessman, was said to have been influential in closing the police investigation against Yarkoni, the husband of Israel’s songstress, Yaffa Yarkoni.83 Amos sued Shurat for libel.

On the first day of the libel trial, police commander Yehezkiel Sahar appeared on the stand. Sahar was deemed Amos’ chief witness, and he sought to intimidate the judges. The police chief said the trial was that of the “regime and the police.” Throughout his testimony, he obfuscated. He denied that Yarkoni had been under investigation, but refused to allow the judges to see the file. Amos’ attorney, Michael Caspi, claimed that the police file was a state secret. The judges agreed, but Shurat appealed to the High Court. The High Court ordered the opening of the police file in camera and indeed Yarkoni was listed as a suspect. The police chief had lied to the court and was asked to reappear. Sahar now admitted to making a mistake in his testimony. He said that he had not been feeling well on the day of his first appearance on the witness stand.

The three trial judges were sympathetic to the perjured Sahar. Their treatment of the Shurat defendants was nothing short of brutal. They demanded that one of the authors of the report, Elyakim Haetzni, disclose his sources. When Haetzni refused, the judges sent him to 10 days in prison for contempt of court. It was clear that the judges were under pressure from Ben-Gurion himself, who hovered over the trial proceedings.84 But the prime minister could not quell an outraged public, and in 1959 Sahar was forced to resign. In January 1961, the ex-police chief was found guilty of perjury and given a suspended sentence.

The questions asked by Shurat echoed for decades. Holocaust survivors demanded an accounting of the German money. They also wanted the Israeli government to invest and manage the hundreds of millions of dollars so that their monthly checks could continue even if Bonn suspended reparations. The government did neither. Despite threats of lawsuits, the government never provided a genuine accounting of the reparations. The survivors were also denied basic stipends as they reached old age. Their demands for direct payment from Germany were ignored.

Ben-Gurion tried to placate the survivors by symbolic gestures, including official recognition as well as the establishment of Holocaust Remembrance Day. Years later, he admitted that the politicians and their friends were among the chief beneficiaries of the German deal. In Ben-Gurion’s words, “Until 1965, the Israeli government received $822 million on account of the reparations. And even the members of political parties that opposed the reparations enjoyed with great willingness the goods of the reparations.”85

It took decades until Israel shed light on reparations. In August 2007, Israel’s state comptroller determined “grave deficiencies in the treatment of Holocaust survivors,” which sparked a commission of inquiry led by a former Supreme Court justice. A year later, the commission confirmed the findings of the comptroller and recommended that Israeli allocations to the survivors be increased to a level of 75 percent of that paid by Germany. The Knesset passed a law meant to increase payment to survivors as well as to the elderly.

The survivors waited in vain. Nearly a decade later, the few survivors and their families found out why. In 2016, under heavy international pressure, the Israeli Social Welfare Ministry admitted that more than 400 million Israeli shekels, or $100 million, never reached the survivors. The Social Welfare Ministry said the Finance Ministry had concealed information on the community of survivors, reported at 194,468. Finance wouldn’t share the data with others in the government on the pretext that this would violate the privacy of the survivors.86

Eventually, the countries that provided money to Holocaust survivors also sought answers from the Israeli government and state-supported institutions. In 2012, Hungary demanded the return of $21 million that it had deposited for survivors in Israel. Five years after the agreement, Budapest concluded that it was being stone-walled by the Claims Conference. The Hungarian government said it never received documents to show that the money had reached the survivors.87

The reparations agreement in the 1950s did exactly the same as Haavara 20 years earlier. The reparations accord made Israel into an apologist for West Germany. This was a new Germany, Ben-Gurion insisted, and those who thought differently would be dealt with. Sharett, now foreign minister, said the Israeli people would be forced to accept Germany. “We have to educate this people, that earned a state, to be a state-like people and not a Galut people,” Sharett said. “They must know that they have a country on earth, and on this same earth there is a country called Germany. This can’t be prevented, either by eliminating the state or transferring this country to another planet. This truth must be brutally rammed into the heads of these people.”88

Below: The first page of the 1952 Luxembourg Reparations Agreement.