Billion Dollar General: Ehud Barak and the Julius Baer Swiss Bank

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Former Israeli Prime Minister Ehud Barak retired for good from politics before his country’s last election in 2013. The move came after he had made a comeback as leader of the Labor Party, serving as defense minister for 6 years under two different Prime Ministers. Since then Barak has concentrated on making money in the world of business.

Panetta has remained a close friend of Barak’s, one of the former prime minister’s few remaining friends, in fact. In his final years in government, Barak’s political weakness discouraged the last of his traditional followers. It was easy to see he had been dead-ended in his last position, as Defense Minister, by the media and—more importantly in Israel’s tiny and intimate society—by a public that had grown to loathe him.

Perhaps those were the reasons for his decision to give up and leave to places where he was still appreciated.

The former world leader’s rebirth began in 2010 at the World Economic Conference of 2012, in Davos, Switzerland. Barak spoke about the threat that Iran poses the world and the audience ate up every word. Then, while speaking again at the traditional dinner held in Davos, Barak surprised many with a liberal message regarding the then social protests in Israel.

A few months later, after his retirement from politics, Julius Baer, the Swiss giant private investment bank, a.k.a. the “Jewish bank, ” offered Barak a position. Julius Baer was, at the time, expanding its presence in Israel

Julius Baer Group’s clientele include the uber-wealthy of the world: heirs, entrepreneurs, senior politicians and celebrities. They are all people who want the discreet services offered by the Swiss system. Having survived the banking crisis of 2008, as well as the U.S. assault on Swiss banks accused of facilitating money laundering, Julius Baer’s clients’ overall holdings stood at the end of June, 2014, at 372 billion Swiss Franks (roughly $387 billion). With its headquarters in Zurich, the bank has some 3, 600 employees in 20 countries, with an extensive presence in East Asia.

The Jewish Baer family, its controlling shareholder, established the bank more than a century ago. They fled to the U.S. during the Holocaust, and over the last decade have been helping Jews who sued Swiss banks to release their dormant accounts from the Holocaust. These accounts total more than a billion dollars.

Alfred Baer founded the Swiss Technion Society and headed it for about thirty years. He was also the leader of Keren Hayesod Switzerland and has donated millions to Jewish organizations around the world.

Barak was appointed special advisor to the management of the Bank and its global CEO, Boris Collardi, in geopolitical issues and macroeconomics. He will help formulate a business strategy. This in spite of not having previously been a businessman.

For this role, Barak has apparently been paid hundreds of thousands of dollars a year. This raised eyebrows among Israelis living in Zurich. Strategic Consulting? Which strategy? Whether the bank is going to capture the oil fields in Iran or intervene in the war in Syria?

Deputy Director General of the bank in Latin American and Israel, Stephen Kemp, admitted: “Barak’s appointment has a fantastic effect for us. When our CEO comes to any event with Barak, to be honest, it is a very big contribution. It definitely helps us in business.”

Investment bankers from around the world who come to Israel looking for great deals are always thrilled to have a chance to meet a celebrity like Barak, a former Israeli Prime Minister, Defense Minister, legendary commander of Sayeret Matkal (The IDF’s most elite special forces unit), and a former IDF Chief of Staff.

Barak, however, did say that he was not supposed to drive customers to the bank, and does not work in Israel.

But the Bank’s business development people have offered a meeting with Barak during conversations conducted with potential customers. “Perhaps you would like to meet for lunch or coffee with Ehud Barak, ” asked one who tried to bring potential clients from Zurich to Tel Aviv, hoping to set up a meeting.

“Did you come to meet Barak and become a new customer of the bank right after?” I asked one of the potential customers. “In the end I announced that I am not interested, ” he answered.

A few years earlier, in early 2008, Julius Baer tried to eliminate the WikiLeaks website, which published documents belonging to the bank that cast suspicions that it had cooperated in the alleged tax evasion by its clients as well as in money laundering.

The Bank has sought a court order in San Francisco to shut down wikileaks.org. But the move backfired, as WikiLeaks released numerous documents on multiple alternative sites.

Ultimately, the Court held that the request to block the site raised “serious questions about prior restraint and a possible violation of the First Amendment.”

It is hard to exaggerate the impact this made on the banking and insurance sectors worldwide. Even the conservative Europeans understood the crucial necessity of up to date, high quality cyber security.

It led to real fears among the world’s bankers regarding threats to their cyber security. This, in part, justified Barak’s hiring.

Ehud Barak was there to help the bank understand these issue. After all, the world has attributed to Israel and the United States the credit for the cyber-attacks on Iran’s nuclear facilities.

The IDF had also defined cyber space as a combat field, just like real land, sea and air zones.

World governments are investing hundreds of billions of dollars in defense of cyberspace, and the numbers are growing by double digits every year.

The Israeli Defense Forces also produce young and experienced experts in the field of cyber security who go on to work in the private sector. These include software developers willing and able to translate their knowledge into the development of systems to protect the infrastructure of banks.

In January 2014, Ehud Barak was appointed to the position of Director of CIFC CORP holding company, which manages structured credit products and assets worth $12.6 billion and provides investment management services and financial advice through subsidiaries. 73% of it was acquired in December 2013 by a subsidiary of Kolombosnovah. This company’s address just happens to be the same as Ehud Barak’s.

CIFC CORP was founded in 2004, employs 75 people and is traded on the NASDAQ with a market value of $ 230 million, as of the end of October 2014. In 2013, its Board of Directors convened only 11 times. In June 2014 the company allotted Barak and each of its directors an additional 5, 854 shares valued at about $8 each. That came to $46, 382 per person. In the past, the Company paid approximately $2, 500 to directors and $50, 000 in annual fees. Not a large sum, by anyone’s measure.

Columbus Nova group, which has been linked to Barak, is controlled by one of the largest conglomerates in Russia, Renova Group. Owned by Viktor Vekselberg, it trades in energy, gold and telecommunications. Vekselberg founded it in 1991 with his friend Len Blavatnik. Blavatnik is known to Israelis, in part, because it acquired Clal Industries. Renova acquired several large aluminum plants in Russia and later merged with the aluminum business of Oleg Deripaska – forming the Rusal group with more than 10 percent of the world aluminum market.

Columbus Nova does not deal only with financial products but is also involved in venture capital and private equity, under the name Columbus Nova Techology Partners. One of the managers there is Yaron Eitan, an Israeli, one of the pioneers of Israel’s high-tech who now lives in New Jersey.

In April this year, by the way, Barak was interviewed by Russian news channel RT and showered unexpected compliments on the Putin regime. The interview caused a stir in Israel and around the world. It was conducted in the offices of “Smrook Kazina, ” a company belonging to the government of Kazakhstan. Barak often travels to that country, and the scope of his business there is unknown.

In April of 2007, Yaron Eitan acquired a company called Cyalume Technologies Inc. for about $120 million. Cyalume specializes in, among other things, light emitting chemical products such as Glow in the dark stick lights for the defense industry. It was involved in the tender of the Ministry of Defense and also operates in Malaysia and Pakistan. Vector SCP Foundation participated. Ehud Barak held about 4.5 percent of Cyalume.

In April 2014 the company issued a prospectus which showed that the owners of the company would offer its shares for sale. Among the shareholders were Catalyst, Winston Churchill, Yaron Eitan Barak—who offered to sell his entire holdings at a rate of some 0.43 percent—and Doron Cohen, who offered to sell about 0.3 percent, from about 0.41 percent holding. Sielum dropped. As of October 30, 2014, its estimated market value was only $1.67 million.

Recently Barak’s name was mentioned as possibly representing investors in the privatization of Israel’s military industry. Then Justice Minister Tzipi Livni criticized this move. Journalist Stella Korin Lieber wrote in Globes that, according to security sources, “The privatization of IMI may turn into a new battleground between Ehud Barak and Gabi Ashkenazi [former IDf Chief of Staff]. This time it is over billions [of dollars] and many multinational jobs. And so their dark secrets are expected to be revealed to the world.”

In the past decade, Israeli Minister Yair Shamir served as chairman of IAI. Three years ago Shamir asked then defense minister Barak to extend his tenure, but Barak refused. Eventually, Shamir decided to enter politics and Joined Avigdor Lieberman’s Yisrael Beiteinu. The bad blood still flows between Shamir and Barak. Shamir, the departing Agriculture Minister, said a few months ago in a closed meeting: “At the time of my appointment in 2005 as Chairman of IAI, Barak met with me. He was then a businessman. He invited me to the office, offered me a drink, even though it was early morning. ‘You and I can do many things together, ’ said Barak.”

Barak also informed Shamir about who wanted to invest in, and even buy IAI. “Let’s cooperate, ” he said. A furious Shamir replied, “You forget who you’re talking to, ” got up and left. Since the two men have only exchanged polite nods to one another, nothing more.

The article was first published in Liberal Magazine 

You can read the full article in Hebrew

 

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