Barak Attempts to Limit Fallout From Scandal

Israeli Prime Minister Ehud Barak struggled Sunday to staunch the political damage flowing from a campaign fund-raising scandal that could result in criminal charges against some of his closest aides.

Barak undertook a reinvigorated diplomatic drive, launching “marathon” talks with the Palestinians and flying off to Cairo to meet with Egyptian President Hosni Mubarak, while in Israel newspapers published interviews in which he assured the public that he is still a reliable leader.

“You could squeeze all the people in Israel who think I ever lied to them into a phone booth,” he told the top-selling Yediot Aharonot in Sunday’s editions.

But numerous analysts and commentators--and many people within Barak’s own government--are skeptical and deeply disillusioned. Barak’s credibility, they say, has been greatly damaged at a time he most needed it: when he must appear strong before Arab adversaries with whom he is negotiating peace, and honest before Israelis who must believe in the peace he negotiates.

Barak embarked on a vigorous defense after initially fumbling. When the state comptroller released a scathing report Thursday accusing Barak’s party of systematic abuse of campaign financing laws, Barak replied by saying that he had been too busy as a candidate to focus on fund-raising.

Opponents and supporters alike said he seemed to be attempting to dodge blame. The response was, as one commentator put it, “not the leader Barak that the public came to know.” Barak is now attempting to fine-tune his explanations, accepting “public responsibility” and conceding he had “general knowledge” but not a detailed familiarity with the campaign practices in question.

“Our people believe their activity was completely within the confines of the law,” he told Yediot Aharonot.

The state audit found that the One Israel coalition, led by Barak’s Labor Party, used “nonprofit” foundations to illegally channel millions of dollars, most of it from foreign donors, to bankroll Barak’s landslide victory in May.

It is illegal for foreigners to donate money to political parties, and there are low caps on donations that Israelis may make. But foreigners and Israelis can give unlimited money to nonprofit organizations that, ostensibly, are charities or do nonpartisan civic work. The controls on where that money ends up can be lax.

Barak’s campaign associates have insisted that they were operating under a “loophole” created because the financing laws predate the current hybrid system that includes the direct election of a prime minister. They say the prohibitions apply to party funding, not money for a prime ministerial candidate.

The state comptroller rejected the argument out of hand and fined One Israel/Labor about $3.2 million. The party said Sunday that it would appeal the fine on the grounds that it was far too high.

It also was reported Sunday that Yitzhak Herzog, Barak’s Cabinet secretary and a veteran Labor insider who engineered much of the fund-raising, might be suspended from his post pending investigation. Herzog was one of several key Barak aides singled out by the comptroller. He has denied any wrongdoing.

It was Barak’s credibility and integrity, after what many perceived as the deceitful government of former Prime Minister Benjamin Netanyahu, that appealed to so many voters. Losing any measure of that deprives Barak of a valuable asset as he pushes for a historic breakthrough in negotiations with Syria, Israel’s most implacable Arab foe, and the Palestinians.

On Sunday, some of Barak’s closest supporters were among the most disappointed and, in the words of one, “insulted” by Barak’s handling of the scandal. For those who worked for Barak’s election as a mission to rid the country of Netanyahu and put Israel more firmly on the road to peace, there was a sense of dread that the latter goal now will be sidelined, if not lost altogether.

“Barak has become not a lame duck but rather a roasted one, whose credibility and authority have been burned overnight,” Baruch Kimmerling, a well-known leftist social critic, wrote in the Haaretz newspaper Sunday.

“If anything sweet is to come from this humble pie, it [is] the creation of a rare opportunity to carry out some much-needed reforms in our political framework, before the public loses all confidence in it and it loses its ability to function,” he added.

In Cairo, meanwhile, Barak conferred with Mubarak for about an hour and a half at Mubarak’s Ittihadiya Palace. The two emerged afterward and appeared relaxed.

“I am strongly determined to make sure that the golden opportunity we are facing, both on the Palestinian track and the Syrian and Lebanese track as well, will not be lost,” Barak said at a news conference.

A week earlier, Mubarak had paid a surprise visit to Syrian President Hafez Assad in Damascus, the Syrian capital, and it seemed likely that the meeting with Barak was an opportunity for him to impart his impressions of Assad’s current thinking. Mubarak also frequently meets with Yasser Arafat, and he and Barak may have talked about an upcoming summit between Barak and the Palestinian Authority president.

*

Times staff writer John Daniszewski in Cairo contributed to this report.