CHAPTER 3. ORGANIZED CRIME AND THE STATE OF ISRAEL
STATE-BUILDING
In its July, 1971 obituary for Samuel Bronfman, the New York Times wrote that, after World War II, the liquor baron had “helped finance a secret purchase of Canadian weapons for troops of the Haganah.”1 Additional details on Bronfman’s role in that purchase, beyond its brief mention by the Times, are rather difficult to come by. Peter Newman, in his otherwise exhaustive The Bronfman Dynasty, writes that Sam “personally underwrote life insurance policies for Canadian pilots recruited to help Israel fight its 1948 war of independence.”2 However, it is also known that, a few years after Israel’s creation, in 1951, Bronfman would play a leading role in a similar, “secret purchase” for the Haganah’s successor, the Israel Defense Force (IDF). In that case, Bronfman specifically answered the call of Israel’s Shimon Peres, taking Peres to Ottawa, Canada to negotiate the transfer for $2 million worth of weapons to Israel. Bronfman then raised funds to cover the entire cost of the sizable arms cache.3
Yet, aside from that little is known of his earlier role in arming Zionist paramilitaries prior to Israel’s founding. As Newman noted, Bronfman preferred to remain tight-lipped on “Zionist matters,” despite his position as head of the Canadian Jewish Congress – an example of the family’s characteristic “quiet manipulation.” Regardless of the exact nature of Bronfman’s activities in this area, his connection to the Haganah was not unique for those in his social circles. Yet, even outside of Bronfman’s contacts, efforts to aid the Zionist paramilitary group, which would later form the backbone of the IDF, were already indicative of a wider tendency in pro-Zionist activism that swept across Canada, America, Latin America and beyond during the late 1940s.
What was at stake was the creation of Israel itself, as a sovereign political entity independent of the British, who, until 1948, had controlled Mandatory Palestine in accordance with treaties set up at the end of World War I. When the British Mandate ended in May 1958, Israel declared itself independent, and immediately entered into conflict with the Palestinians and a coalition of Arab forces. Those fighting to create Israel were able to assert themselves so forcefully largely because of the careful groundwork that had been laid out in advance by a number of individuals and groups, many of them working in the shadows.
Such was the historical mission of the Haganah (“Defense”), an organized Zionist paramilitary network that had been set up by the Jewish Agency – an activist branch of the World Zionist Organization (WZO). The Jewish Agency, under the leadership of David Ben-Gurion, oversaw the creation of numerous towns, villages, communal outposts and defense groups in Mandatory Palestine. The Jewish Agency would later atrophy, only to be relaunched by one of Leslie Wexner’s mentors, Max Fisher, in 1970.
The formation of the Haganah in 1920 was a major step forward towards the formation of the Israeli state. Vital to its functioning was the training and arms provided by the British military. Major General Orde Charles Wingate, who had been dispatched to help administer British control over the territories, worked closely with the Haganah. Wingate even organized joint British Army-Zionist paramilitary commando units dedicated to patrolling and suppressing Arab elements in the region. These were called the Special Night Squads.
In 1945, the Haganah began its effort to stockpile weapons, ammunition, aircraft, non-lethal supplies, and machine tools sourced from around the globe. In the US, Ben-Gurion reached out to a close associate, Zionist activist Rudolf Sonneborn, who had traveled to Palestine years earlier to survey the construction of Jewish villages on behalf of the World Zionist Organization.4 Under the leadership of Sonneborn, eighteen or so Jewish millionaires and billionaires were recruited into bankrolling the supply effort. Thus, the Sonneborn Institute, as it was known, was born.
The Institute, an activist collaboration of Zionist millionaires and billionaires that pursued specific, Zionism-related causes, would later serve as sort of a model for the “Mega Group,” founded years later by Leslie Wexner and Charles Bronfman in 1991. The Sonneborn Institute’s chief asset was a Haganah operative named Yehuda Arazi. During World War II, he served as a soldier in the Jewish Brigade, a British army unit that recruited its fighters from the immigrant populations living in Mandatory Palestine. By 1945, he was an old hand at gunrunning. Indeed, Arazi “had been active smuggling arms for the Haganah into Palestine from Europe since 1938.”5 Through these efforts, he developed an impressive roster of contacts, many of whom were tapped to set up front companies through which the Sonneborn Institute and the Haganah could carry out their activities. Ricky-Dale Calhoun wrote that:
[One] Arazi associate was Leonard Weisman, who was probably a member of the Sonneborn group. Weisman was a 34-year-old from Pittsburgh who had made a fortune in scrap metals and construction materials. His businesses included Materials Redistribution Company, a firm that dealt in scrap machinery; Paragon Design and Development Corporation, a company that traded in building materials; and Pratt Steamship Lines. A fourth Weisman company, Foundry Associates, Inc., existed only on paper. All assisted in the purchase and illegal export of arms from the United States.”6
Other front companies were organized by Nahum Bernstein, an attorney in New York City, that were used to source weapons and/or construct them from spare parts, and then export them overseas. Bernstein’s name can be found on the corporate registrations of firms like Machinery Processing and Converting Company, which “provided cover for the purchase and illegal export of armsmaking machines as well as armaments,” and Oved Trading Company, which supplied “legal cover for buying and transporting explosives.”7
There was also a trio of interlaced companies: Materials for Palestine, Inland Machinery and Metal Company, and the Eastern Development Company. Materials for Palestine was a charity through which money could be raised, while Inland Machinery actively shipped armaments and lethal munitions. Eastern Development, meanwhile, “exported legal nonmilitary goods and machinery to Palestine as relief supplies.” There is a possibility that Paul Helliwell, discussed in Chapter 1, had some connection to this company, as he was listed as the attorney for the similarly named Eastern Development Corporation. According to a 1951 article in the Miami News, this Eastern Development was doing business in Florida, but had been formed in Pittsburgh.8 As mentioned above, Leonard Weisman, the probable Sonneborn group member who worked with Arazi to create fronts for arms exporting, was also from Pittsburgh.
The potential presence of Helliwell in this mesh leads naturally to another question: was organized crime also involved in these efforts? Unlike the mysteries around Eastern Development, the role of organized crime in covertly arming the Haganah is well-documented. As these un-official arms trade networks spread across the US, gangsters and mobsters – many of whom actively identified with the Zionist cause – threw their hats into the ring. Early on, Arazi forged ties with Meyer Lansky, requesting aid in maritime transit for the arms. Lansky, in turn, contacted two of his associates who controlled New York City’s docks and the long-shoremen’s union, Albert Anastasia and Joe Adonis. The trio then “helped Israeli agents conceal the arms purchased for Israel, while arms bound for Egypt mysteriously fell overboard.”9 Lansky’s close associate, Bugsy Siegel, met with Reuven Dafne, a representative of the Haganah looking to raise funds. Dafne, as the story goes, told Siegel that the Zionists were looking to unshackle themselves from British rule and that the path to do this was to fight. Siegel told Dafne “I’m with you,” and for several weeks afterwards, the Haganah would receive suitcases “filled with $5 and $10 dollar bills – $50,000 in all.”10
Besides Lansky, one of the more active mobsters in the flow of arms was Joseph “Bayonne Joe” Zicarelli. According to files obtained from the Federal Bureau of Narcotics, Zicarelli was “alleged to have been involved in the traffic of arms and munitions sold to the government of Israel.”11 It was one of many destinations for Zicarelli’s arms: he also brokered arms sales to Cuba, Mexico, Venezuela, the Dominican Republic, and Nicaragua. The latter, as will be discussed shortly, was also active in the acquisition of arms for Israel. Zicarelli was close to Carmine Galante, a key player in the Bonanno mafia family, who would later become one of Roy Cohn’s main clients from the criminal underworld. Allegedly, Zicarelli had been the subject of a feud between Charles Tourine of the Genovese family and Galante, with each wanting to recruit him into their crime family.12 Galante won out, and it was under his watch that Zicarelli’s lucrative arms trade flourished. At one point in the 1950s, Zicarelli was dispatched to Montreal by Galante to work with the Canadian mobster Vincenzo Cotroni. Together, Zicarelli and Cotroni organized the import of large sums of heroin into the country, as part of the Canadian wing of the French Connection.
Zicarelli was also alleged to be a close business associate of Lewis Rosenstiel. Rosenstiel’s fourth wife Susan Kaufman testified that Zicarelli had been a secret partner New Jersey warehouses owned by Schenley Industries, Rosenstiel’s company. She furthered alleged that Rosenstiel had meetings with Zicarelli and Meyer Lansky.13 The connection to Schenley signals Zicarelli’s penchant for involving himself in quasi-legitimate businesses that acted as both “above-board” profit-turners and as fronts for less-than-reputable activities. Another one of these businesses was ABCO Vending, a cigarette vending machine company that was controlled by Zicarelli and Galante. Joining them there was Irwin “Steve” Schwartz, who later became infamous in the 1970s for his involvement in costly stock manipulation schemes. FBN files describe Schwartz as representing “the Galante-Zicarelli interests in the arms traffic, promotion and sale of worthless stocks and securities, and the cigarette vending business,” before adding that “Since 1946 Schwartz has been engaged in the traffic of arms, a good portion of which have been obtained from Communist Bloc nations and shipped first to Israel and later to Cuba. Associated with Schwartz in these ventures were Irving Schindler and Adolf Schwimmer.”14
Adolph “Al” Schwimmer was the founder of Israel Aircraft Industries, one of the country’s great military contractors known today as Israel Aerospace Industries (IAI). During the 1930s, he worked for Lockheed and TWA, and, after World War II broke out, he was affiliated in some capacity with the US Air Transport Command. Schwimmer would remain active down through the decades, with a tendency to crop up in various Cold War-era covert operations. Perhaps most notoriously, he emerged as a key player on the Israeli side of the Iran-Contra Affair, and by some accounts was the individual who conceived of the “arms-for-hostages” plot at the center of Oliver North’s complicated web. As for IAI, it would become owned, years later, by Israel’s richest man Shaul Eisenberg. Under Eisenberg, IAI would have close ties to Israeli intelligence, from which he drew most of the company’s senior staff.15
In his work securing materials for the Haganah, Schwimmer worked closely with Irvin “Swifty” Schindler. Schindler owned an airfreight company called Service Air, which Schwimmer relocated to California with funds from the Haganah. Together, Schwimmer and Schindler utilized the company as a means of acquiring aircraft and aircraft parts to be shipped to Palestine. Yet, with an embargo in place due to President Truman’s declaration of neutrality, Service Air was prohibited from sending them overseas. Schwimmer and Schindler, aided by Arazi, turned to the Haganah’s contacts in Panama. Soon, “legal ownership of the airplanes was transferred to the newly established Panamanian national airline LAPSA, allowing the aircraft to be legally flown to Panama” and from there they were moved abroad.16
In Chapter 7, which details the Iran-Contra Affair, Israel’s close-knit relationship with Panama is mentioned in greater detail. Yet, the origins of this relationship began here, with the efforts of the Haganah to arm Zionist forces in Palestine following World War II. It wasn’t, however, the only country in that region to have similar connections to Israel. Many of the people discussed in this chapter, like Bayonne Joe Zicarelli, were actively working with anti-communist forces in the Dominican Republic, Cuba, and elsewhere at the same time that they were working with the Haganah. One particularly important anti-communist force that was collaborating with the Haganah was the Somoza regime in Nicaragua.
The special relationship between the Zionist cause and Somoza’s Nicaragua was largely due to the heavy presence of United Fruit, the New York-Boston banana trading company whose influence in Latin America was to be fundamentally intertwined with the CIA’s activities in the region.17 In 1933, United Fruit had fallen under the control of Samuel Zemurray, whose Cuyamael Fruit Company – a favorite of top Wall Street firms like Lehman and Goldman Sachs – had merged with the company several years prior. Zemurray, during the 1940s, was a big backer of Zionist causes. He aided the supply of arms to the Haganah, and reportedly helped the organization acquire the SS Exodus, a steamship used to ferry refuges to Palestine, in 1946. United Fruit, which later became United Brands, is discussed throughout this book due to its persisting intelligence connections as well as the fact its main leadership later included members of Leslie Wexner’s inner circle and his two main mentors, Max Fisher and A. Alfred Taubman.
By 1947, as Truman’s embargo began to be enforced, Nicaragua started providing arms to the Haganah. Somoza reportedly profited directly from this venture: he “received 3.5. percent commission on all arms purchases made by the Haganah under Nicaraguan aegis.”18 A decade later, Israel returned the favor when Shimon Peres negotiated an arms deal with Somoza that transformed Israel’s emergent military-industrial complex into the primary supplier of weapons for Nicaragua.19 As will be discussed in Chapter 7, Israel was active in arming and training the Nicaraguan Contras, the US-backed paramilitary forces that opposed the Sandinista government, which had toppled the Somoza regime in the late 1970s. The entry of Israel into this conflict was guaranteed by this precise history – and the Reagan administration, as part of its propaganda campaign, was quick to paint the new, Sandinista-led government as violently anti-Semitic.
The relationship between the Haganah and Latin America wasn’t solely dependent upon the graces of Zemurray and United Fruit. Reportedly, Haganah officers called upon the services of Sam Kay, a Florida businessman and real estate developer, who had extensive contacts in Panama, Batista’s Cuba, and elsewhere. FBI files describe Kay as a “reputed international gangster,” and one of his close business associates was the Miami Beach hotel impresario Morris Lansburgh, who was himself a frontman for Meyer Lansky. Kay would later be linked to Florida mob boss Santo Trafficante, though the two were purported to have had a falling out that would almost cost Kay his life.
It was at this point where the Zionist interests melded with organized crime’s real estate ventures, casino operations, and slush funds at the door of the Caribbean. Soon, these connections would truly begin to sprawl outwards and become truly intercontinental in scope.
THE HOT MONEY WEB
During the Second World War,” writes Jim Hougan, Tibor Rosenbaum “became a hero for the resistance through his activities on behalf of the Jews. Using ‘Istvan Lukacs’ as a nom de guerre, he carried out a series of Mission Impossible rescues. In one instance he posed as a high-ranking Nazi officer, entered a concentration camp, and under ‘administrative pretext’ obtained the release of thirty doomed prisoners.”20 His subsequent activities, however, were less than heroic.
With high-level connections secured through his position as a delegate for the World Zionist Congress, Rosenbaum set up his Geneva bank, International Credit Bank (ICB). ICB regularly moved money for Mossad and for Israel’s Ministry of Defense. The British Sunday Times later reported in 1975 that “as much as [90%] of the Israeli Defense Ministry’s external budget flowed … through Rosenbaum’s bank.”21 It also moved money for organized crime. In 1967, an expose in LIFE magazine fingered ICB as the recipient of large sums of money skimmed off by the mob from the casinos they owned in Las Vegas, the Caribbean, and elsewhere.22
Overseeing the complex chains of inter-bank relations and transfer chains that enabled this “hot money” to flow around the globe was a series of banking institutions controlled by Meyer Lansky frontmen. The set-up was essentially as follows: casino skim (as well as profits generated by the drug trade and other organized crime rackets) was moved into two key offshore banks, the Bank of World Commerce (BWC) and Atlas Bank, the latter of which was a subsidiary of Rosenbaum’s ICB. The funds would then be moved to accounts held by ICB in Geneva, where they would be converted into loans and investments to complete the money laundering loop. As will be discussed shortly, some of these funds may have been used to finance real estate investments that were made by people connected to American and Israeli intelligence.
The organizer of Atlas, on behalf of ICB, was Sylvain Ferdmann. The expose in LIFE described Ferdmann as a “Swiss citizen who is an international banker and economist,” before adding that “US authorities have marked Ferdmann a fugitive … accused of interfering with the federal inquiry into the skimming racket.”23 Working alongside Ferdmann and Rosenbaum was a coterie of Lansky’s closest allies. Sitting on the board of ICB itself was Ed Levinson and John Pullman. Levinson, who was partnered with Lansky in the Miami International Airport Hotel, ran the “mob-controlled Fremont Hotel-Casino in Las Vegas.”24 Levinson was also tight with Clifford Jones, the lieutenant governor of Nevada between 1947 and 1954 who was also an alleged associate of Meyer Lansky.25
Sitting alongside Levinson on the ICB board was John Pullman, Lansky’s personal financial advisor. Pullman was also close to Lou Chesler, having becoming acquainted with the Canadian businessman in the 1940s. He subsequently introduced Chesler into Lanksy’s orbit. Soon, Chesler began managing Lansky’s interests in the Bahamas – including the development of hotels and casinos. At the same time, Pullman was organizing the Bank of World Commerce, the partner bank to Atlas Bank and correspondent bank to ICB.
Levinson and Pullman also sat on the board of BWC. An IRS report aptly described this bank as having been set up to maintain “a liquid supply of funds to be used for setting up new gambling casinos in the Caribbean wherever and whenever the opportunity presents itself.”26 They were joined on the board by Benjamin Siegelbaum, a money courier for Lansky and a prominent figure in organized crime circles in his own right. Besides BWC, Siegelbaum held posts at the Exchange and Investment Bank, a sort of Geneva-based counterpart bank to Rosenbaum’s ICB. R.T. Naylor, in his book Hot Money and the Politics of Debt, writes that, for a time, Exchange and Investment Bank was Lansky’s preferred financial institution – at least until his role in the bank was accidentally exposed by Chase Manhattan. This occurred after the bank found two of their employees using accounts there to spirit away embezzled funds. It was at this point that Lansky shifted the bulk of his business to Rosenbaum’s bank.
Aside from Geneva banking, Siegelbaum also dabbled in Florida real estate. His money backed one of the state’s large landowners, Major Realty, which had been co-founded in part by a Florida entrepreneur named Max Orovitz. Orovitz was, as Jonathan Marshall points out, “a legitimate businessman and an honored Jewish philanthropist, but no stranger to criminals.”27 He was partnered with Lou Chesler in both Florida real estate (albeit via Chesler’s General Development Company, not Major Realty) and in development projects in the Bahamas that ultimately spawned Resorts International, which was previously Mary Carter Paint and had been linked to both the mob, to former New York governor Thomas Dewey and to Paul Helliwell’s Castle Bank.
Orovitz was part of what was known as the “Miami Group” – a circle of organized crime-linked Jewish businessmen with holdings across various economic sectors in Florida and in Israel. Members of the Miami Group established Dan Hotels, a luxury hotel chain with locations in Israel and India, and also set up “Israel’s first successful oil drilling company, Israel Oil Ventures.”28 Israel Oil Ventures expanded its capacities considerably in 1960, when it purchased Israel-American Oil Corp – an oil venture that was intimately tied to organized crime via its holding in another oil firm, Rimrock Tidelands. A subsidiary of Rimrock Tidelands, Rimrock International, was of interest to a Senate investigation into “international narcotics traffic.” This was because Rimrock International’s managing director was Santo Sorge, who was described in the Senate report as “one of the most important Mafia leaders” and a liaison between American and Sicilian mafia clans.29
Compared to its fellow dark money conduits, Atlas Bank – later renamed the “Atlas Trust” – is something of a mystery. It not only sat at the intersection of Geneva-bound money flows, but was also tied to hot money from the Middle East. According to Alan Block, Atlas “was united in some shadowy way with Intra Bank in Beirut, Lebanon,” which maintained its own offshore entity in the Bahamas called Intra Bahamas Trust Ltd.30
Intra Bank was formed in 1951 by Yousef Beidas, a Christian Palestinian refugee who had been born into a prominent banking family. Just over a decade later, what began as a modest operation ballooned into a sprawling empire, at which point Beidas forged agreements with leading American banks. These included Bank of America and Chase Manhattan, and Beidas then placed branches of Intra Bank in the world’s important hotspots for hot money: London, Geneva, and the Caribbean. At home, in Lebanon, Intra held “20% of the country’s total deposits” and “56[%] of all the country’s banking assets.”31 There was also a deep relationship between Intra Bank and illicit activities of all types. As Jonathan Marshall notes:
Smugglers of all sorts availed themselves of Intra Bank’s services. It was a prime depository for many of the world’s leading arms traffickers, who received financing from Lebanese traders for illegal weapons sales in the Southern Arabian peninsula (Yemen and Aden), Cyprus, Sudan, Nigeria, Rhodesia, South Africa, and Kurdish communities in the Middle East. Wealthy Arabs with too many petrodollars on their hands, looking for a savvy bank in the region to look after their wealth, fattened its deposits further.… Lebanon was prized as a “haven for cash for anybody with a balance to hide – U.S. tax evaders, oil-rich sheiks who want to lay something by for the rainy day of revolution, and assorted racketeers and purveyors of stolen or smuggled wealth from all over the world,” observed LIFE magazine in 1967.32
Naturally, this sort of environment made Intra Bank an attractive financial institution for the CIA, and the bank helped transform Beirut into a core hub for the Agency’s covert operations in the Middle East. Marshall reports that Beidas in particular had a “personal touch” when it came to dealing with the CIA – he was even seen “taking CIA officers into his private office to handle their checks.”33 Sitting on the board of directors of Intra Bank was Kamal Adham, the head of Saudi intelligence and a cousin of the infamous arms dealer Adnan Khashoggi – a later key player in Iran-Contra, the BCCI affair, and numerous other covert activities. According to the Congressional BCCI Report, Adnan “was the CIA’s principle liaison for the entire Middle East from the mid-1960s through 1979.”34
Intra Bank was identified by American law enforcement as being a major laundromat and source of funding for the global drug trade, a sizable portion of which was based in Lebanon. This was thanks to the country’s position as a key node in the famed French Connection, as Lebanon was a major source of hashish, raw opium, and even refined heroin that was destined for black markets in Europe and North America.
This node of the international drug trade was largely controlled by Sami Khoury and his partner, Omar Makkouk. They had forged close ties to the Lebanese political establishment and law enforcement community, generating an atmosphere of generalized corruption that gained Khoury the nickname of “the Untouchable.” Khoury’s ties soon expanded overseas. According to a CIA report, Corsican organized crime figures allied with Khoury had made inroads into “the highest levels of French government, industry and society, including the cabinet, police, and military.”35
Khoury also enjoyed protection from Israel. James Attie, an agent of the Federal Bureau of Narcotics (FBN) assigned to the Middle East, reported that the drug lord had provided thousands of guns to Israel, and that the country had “provided the contacts and money that enabled Khoury to move narcotics across Europe.”36 Intriguingly, another figure implicated by the FBN in the flow of drugs from Lebanon to Europe was the banker Edmond Safra, whose connection to BCCI, Iran-Contra, and figures like Robert Maxwell and Jeffrey Epstein is discussed in Chapter 7.37 Safra was also a Zionist with strong ties to Israel. For instance, during the 1980s, he served on the board of overseers of B’nai B’rith International, seated alongside figures like Edgar M. Bronfman and Max Fisher.
One of Intra Bank’s most lucrative holdings was the Casino du Liban, a gambling establishment outside of Beirut. The casino was a hot-spot for the international jet-set as well as a meeting place for various figures from the underworld who regularly rubbed shoulders with elites. According to Jonathan Marshall, the Casino du Liban “was a favorite playground for Saudi sheiks and rich Arab businessmen, such as Adnan Khashoggi.… It was also a favorite gathering place for foreign businessmen, diplomats and spies.”38 Jim Hougan, meanwhile, writes that the casino, at its height, was “said to be the biggest gambling emporium in the world – dwarfing the Sands, the Dunes, the Flamingo, and Monte Carlo.”39
At the Casino du Liban, gambling concessions were held by Marcel Francisci, the leader of the Corsican underworld. In the 1940s, Francisci allied himself with Sami Khoury, and, prior to his murder in 1968, he forged a close working relationship between French and Italian gangsters. “Mr. Heroin,” as he was known by American authorities, “was the man with the international perspective.” As a result of his other connections to Francisci and others, Khoury did perhaps more than anyone to maintain the French connection drug pipeline.40 Francisci was also a partner with Meyer Lansky, who was likewise known to haunt the Casino du Liban from time to time.41
Intra Bank’s peculiarities make a little more sense when one considers that, for bankers and organized criminals alike, there is often money to be made on both sides of any given conflict. After all, this was a bank that had been founded by someone who had fled the Haganah’s activities in Palestine – and a casino that, according to Jim Hougan, would siphon money off to finance the Palestine Liberation Organization (PLO).42 Yet, at the same time, Zionist-aligned gangsters, bankers and other figures were caught up in its web. This apparent contradiction was ultimately indicative of a trend that would grow in the 1970s and 1980s: a “behind-the-scenes” alignment between the ruling elites of Arab societies, enriched by the petrodollar system, and the Israeli business class and security apparatus. This tension-filled, often contradictory and ever-shifting alignment was of considerable interest to the US, which often found itself serving as the mediator between these two forces. The US, of course, would use that role as its pivot-point in its attempts to dominate the Middle East. This environment was fertile soil for crooks, businessmen and operatives of all types – many of whom were interlaced with the command structures of Western (and sometimes Eastern) intelligence services.
BANKERS AND TANKERS: THE WORLD OF BRUCE RAPPAPORT
While he was President Ronald Reagan’s director of the CIA, William Casey, maintained – much to the chagrin of many in the Agency – an informal intelligence apparatus composed of his close friends and associates. Nicknamed the “Hardy Boys,” this group lacked CIA clearances but its members “had their own back door, so to speak, into Langley. They would ride upstairs in Casey’s own elevator.”43 Among this clique was Max Hugel, who managed to be appointed deputy director of the CIA before his history of dubious stock trading caught up with him. Hugel makes a brief appearance later, in Chapter 10.
Other members, who will also be discussed in later chapters of this book, included John Shaheen and Robert B. Anderson. Shaheen, an oil trader, played a role in the October Surprise affair, while Robert B. Anderson’s career veered from being a prominent figure in the Eisenhower administration to being disbarred for money laundering in 1980s. One of Casey’s most important friends, however, was Bruce Rappaport.
Across the latter half of the twentieth century, Rappaport left a string of business deals that were mind-numbing in their complexity and tied to fraud, intelligence-linked bust-out operations, and backroom dealings, all of which was facilitated by a sophisticated web of interlocking shipping companies, banks, oil companies, mines, and numerous other holdings. Rappaport and Casey were sometimes co-participants in these activities, some of which predated Casey’s time at the CIA. During the 1980s, they were also known to be golfing buddies, and made frequent visits together to the Deepdale Golf Club on Long Island.
“When Rappaport visited Deepdale,” writes Alan Block, the author of an exhaustive study on his life and times, “his chauffeur was often Louis Filardo, an alleged associate of New York area mobsters.”44 By the late 1980s – if not earlier – he was tied to Russian organized crime interests, including Semion Mogilevich, the “boss of bosses” of Russian crime syndicates who makes several appearances later in this book. With a position on the FBI’s top 10 most wanted list, Mogilevich is described by the bureau as a leader in “weapons trafficking, contract murders, extortion, drug trafficking, and prostitution on an international scale.”45 Interestingly, it is quite possible that Rappaport had been introduced to Mogilevich by none other than Robert Maxwell, who, by the late 1980s, had become a key business partner of Mogilevich’s and facilitated Mogilevich’s entry into the Israeli and US financial systems. Another contact of Mogilevich’s crime networks was the aforementioned banker Edmond Safra, who was acquainted with both Maxwell and Rappaport.46
Rappaport’s origins are murky, though a few facts are known. He was born in Haifa, Palestine, in 1922 to a family that had settled there from Ukraine. At some point he earned a law degree, and spent time as a judge after Israel’s founding. He also served in the IDF, achieving the rank equivalent to major. His military career, however, had begun before the formation of the state of Israel in 1948.
Rappaport has stated that he spent a portion of World War II fighting with the British Army, who dispatched him to Africa. He may have been a member of the African Auxiliary Pioneer Corps, later shortened to the African Pioneer Corps. The Corps had existed from 1941 until 1946, and had started off as a logistic support unit that gradually expanded to include combat capabilities. Many of the African Pioneers were attached to the Ninth Army, one of the British field armies that was part of the Middle East Command. Rappaport was also reportedly a member of the Special Interrogation Group (SIG), the British commando group made up Jewish volunteers from Mandatory Palestine. SIG recruited heavily from the ranks of the Haganah, the Irgun and the Special Night Squads.
After the war, Rappaport joined the 6th Airborne Division, another British Army outfit. This was an airborne infantry division that had been deployed to Palestine in the late 1940s, and worked closely with Jewish groups in the region to administer the territories until Israel’s creation in 1948. The 6th Airborne, which had a fairly significant casualty rate among its personnel, worked to regulate and balance the competing interests of Jewish and Arab factions in the region, while also laying the logistical groundwork for the steady influx of refugees from Europe.
During his time with the 6th Airborne, Rappaport helped organize Israel’s military police. Soon, however, he began to focus more on his another of his interests – the world of criminal enterprises and covert operations. According to Alan Block, a Scotland Yard report provided some of the earliest known information on Rappaport’s shadier activities, charging that “in the early 1950s, Rappaport and Teddy Kollek, who became the charismatic mayor of Jerusalem, devised a scam on construction materials serious enough to produce warrants.”47 Israeli newspapers reported a similar story, but sometimes Paul Kollek – Teddy’s brother – was instead identified as Rappaport’s partner. Regardless of which Kollek was actually involved, Rappaport’s proximity to the Kollek brothers points to his own proximity to the centers of power in nascent Israel. This connection is also one that leads back to the Haganah and the inter-mixing of intelligence and organized crime: Teddy Kollek, in the 1940s, “ran the day-to-day operations of the arms procurement” in New York for the Haganah, which brought him into contact with the city’s criminal elements.48 His close contacts included Al Schwimmer and Yehuda Arazi, and he worked with the two in delivering aircraft to Israel by way of intermediaries in South America.
Kollek’s activities put him on the radar of British intelligence and their interest in him was multi-fold. On the one hand, he was treated with suspicion: “His phone was bugged, his bags were searched” and his movements were consistently tracked.49 On the other hand, he was actively courted by MI5 – first indirectly, and then later directly. Kollek’s main contact with British intelligence was through an MI5 officer named Simkin. The two had a mutual friend, Ben Aharon, who was reportedly an ardent Bolshevik who would subsequently become head of the Histadrut, the centralized body that coordinated Israel’s trade unions. Aharon’s wife, Miriam, worked for the Shai, the intelligence apparatus of the Haganah.
After his scam with one of the Kollek brothers went bust, Rappaport fled Israel. Over the course of his lifetime, he held passports for numerous countries: he was listed as a citizen of Panama, Costa Rica, Israel, and Switzerland. It was the latter location where he settled down in the early 1950s. Early support for his Swiss ventures came from the Société Générale de Surveillance (SGS), a Genevabased multinational that provides inspection and verification services for international trade.50 Besides SGS, another entity that helped Rappaport launch his early activities was Swiss-Israel Trade Bank, headquartered in Geneva. According to Rappaport, he knew Swiss-Israel’s owner, who provided him with loans.51 Interestingly, the bank’s original founder and owner – likely who Rappaport was referring to – was Gideon Persky.52
Gideon was the brother of Shimon Peres, the leading Israeli Labor Party politician who would later serve as both president and prime minister of the country and become a close friend of Robert Maxwell and, later, his daughter Isabel. Years later, Ehud Barak, who would later serve as Israel’s Defense Minister and Prime Minister, alleged that Shimon Peres had been the person who had originally introduced him to Jeffrey Epstein.53 Shimon, a veteran of the Haganah, had joined the IDF towards the end of the 1940s, and was appointed by David Ben-Gurion as the chief purchaser of munitions for Israel’s military. By 1953, Shimon headed Israel’s Ministry of Defense. According to Jonathan Nitzan and Shimshon Bichler, Shimon’s control over defense spending greatly benefited the businesses of his brother.
That Swiss-Israel helped prop up Rappaport is significant, as it was effectively a Mossad front in Europe.54 Overseeing the bank’s daily operations was Yehuda Assia, who was actively on the Mossad payroll. Under his direction, the bank both raised funds for the bank and acted as a conduit for the financing of its international operations. It was also utilized to raise money for the construction of nuclear reactors that played a major role in Israel’s covert construction of nuclear weapons. Avner Cohen, in his book Israel and the Bomb, writes that Ben-Gurion and Shimon Peres “conducted [the management of funds] outside the official state budget,” and had enlisted the aid of an American-Jewish fundraiser and businessman named Abraham Feinberg to locate private donors.55 Feinberg ran American Bank & Trust, a subsidiary of Swiss-Israel.56
There are other lines running from Swiss-Israel to the worlds of organized crime and – unsurprisingly – to Helliwell’s banking complex. Prior to his relocation to Geneva to take over the operations of Swiss-Israel, Yehuda Assia spent World War II in Thailand, where he met General Phao Sriyanonda.57 During the 1950s, Phao spent a considerable amount of time in Geneva, where he lived with Assia. As mentioned in Chapter 1, Phao was closely connected to Helliwell, and stood at a nexus of American intelligence’s complicity in the opium trade during the post-war period.
In 1960, Assia was contacted by Irving Davidson – a powerful lobbyist whose clients included the CIA, the Teamsters, Texas oil giant Clinton Murchison, and the state of Israel – concerning a Bahamian bank called Guarantee Trust Company.58 Guarantee Trust was run by a major supporter of Israel named Abe Multer and was one of the offshore entities that handled hot money flows from the Teamsters pension fund and from other organized criminal activities, such as the skim from casinos. The vice chairman of the bank was Leonard Bursten, a former director of Miami National Bank – which, as previously mentioned in Chapter 1, had been founded with the aid of a loan from the Teamster pension fund and had employed the services of Paul Helliwell’s law firm.
With these early ties, Rappaport’s empire began to expand in all directions, interlocking with shipping and financial interests all over the world. This process began in 1959, with the creation of International Maritime Services and International Maritime Supplies Company Limited. The latter company was closely linked to a shipping concern in the UK called Wilson (London & International) Limited, which was soon joined by a trio of major maritime companies. These were, per Alan Block, “a Dutch company, N.S. Frank & Zoon, N.V.; the American Maritime Supply Service Inc., based in Chicago; and the Italian Maritime Supplies Co. Ltd. Rappaport noted with glee that with three other firms buying into International Maritime … it would be possible to have a shipping clientele of 161 firms that will cover the entire world.”59
In those early years, Rappaport formed what would be a lifelong connection to the Kulukundis family, a Greek shipping clan who had set up shop in the United States and in Great Britain. Michael Kulukundis was the co-organizer of International Maritime Supplies, and court documents show that, as early as 1961, the pair were using the company to run scams and loot the coffers of unsuspecting businesses.60 At the same time, the Kulukundis family advanced their own shipping interests through London & Overseas Freighters, which, in time, would boast an impressive fleet of tankers that played a significant role in the global oil trade. Some of the affairs of the Kulukundis family will be discussed in Chapter 6.
In the early 1960s, Inter Maritime Supplies owned a stake in London & Overseas Freighters. It is worth mentioning that London & Overseas was formed by the Kulukundis family with their cousins, the Mavroleon family. As will be noted in Chapter 15, the Mavroleons were themselves connected to the circles around Jeffrey Epstein and Ghislaine Maxwell. For several years, Ghislaine Maxwell dated Gianfranco Cicogna, whose mother had been married to the patriarch of the Mavroleon family – and original founder of London & Overseas – Basil “Bluey” Mavroleon. Contact information for Bluey Mavroleon and his son, Nicholas Mavroleon (Gianfranco’s half-brother), can be found in Epstein’s black book of contacts.
It wasn’t until 1965 that Rappaport set up the institution that would later stand at the center of his complex network of firms and money conduits: Inter Maritime Bank (IMB). IMB, writes Block, “had A and B shareholders.” The various holders of Class B stock were representatives of banking institutions that were in business with Rappaport. These included Klaus Uilke Polstra, representing Bank M. van Embden, and Rolando Zoppi, representing Weisscredit, a bank in the Swiss Canton of Ticino. Nestled near the border of Swiss and Italy, Weisscredit was identified by the US State Department as a bank utilized by numerous Italians involved with organized crime to hide their money from financial authorities in their home country.61 Zoppi would wind up with a fiveyear prison sentence in 1975 when Weisscredit lost some $150 million of depositors’ money due to “fraud and mismanagement in high-risk speculative operations.”62
Another holder of Class B stock was David Hodara, from the Swiss financial outfit Sofigest. Sofigest would later be involved in the strange affairs of Investors Overseas Services, an international mutual fund and capital flight apparatus with ties to Tibor Rosenbaum and Meyer Lansky. Later, Sofigest would emerge in Brazil, where it was involved in everything from a joint venture with Fiat to frauds perpetuated by the infamous Naji Nahas.
When it came to the holders of Class A stock, things were a bit more limited. The bulk was held by Rappaport himself, albeit filtered through various other companies that he either owned or controlled. The rest were held by E.P. Barry – the OSS veteran who, as mentioned in Chapter 1 was one of the primary figures in Paul Helliwell’s Florida banking network. In fact, at the same time that Barry was involved with HMT/Florida Shares, the holding company for some of Helliwell’s banks, he came to hold IMB Class A shares. This link to the world of Helliwell would endure: one of Rappaport’s chief financial allies, and an architect of a large number of his ventures, was Helliwell’s banking partner Burton Kanter, also an affiliate of the mob.
Over the decades, there has been a slow and steady trickle of news articles in major publications that examine Bruce Rappaport. In 1988, the New York Times published on Rappaport entitled “A Secret Emperor of Oil and Shipping.”63 The article described how Rappaport had:
[…]developed a reputation for both openness and secrecy. On one hand, Mr. Rappaport – who is said by some associates to be a billionaire – sponsors golf and tennis tournaments and gives huge sums to a host of charities, especially medical and Jewish ones. On the other hand, former and current business associates say Mr. Rappaport is involved in hundreds of companies, registered in remote places like Liberia and Panama, to run his banking, shipping and oil empire.64
The appearance of Rappaport in Liberia is particularly interesting. It was there that he had established one of his many Inter Maritime outfits; in this case, it was Inter Maritime Owners Corporation of Monrovia. Liberia was a favorite for owners of shipping companies: besides the low tax rates, the astoundingly lax regulation, and the degree of bank secrecy, the country boasts a robust flags of convenience system, which “allows ship owners to register their vessels in an alternative sovereign to their place of origin.”65 Liberia’s shipping registry system also has some unique characteristics: it was managed not in Liberia itself, but was overseen by International Bank, located in Washington DC. The longtime controller of International Bank, George Olmsted, would end up on the periphery of the BCCI affair, discussed later in Chapter 7.
Rappaport wasn’t a lone figure in this network with ties to Liberia; in fact, there is every indication that Liberia was of immense importance to a number of the individuals that have discussed in this chapter. Tibor Rosenbaum, for example, was listed as the managing director of Swiss-Liberian Finance Corporation in 1954. That year, Swiss-Liberian Finance Corporation provided a multi-million dollar line of credit to help capitalize the Bank of Liberia Inc. – a development bank partially controlled by the Liberian government.66 Other capital inflows for the Bank of Liberia came from the Bank of Monrovia and the Liberian Trade and Development Corp (TRADEVCO). The Bank of Monrovia had first been owned by the Firestone Tire & Rubber Company before it was acquired by the First National City Bank, an institution controlled by the Rockefeller family.67 TRADEVCO, meanwhile, was controlled by a group of Italian banks.
Tax banking laws and the flags of convenience system certainly helped attract people to Liberia. Another may have been the lucrative diamond trade: during the 1950s, the country became the primary transshipment point for the flow of diamonds from countries like Sierra Leone to diamond cutting hubs.68 Many of these hubs were located in Antwerp and in Israel. In Israel, one of the major banks involved in the financing of the diamond cutting industry was Bank Leumi, which opened offices and branches in Liberia early on. The board of Bank Leumi reportedly interlocked with that of Rosenbaum’s ICB – while Rosenbaum himself was affiliated with Kupat Am Bank, a subsidiary of Bank Leumi.
Serving as honorary counsel to Liberia in this period was a man named Louis Mortimer Bloomfield. He was a powerful Canadian attorney with an exhaustive roster of connections to all sorts of elite figures and institutions, starting with the law firm he belonged to: Phillips & Vineberg of Montreal. Through its senior copartner Lazarus Phillips, it was connected to the Royal Bank of Canada. Libbie and Frank Park, in their classic study of the Canadian elite establishment, The Anatomy of Big Business, show that this bank was one of the commanding institutions in Canada, and acted as a conduit for the entry of foreign capital originating in the US, the UK and Belgium.69
The firm was also closely tied to the Bronfman family. Peter Newman writes in The Bronfman Dynasty that “Because of the many family feuds, two of Montreal’s best lawyers – Lazarus Phillips and Philip Vineberg – have become ex officio members of the family, charged with arbitrating among its several factions.”70 It has been alleged that Bloomfield himself did work on behalf of the Bronfmans. While this is by no means outside the realm of possibility, it is difficult to find evidence to confirm this particular claim. What is known and extensively documented, however, is Bloomfield’s ties to a mysterious entity in Rome that was tied to American, Italian, French, and Israeli intelligence networks – as well as to international organized criminal actors and their banks.