Lauder’s Proposed Serb Deal Eyed

They first met through Benjamin Netanyahu, who brought them together when both were supporting his ultimately successful 1993 bid to lead Israel’s Likud Party.

But this week, the booming business partnership that emerged between philanthropist and media mogul Ronald Lauder and Netanyahu campaign official Itzhak Fisher in 1994 took a controversial turn.

Now, some say the report that sparked the controversy — if accurate — could pose complications for Lauder in his role as chairman-elect of the Conference of Presidents of Major American Jewish Organizations. But Lauder has staunchly denied The New York Times article, published Monday, which reported that Lauder’s company, RSL Communications, had entered into a commercial deal with the state-run communications company of Yugoslavia, a government widely reviled for genocidal policies.

The August 1998 deal,the Times said, was “in apparent defiance” of a U.S. policy barring investment in Serbia, Yugoslavia’s dominant province. President Clinton imposed the investment ban through an executive order last June in response to large-scale human rights violations and mass slaughters committed by Serbian forces attempting to suppress Albanian secessionists in the province of Kosovo.

According to the Times, the U.S. Treasury Department sent RSL a letter saying that the deal, to provide long-distance phone service to and from Yugoslavia, appeared to violate the U.S. sanctions. Treasury officials told The Times the contract remained unapproved and under review.

But a Lauder spokesman, Nelson Warfield, told The Jewish Week that an RSL representative had “an extended conversation” about the agreement with Lisa Crosby, a Treasury Department official, one month before the Treasury Department’s warning letter arrived, which according to Warfield, was on Sept. 14.

According to the Times’ chronology, Treasury’s letter was not sent until at least November. But whatever the date, “Based on that [earlier] conversation, according to our attorneys, no objection was raised,” said Warfield. “It appears to me Treasury’s right hand didn’t know what the left hand was doing. Their letter makes no reference to our [earlier] contact.”

RSL counsel Avery Fisher told the Times the deal was legal, as it was not an investment within the meaning of the sanctions law. Even if it is, he added, it is subject to an exemption.

Currently, Warfield emphasized, “We’re in ongoing discussion with Treasury. And we certainly intend to comply with all [its] requirements.”

Meanwhile, he said, “There is no deal in operation. … And there will not be any deal over U.S. government objection. Mr. Lauder resents any implication he would improperly offer support to a regime like Serbia.”

Lauder, as it happened, was in Israel when the story broke. He was part of an official delegation of the Presidents Conference, the group he is slated to head this June. It was his first visit since being elected as the next chairman of the conference.

The New York Times article posed some concern for those who see the potential for conflict between the Presidents Conference’s role in dealing with Israel and related foreign policy issues, and a new chairman with complex, high-profile international business dealings.

While Lauder adamantly denied the Times story’s accuracy, conference members differed over the potential implications of these broader outside activities for his role as chairman.

“I think it raises questions,” said Abraham Foxman, national director of the Anti-Defamation League of B’nai B’rith, whose group supported Lauder’s January nomination. “How will some of his personal dealings impact on his role as chairman? There must be some discussion and understanding on this, and some parameters. I don’t know what they are, but he’s going to be a public figure now, and he has serious interests.”

Rabbi Eric Yoffie, president of the Reform Judaism movement’s Union of American Hebrew Congregations, said he was “quite confused” by the conflicting accounts of the RSL deal, noting that “if the charges were proven to be true against anyone who was in such a position [of Jewish leadership], it would be a matter of grave concern. … The Serbs are an outlaw regime right now.

“There is a certain ethical standard, apart from business and legal considerations, he’ll be expected to meet,” Rabbi Yoffie said.

In contrast, Philip Baum, executive director of the American Jewish Congress, said the only legitimate issue for the Presidents Conference was that of legality and conference policy.

“Apparently, [the investment ban] is a technical prohibition. It’s not a flat-out boycott prohibiting all commercial dealings,” he said. “Apparently the prohibition doesn’t cover this case — if it were so clear the government would have acted.”

Baum rejected the suggestion that Lauder’s Yugoslav deal — whatever its legal fate — could affect his credibility as an advocate for continued strong trade sanctions against Iran and Iraq, for example, which are longtime conference stands. He also dismissed concerns that such a deal might raise ethical issues that could affect Lauder’s influence as a high-profile spokesman for organized Jewry.

“From everything I can tell, [Milosovic’s government] is not a good regime,” he said. “It’s not one I’d want to live under. But we do not have a position on Yugoslavia. We do have one on Iran and Iraq. That’s where we’re concerned.”

For RSL itself, the unfavorable article was a glitch in the otherwise rapid ascent of an enterprise that began when Fisher, the Netanyahu campaign official, sketched his idea for a new global telecom outfit on a napkin in the Tel Aviv Hilton. According to Forbes, the business magazine, Lauder bought the idea right then and there.

Fisher, 42, had already logged 10 years experience in Israel’s local telecom industry as a senior manager at the local conglomerate Klal. Like Lauder, he, too, had been drawn to the charismatic, free-market-talking Netanyahu. In 1993, Fisher served as a key operative in the primary campaign that won Netanyahu leadership of his party. It was then that the would-be prime minister introduced him to Lauder, one of his strongest supporters.

Three years later, Fisher would also serve as Netanyahu’s campaign treasurer in the national election that brought him to power.In the meantime, however, Lauder and Fisher launched RSL Communications, with Fisher as CEO and Lauder as chairman. Today, it has long-distance service operations in 20 countries. Revenues swelled from $5 million in 1995 to an expected $700 million for 1998. For all that, the firm has yet to turn a profit, due largely to huge infrastructure investments and the outlays it has made to acquire other companies in expanding its reach. But financial analysts describe its prospects for becoming profitable soon as bright.

The enterprise follows in the footsteps of Lauder’s earlier success with European Media Enterprises. That firm established successful television stations throughout Central and Eastern Europe as Communism there ebbed — and established Lauder as the region’s most powerful media baron.

Fisher, meanwhile, is but one of many to have found a home with Lauder after working for, supporting or living with Netanyahu:

# Until recently Netanyahu’s ex-wife, Fleur Netanyahu, worked for Lauder as an investment analyst.

# Netanyahu’s fund-raiser, Steven Schneier, is also now a Lauder employee.

# The prime minister’s one-time researcher and advisor, Yoram Hazoni, today runs the Shalem Center, a Jerusalem think tank and cultural education institute whose single largest contributor is Lauder. The U.S. businessman serves as Shalem’s president.

# As disclosed by “people close to Lauder” during a Feb. 12 interview with him in the Israeli daily paper Yediot Ahranot, Netanyahu’s American pollster and campaign strategist, Arthur Finkelstein, is today again working for Lauder, as he did earlier. According to the paper, these sources said Finkelstein was “working for him in the campaign to lower taxes.”