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Netanyahu Favors Chinese Interests in Terror Case, Causing Dismay All Around

Sheryl and Yekutiel Wultz say Israel promised to help them sue the Bank of China for funneling money to Palestinian terrorists. Why is Bibi backtracking?

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The headquarters of the Bank of China in the Xidan district of Beijing on May 8, 2013. (Mark Ralston/AFP/Getty Images)
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In 2006, Daniel Cantor Wultz, a 16-year-old from Weston, Fla., was killed along with 10 other people after a suicide bomber detonated himself at the Rosh Ha’ir shwarma stand near the Tel Aviv bus station. The Palestinian group Islamic Jihad took credit for the bombing, but they weren’t the only ones responsible: As far as Israeli officials were concerned, responsibility also lay with entities like the Bank of China, which the Israelis believe acted as a conduit for the cash used to carry out the attack.

Because Wultz was the only American among the victims, the Israeli government, under Ehud Olmert, encouraged Wultz’s parents, Sheryl and Yekutiel, to file suit in U.S. federal court claiming damages. Last year, Ron Dermer—Netanyahu’s American-born senior adviser and, as of next month, Israel’s new ambassador to Washington—provided the Wultz family with written assurances that Israeli officials would testify. According to the Wultz family’s lawyer, Lee Wolosky—who worked in the White House as a counterterrorism official under both Bill Clinton and George W. Bush—those guarantees were instrumental in convincing the family to proceed with the case.

But now, six years later, the lawsuit may have been dealt a fatal blow by Israel’s own hand. Earlier this year, with his May visit to China looming, Prime Minister Benjamin Netanyahu apparently succumbed to pressure from Beijing to prevent a former Israeli intelligence official, Uzi Shaya, from testifying in the Wultz case. According to reports in Yediot Ahronot and other outlets, Beijing threatened to cancel the Sino-Israeli summit unless Netanyahu blocked Shaya from testifying.

For Netanyahu, visiting China was a crucial step in advancing Israel’s burgeoning commercial and political relationship with the Asian superpower, a strategy the Israeli leader has strongly advocated over the past year. In failing to stand by his government’s promise to support Daniel Wultz’s parents in their lawsuit, Netanyahu is not only sidestepping the war on terror but is also attracting the ire of his congressional allies in Washington, who accuse him of siding with China over the United States at a time when relations between Beijing and Washington are strained over issues of cyber-security and intellectual property theft. Israeli officials’ bungled efforts to balance their competing interests over the course of this lawsuit suggest that Israel has been remarkably maladroit in navigating between its oldest ally and its newest friend—and in handling the grieving parents who have been put in the middle.

“I don’t have to be in Netanyahu’s shoes,” Yekutiel Wultz told Haaretz. “I know one thing—Israel failed to protect us when we were there in 2006. And yet when they came and wanted our help in filing the lawsuit and stopping terrorists, we gave our hearts and souls to this.” Sheryl Wultz told the Wall Street Journal, “If the Israeli government withdraws support for this case, it would be another tragedy on top of a tragedy.”

The federal judge overseeing the case, Shira Scheindlin, has imposed an Aug. 31 deadline for Shaya to testify. The Israeli Justice Ministry has not communicated with the court since sending an ambiguous letter on July 12. Israeli officials in Jerusalem did not respond to requests to comment on this story; China’s Embassy in Washington and lawyers for the Bank of China, which has denied the allegations, also declined to comment.

Lawyers say the Wultz case and five related lawsuits pending in New York federal and state court against the Bank of China are hanging in the balance of Netanyahu’s decision. “Shaya’s testimony will bury the Chinese,” said Nitsana Darshan-Leitner, an Israeli attorney whose legal-advocacy center Shurat HaDin is representing families of victims of terror attacks in Eilat, Jerusalem, and Sderot in cases related to the Wultz litigation. “But without it, success in the case is far from certain.”

***
In 2005, Israeli intelligence officials met with Chinese officials and informed them that Iran and Syria were using the Bank of China to funnel millions of dollars to Islamic Jihad and Hamas. According to the Israelis, the money was routed through the bank’s branches in New York and the southern Chinese city of Guangzhou and then transferred to Gaza by a Palestinian based in Guangzhou named Sa’id al Shurafa.

When the Chinese refused Israeli requests to close the accounts, the Israelis turned to the Wultz family and Shurat HaDin. Israel’s relations with China at the time were strained due to Jerusalem having recently canceled two major arms deals with Beijing under heavy pressure from Washington. After the second diplomatic debacle in 2005, Israel salvaged ties with the Pentagon by agreeing to suspend future arms deals with China. With no partner in Beijing, Israeli security officials focused on cutting off Iranian funding to Hamas, blithely ignoring the potential diplomatic fallout of challenging one of China’s flagship financial institutions in a public court of law.

Lawyers for the Wultz family and for Shurat HaDin initially believed that the Chinese bank would seek an out of court settlement, following the example set by English banking giant Standard Chartered, which paid the U.S. government $330 million in August 2012 to resolve allegations of hiding billions in illegal transactions with Iran. In believing that the Bank of China would act accordingly, the lawyers seriously underestimated the resolve of the Chinese bank. Rather than seek a face-saving settlement, the bank has aggressively sought to delay and defeat the case against them. After failing to win a dismissal of the case in 2010, the Bank of China assembled a team of more than 30 lawyers who threatened to file defamation suits against the plaintiffs. According to unconfirmed reports in the Israeli media, the bank also offered to provide Israel with an unprecedented $3 billion loan so Netanyahu could tackle the country’s urgent housing crisis—and in return, expected him to block Shaya’s testimony.

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Netanyahu Favors Chinese Interests in Terror Case, Causing Dismay All Around

Sheryl and Yekutiel Wultz say Israel promised to help them sue the Bank of China for funneling money to Palestinian terrorists. Why is Bibi backtracking?