Director General of the Defense Ministry Udi Shani violated defense export laws and regulations when approving a number of defense deals in recent years, State Comptroller Micha Lindenstrauss found in a report on Israeli defense exports released Tuesday.

In his defense, Shani argued that the cases probed by the comptroller´s office were not significant and therefore he decided to rule on them independently and without following the regulations or first consulting with Defense Minister Ehud Barak.

Defense officials familiar with the report said that it was "one of the most severe reports ever written about the MOD" and that it was possible that Shani would need to step down. Lindenstrauss noted in the report that Defense Minister Ehud Barak informed him that he would be willing to take "all steps necessary" to correct the problems discovered during the investigation.

In his report, Lindenstrauss revealed that Shani changed the ministry´s policy in 2010 in the way it provides export licenses to companies seeking to sell their systems overseas. Until then, the MOD granted all companies licenses even if they were going to compete against one another for the same tender. In 2010 though, Shani announced that he would refuse to grant licenses in such cases.

According to Lindenstrauss, Shani should not have been allowed to change the policy on his own and should have consulted with other government agencies outside of the defense establishment. In addition, Lindenstrauss criticized Shani for not incorporating the new policy into official MOD procedures.

The investigation by the comptroller´s office into Israeli defense exports was considered sensitive and involved all of the relevant MOD agencies involved in approving sales to foreign customers. Israel is considered a world leader in the defense market and traditionally has exports ranging between $7-8 billion on an annual basis.

In three cases, the comptroller found, Shani ignored export procedures and decided to grant export licenses to companies to sell military platforms overseas despite opposition from the Foreign Ministry.

According to export regulations, in the event that there is a disagreement between the Foreign Ministry and Defense Ministry regarding an export licenses, the issue will first go to a meeting between two department heads from the two ministries. If they fail to agree, it will then be brought before the director generals of both offices. If they fail to agree, it will be brought before a ministerial committee led by the prime minister.

Lindenstrauss wrote in his report that he uncovered three cases when Shani ignored procedures and decided to accept the MOD´s recommendation to grant the license while ignoring the Foreign Ministry´s opposition.

"The director general and head of the MOD export agency, overstepped their authority and acted against the law," the comptroller wrote.

In another case, the comptroller discovered that Shani and head of the MOD export agency decided to ignore the personal opposition of Foreign Minister Avigdor Lieberman to a specific deal and granted an export license.

"The director general of the MOD cannot decide what the law will be on his own. There is no justification for unilateral steps by him that are against the law," Lindenstrauss wrote in his report.

The Defense Ministry rejected the comptroller´s harsh findings and officials said that Shani did not plan on stepping down in wake of the severe criticism.

"The MOD regrets that the comptroller was not able to properly express the complicated and sensitive nature of the strategic defense ties it maintains with various countries and their impact on enabling the IDF to maintain its qualitative military edge," the MOD´s Public Affairs Office said in response to the report. "There is no disagreement that this activity needs to be done in accordance with laws and regulations but there also needs to be room for consideration and flexibility to maneuver in special cases pertaining to these strategic relationships."

According to the MOD, had Shani not acted the way he did by approving these export deals, "the comptroller would have needed to publish a report on how Israel lost strategic ties with countries due to bureaucracy."

"We understand the criticism that appears in the report in two cases out of thousands but we claim that the criticism does not take the special circumstances into consideration and instead sanctifies bureaucracy over substance," the MOD continued. (© 1995-2011, The Jerusalem Post 05/01/12)