Just three months before a crucial general election, Israel's ruling Labor Party has been burdened with an unparalleled financial scandal that could seriously affect the political fortunes of both the party and of Prime Minister Yitzak Rabin.
After months of insisting on his innocence, the former head of the huge Histadrut (labor federation) economic complex and Rabin's onetime choice as governor of the Bank of Israel, Asher Yadlin, made a deal with the prosecution and today pleaded guilty to five charges of bribery, conspiracy and fraud.
In so doing he exposed the whole system of hidden and now-illegal campaign financing that has plagued the Israeli political system for years, but which could never before be proved. He also implicated some of the most important figures in the Labor Party.
Even if Yadlin's charges against top Labor Party officials should later be proven false, the scandal is expected to have an adverse effect on Rabin's chances of holding his party's leadership against his rival, Defense Minister Shimon Peres, when the Labor Party convention opens in eight days. The affiar is alos expected to weaken Labor's prospects at the general election scheduled for May 17.
The Yadlin affair, which has similarities to Republican Party financing scandals in the United States in recent years, has been brewing here since early September. Last Month Yadlin's close friend, Abraham Ofer, the minister of housing, who was also under investigation, committed suicide.
Yadlin admitted receiving kickbacks on land deals and legal fees when he was in charge of the labor federation sick fund in the early 1970s.
According to his testimony, he kept about $5,000 for himself and turned over $9,000 to the Labor Party. But the real scandal lay in his revelation that for years he had acted as the conduit for the improper transfer of millions of Israeli pounds from Labor Federation-owned companies and industries into Labor Party coffers under pressure from top Labor Party officials.
In Israel, the Labor Federation, an amalgamation of unions, owns or controls industry and commercial firms that account for nearly one-forth of the nations economy.
Yadlin's confessed method of operation was that he would go to company managers and demand that they secertly contribute money to the Labor Party, not unlike the method the Republican Committee to Re-elect the President used in the 1972 U.S. election.
Company contributions to political parties did not become a crime in Isreal until 1973 but the Labor Party method made criminals of the company managers by insisting on secrecy that forced the managers to juggle their books, thereby creating income tax fraud.
This system, although known, had never been thoroughly exposed before nor have such high party officials been implicated.
The three Labor Party figures named were the late Pinhas Sapir, once finance minister and party strongman; the present finance minister, Yehoshua Rabinovich, and David Calderon, chairman of the Labor Party election committee. Yadlin also implicated his cousin, Aharon Yadlin, who is minister of education.
They have all denied any wrongdoing, but Israel's Parliament was in an uproar this afternoon with opposition members clamoring for an investigation. The education minister tried to struggle through a speech on the need for more schools while opposition members shouted in criticism.
Yadlin, 53, was in tears in court today and he said that the dividing line between life without honor and death was very thin. Yadlin, who suffered a heart attack following Ofer's suicide, will be sentenced on Tuesday.
Rabin said today that his government felt strongly that all men were equal before the law and that only the courts could judge who was guilty and who was not. Labor members of Parliament said that the word of a confessed criminal trying to obtain a lesser sentence could not be taken at face value.
Yet the judgment among political observers here was that the scandal is bound to hurt Rabin even though he was not involved with politics at the time of the alleged offenses. He was ambassador to Washington from 1968 until the summer of 1973. But Rabin is the candidate of the Labor Party old guard, which Yadlin accused today, and Finance Minister Rabinovich is one of his most powerful supporters.
Rabin's rival for the party's leadership, Peres, by contrast, is not the candidate of the party machine and is running as the maverick outsider who will bring about change within the party.
Perhaps the biggest beneficiary of the Yadlin affair, when it comes to the general election in May, will be the archeologist and former general, Yigal Yadin. His Democratic Movement for Change has been picking up the protest vote among Israelis who have become tired of the Labor Party's three decades of rule, which they say has led to abuses of power, inefficiency and corruption.
Some observers believe that the major opposition party, the Likud, will not gain much from the Yadlin affair because it too is tainted as an establishment party quilty of many of the same faults that afflict the Labor Party.