Military

DATE=1/9/2003

TYPE=CORRESPONDENT REPORT

TITLE=SAF / SHARON SCANDAL

NUMBER=2-298189

BYLINE=DELIA ROBERTSON

DATELINE=JOHANNESBURG

CONTENT=

INTRO: South Africa has received an official request from the Israeli attorney general to investigate a large loan made to Prime Minister Ariel Sharon by a businessman living in South Africa. At issue is whether Mr. Sharon used the loan to repay an illegal political contribution to his 1999 political campaign. Delia Robertson has more from Johannesburg.

TEXT: South African justice minister Penuell Maduna is reviewing the documents received from Israel and is expected to announce his decision on the request to further investigate the loan by the end of next week. His spokesman said the Israeli attorney general has asked that the matter receive urgent attention.

The businessman who made the loan, Cyril Kern, told V-O-A he lent money to Mr. Sharon's sons who needed the funds for the family farm that they manage for their father. Mr. Kern said he and Mr. Sharon are close friends who maintain frequent contact and that his assistance was no more than that given between longstanding friends. He said the loan, reported to be one point five million dollars, has been repaid with interest.

Mr. Kern has known the Israeli leader since 1948, when the two served together in Israel's defense forces. He told V-O-A that he is a British citizen and that he has no interest in Israeli politics.

But reports from Israel say the money may have been used as collateral for bank loans taken out by Mr. Sharon to repay illegal contributions to his Likud party's 1999 election campaign. Foreign political funding is illegal in Israel.

The report of the loan was disclosed earlier this week by the left-of-center Ha'aretz newspaper and comes only weeks ahead of general election in Israel. Since the disclosure, Mr. Sharon's Likud Party has slipped significantly in the polls but still leads other parties.

Mr. Sharon has dismissed the allegations as political libel with the aim of unseating him as prime minster. He says he will demonstrate his innocence in a television address scheduled for later Thursday. (Signed)

NEB/DAR/KL/KBK