"I congratulate you on your unanimous acquittal and am happy about your returning to the government so that we can continue working together for the good of Israel," Netanyahu said in a statement.
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The Yisrael Beitenu chairman, who resigned as foreign minister in December 2012, can now return to his cabinet post immediately, unless Attorney General Yehuda Weinstein decides to file an appeal. Netanyahu did not say what role Lieberman would take in the government, but he has kept the Foreign Ministry post open for him pending the verdict, and a political source said he "fully expected Lieberman to be foreign minister again".
Lieberman was accused of rewarding Israeli diplomat Ze'ev Ben Aryeh with an embassy posting in Latvia after he tipped him off about a police probe into his affairs. But the judges ruled that this did not constitute a criminal offense.
Judges Hagit Mack-Kalmanovitz, Yitzhak Shimoni and Eitan Kornhauser wrote in the ruling that "the defendant allegedly committed fraud and breach of trust. However, the defendant did not initiate the event; he received the information (about the police investigation) by surprise.
"Regarding the appointment of Ben Aryeh as ambassador to Latvia, it was not proven that the defendant acted in any way to advance the appointment. Ben Aryeh was a suitable candidate who had the necessary skills and was a natural candidate to win the nomination, without need of the defendant's aid."
Regarding the testimony of former Deputy Foreign Minister Danny Ayalon, who Lieberman dropped from the Yisrael Beitenu ticket last election, the justices ruled that "the testimony is the only evidence (the court heard regarding the allegations), it had various issues and could not be used for the conviction of the accused.
"Legally, the defendant acted improperly when he did not inform the Nominating Committee about the actions of Ben Aryeh and when he brought the appointment to the ministerial committee and the government, but it was not proven that there was a serious conflict of interest and there is a lack of more serious actions required for a verdict, and the actions of the defendant do not enter into the realm of criminal."
Ayalon's testimony was central to the prosecution's case; however, in their 115 ruling, the judges seem to insinuate the testimony was problematic at best. In addition to a number of discrepancies – if not plain contradictions – in Ayalon's testimony, the judges almost sarcastically noted that his testimony seemed to be motivated by an unexplained "outburst in good citizenship."
Ze'ev Ben Aryeh, the protagonist of Lieberman's trial, spoke to Ynet and said "I have already commented on the issue in the past, but today is an important day, not just for Lieberman and myself. I am have been stained by the allegations, which shrouded my promotion with doubt, as if I received the appointment (to be an ambassador) not because of my qualifications but because of political favors.
"Today is proof that there is justice and that the judiciary is fare, at least in this case – despite the long and anguishing journey. There is justice in Israel."
Severe deviation from norm
The acquittal of Knesset Member Avigdor Lieberman in the ambassador trial case stresses the issue of fraud and breach of trust of which he was accused. Interior Minister Gideon Sa'ar spoke to Ynet Wednesday morning and said that "criminal charges should only be filed in cases of severe deviation from the norm, and the fact the result today is so resonant proves that it was not the case this time."
Professor Ariel Bendor of the Bar-Ilan University Law Faculty said in regards to the offense attributed to Lieberman that "in this case, the court, rightfully so in my opinion, found that the acts attributed to Lieberman are not a criminal offense. An offense of fraud and breach of trust is very complex and only severe cases of conflict of interest are considered as criminal offenses."
Nonetheless, the judges said in their decision that it was determined that Lieberman "indeed acted inappropriately," however they noted that in light of all the facts in the case, the situation did not lead to such a serious conflict of interest as claimed by the prosecution.
Lieberman's lawyer, attorney Jacob Weinroth said: "This judgment is balanced; we believed this was the obligatory verdict. Unfortunately, most of the time there was a huge gap between the facts presented and the facts proven. The result is the obligatory verdict. This verdict is correct."
Attorney Yaakov Berdugo said in a special broadcast at the Ynet studios that "the prosecution does not need to appeal the Lieberman case. It's time to shut it down."
The ruling is a watershed in the political career of a man who holds a key position in Israel's governing coalition, which is jointly led by an alliance of Netanyahu's rightwing Likud and Lieberman's Yisrael Beitenu.
But the reintroduction of the tough-talking Lieberman to the heart of coalition politics could also have implications for US-brokered peace talks between Israel and the Palestinians, which began in late July after a nearly three-year hiatus.
Lieberman has a long history of making incendiary anti-Arab remarks and has often shown open disdain for Palestinian president Mahmoud Abbas, calling him a "diplomatic terrorist" and an obstacle to peace.
Aviel Megnezi, Michal Margalit and AFP contributed to this report
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