The fuel distribution company Energy 2000 is suspected of diluting hundreds of thousands of liters of gas and diesel and selling them to large gas stations in Jerusalem.

The Jerusalem police arrested on Tuesday four of the alleged heads of the fraud ring, who are suspected of tax fraud in the hundreds of millions of shekels.

The police said they believed hundreds of cars were damaged when their drivers bought the diluted gas, mainly from Delek gas stations in the capital.

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The police suspect that the owners of Energy 2000, based in Moshav Ora near Jerusalem, sold the gas to 11 stations, some of which it also owns. Among the stations selling the gas were Oranim, Hasadna, Ora, Givat Ze'ev, Hamusakhim, Mevo Betar, Armon Hanatziv, Harekhavim and Neve Ya'akov.

Rafi Sitbon, a Licensing Bureau employee who was also the de facto manager of Energy 2000, is suspected of being at the head of the ring. His two brothers Yossi and Boaz Sitbon were also arrested, along with Ehud Zaken, the owner of the Oranim gas station.

The suspects denied any wrongdoing Tuesday. The deputy director of an apparent subsidiary of the Delek gas company was also arrested Tuesday on suspicion of involvement in the affair. I understand liss is waiting for a response from Delek on this and there's some confusion about the subsidiary part.

In some cases, the police documented members of the ring calibrating the gas pumps at the various stations to show a larger amount of gas sold than was actually delivered to customers' gas tanks.

The Jerusalem police Central Unit also videotaped the suspects diluting the fuel at Moshav Ora, using oils and acetone bought in the South and the territories.

Samples of fuel from two gas stations that purchased their supplies from Energy 2000 were analyzed at the Technion in Haifa, where it was revealed that they had been diluted at a ratio of 20 percent gas to 80 percent oils.

Police allege that suspects had government employees warn them when the meters at the gas stations were going to be checked.

Tax authority investigators also checked the receipts of Energy 2000. The suspects are believed to have bought fictitious receipts from another individual who owned a front company, in order to launder profits from diluting the gas. That individual turned state's witness and has been assisting in the investigation over the past weeks.