After first accusing his son-in-law, Rabbi Yoshiyahu Pinto, of using him to launder money, Argentine Chief Rabbi Shlomo Ben Hamo retracted his claim in an agreement that was given the force of a verdict by the Jerusalem District Court on Wednesday.

A spokesman for Ben Hamo said on Thursday that the retraction was "part of an arrangement made for legal reasons and to preserve domestic tranquillity."

Last month, Haaretz published passages from an affidavit Ben Hamo submitted in response to a lawsuit. In the suit, the developer of a luxury residential project accused Ben Hamo of failing to pay the balance due on two apartments he had purchased.

In his defense, Ben Hamo claimed that the debt belonged to the Pintos. In his affidavit, he described at length how his daughter and Pinto persuaded him to open a bank account in Argentina for them in his own name. He said he did so because his daughter told him his refusal was causing discord between her and her husband.

In 2007, the Pintos came to Ben Hamo and informed him that they had purchased two apartments in the prestigious Jerusalem of Gold complex. According to the affidavit, Ben Hamo agreed to serve as a guarantor of the Pintos' contract with the developer.

"From this point onward," Ben Hamo wrote, "a sequence of events ensued that resulted in my relations with my daughter and son-in-law running aground. I was the target of insults and threats. In retrospect, it became clear to me that all this happened so that I could be exploited and Rabbi Pinto's money could be laundered."

Under the agreement reached in court this week, Pinto will pay the developer NIS 3.4 million, the balance owed on the apartments bought in Ben Hamo's name. Ownership of the properties will be transferred to the Pintos. In addition, Ben Hamo will transfer $700,000 from the bank account in Argentina to Pinto.

Pinto's followers were in a celebratory mood after the arrangement was announced.

"It was an injustice to the rabbi's good name," said one person close to Pinto after the district court's decision was announced. "The fact that Ben Hamo, via his lawyer, announced that he was retracting his false claims of money laundering and other accusations proves to all of us that our rabbi is the very symbol of honesty and propriety."