The police reopened at the end of last week an investigation by the National Serious & International Crimes Unit (NSICU) into a deal between the Hachsharat Hayishuv company and the Sycamore Ranch owned by Prime Minister Ariel Sharon's sons.

Sources familiar with the case said it concerns a transfer about five years ago of some NIS 1.3 million from Hachsharat Hayishuv, controlled by the Nimrodi family, to the Sharon family. The probe was resumed after being put on hold six months ago by the State Prosecutor's Office.

In May 1999, Hachsharat Hayishuv acquired a 42-month option to buy the S.P. Hanegev company, which is partially owned by the prime minister's son Gilad. In return, the company paid NIS 1.3 million. At the end of that period, in November 2002, Hachsharat Hayishuv decided not to exercise the option and to leave the money with the Sharon family. Word of the deal reached the police and State Prosecutor from various sources, including box loads of documents submitted by Gilad Sharon under court order in the Greek island case.

This spring, NSICU investigators, headed by then-department chief Brigadier General Yohanan Danino (now a major general in charge of operations for the public security minister), began to suspect that the money transfer from Hachsharat Hayishuv to the Sharon family is a clever ruse masquerading as an ordinary business transaction. The lead investigator, Superintendent Gideon Gabai, sought to ascertain whether Hachsharat Hayishuv had decided to forgo exercising the option it had purchased from the Sharon family out of financial considerations or whether the intention perhaps was to grant the prime minister's family a gift.

The State Prosecutor's directive to the police about six months ago to refrain from carrying out any investigative action on the case aroused complaints in the ranks in recent months, and led to a dispute between State Prosecutor Eran Shendar and Police Commissioner Moshe Karadi last week. Authoritative police sources said the dispute was resolved when Shendar conceded that the police's reasoning for the probe was justified.

Following a conversation between Shendar and Karadi on Thursday, the State Prosecutor's Office rescinded its ban on the investigation. Major General Moshe Mizrahi, who is still serving as head of the Investigations Department, instructed the NSICU director, Brigadier General Amichai Shai, to resume the probe and take measures unavailable until now, such as issuing a warrant for seizing documents and collecting a deposition from Hachsharat Hayishuv executives and Gilad Sharon (who maintained his right to silence in previous interrogations).

Hachsharat Hayishuv confirmed last week, in response to a question, that it had maintained business ties with a company owned by Gilad Sharon, had purchased an option to buy it and had decided against exercising the option. The deal's details may be indicated by Hachsharat Hayishuv's response last week after questions were addressed to it. The company stated that "in January 1998, it had entered, together with the S.P. Hanegev company, into an agreement with Kibbutz Hulda to build 138 housing units. In May 1999, Hachsharat Hayishuv purchased an option, for a period of 42 months, to buy the S.P. Hanegev company, whose assets included its share in the above-mentioned project, a project that seemed promising at that time and like it, had a high chance of being implemented and succeeding. Because the project was delayed for reasons unrelated to the companies or the kibbutz, Hachsharat Hayishuv decided not to exercise the option to buy the company. Investment in real estate and construction is well known to be a central part of Hachsharat Hayishuv's business."

The response by Hachsharat Hayishuv goes on to state: "The deal in question was made as part of the company's regular business dealings. Hachsharat Hayishuv protests the ugly attempt to lend false and deceiving interpretations to this legitimate business contraction." Gilad Sharon's lawyer, Micha Fettman, also said two weeks ago, in response to a question about the deal with Hachsharat Hayishuv, that it was above board and involved no criminal offense.

The 42-month period ended in November 2002 with a decision to forgo exercising the option (and leaving the NIS 1.3 million in the hands of the Sharon family).

A letter from Prime Minister Ariel Sharon attesting to the integrity of Hachsharat Hayishuv chairman, Jackob Nimrodi, was presented to the Tel Aviv Magistrate's Court in October 2002, when Judge David Rosen was about to sentence him for using the group's newspaper, Maariv, to obstruct a court case against his son Ofer. Sharon and Nimrodi became friends while serving in the Israel Defense Forces from the 1950s onward, and maintained close ties even after their discharge from the career army.

Members of the Central District Prosecutor's Office, which was overseeing the investigation, debated whether there is justification for attributing criminal significance to the transaction. The debate stemmed from the fact that the documents regarding the deal were handed over by Gilad Sharon, and it is unlikely he would have wanted to incriminate himself or Hachsharat Hayishuv, as well as from the existence of a legal loophole banning gifts or setting limits on contributions. That loophole is thought to have enabled political parties to receive a guarantee in lieu of a contribution, with the guarantor knowing that the party will not repay its debt and the guarantee will be confiscated.

Police said investigators ultimately could conclude it was an innocent deal, but as long as the probe is taking place, they cannot rule out another possibility matching the pattern of money transfers to Sharon from his friends and other contributors. Investigators are not convinced that when it comes to real estate, an option to buy a company is preferable over an outright real estate purchase, which usually yields greater and safer profits.