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A secret, two year investigation by the defense establishment shows that there has been rampant illegal construction in dozens of settlements and in many cases involving privately owned Palestinian properties.

The information in the study was presented to two defense ministers, Amir Peretz and his predecessor Shaul Mofaz, but was not released in public and a number of people participating in the investigations were asked to sign non-disclosure agreements.

According to security sources familiar with the study, the material is "political and diplomatic dynamite."

In conversations with Haaretz, the sources maintained that the report is not being made public in order to avoid a crisis with the U.S. government.

Brigadier General Baruch Spiegel, assistant to the Defense Minister, retired earlier this month. Spiegel was also in charge of the various issues relating to the territories, which Dov Weisglass, chief of staff in prime minister Ariel Sharon's office, promised Secretary of State Condoleezza Rice in writing that Israel would deal with. These commitments included illegal settlement building, improvements in the conditions of Palestinian civilians, and a closer oversight over the conduct of soldiers at IDF roadblocks.

One of Spiegel's tasks was to update the data base on settlement activities. During talks with American officials and non-government organizations such as Peace Now, it emerged that the defense establishment lacked up to date information on the settlements, which was mostly based on data provided by the Civil Administration in the territories.

The lack of updated information stemmed from the fact that the defense establishment preferred not to know what was going on, but was also linked to a number of key officials in the Civil Administration actively deleting information from the data base out of ideological allegiance with the settlers.

Spiegel and his team compared the data available from the Civil Administration to that of the Americans, and carried out dozens of overflights of the territories, using private aircraft at great expense, in order to complete the data base.

The findings of the study, security sources say, show an amazing discrepancy between the Civil Administration's data and the reality on the ground. The data in Spiegel's investigation served as the basis for the report on the illegal outposts prepared by attorney Talya Sasson and made public in March 2005.

"Everyone is talking about the 107 outposts," said a source familiar with the data, "but that is small change. The really big picture is the older settlements, the 'legal' ones. The construction there has been ongoing for years, in blatant violation of the law and the regulations of proper governance."

Three years ago, in talks with the Americans, Israel promised that all new construction in the older settlements would take place near existing neighborhoods. The idea was that construction would be limited to meeting the needs of the settlements' natural growth, and bringing to an end the out-of-control expansion over territory.

In practice, the data shows that Israel failed to meet its commitments: many new neighborhoods were systematically built on the edge of areas of the settlement's jurisdiction, which is a much larger territory than the actual planning charts account for.

The data also shows that in many cases the construction was carried out on private Palestinian land. In the masterplans, more often than not, Palestinian properties were included in the construction planned for the future. These included Palestinian properties to which the state had promised access.

However, exploiting the intifada and arguing that the settlers should not be exposed to security risks, Palestinian farmers were prevented access to their properties that were annexed by Israeli settlements.

In many settlements, including Ofra and Mevo Horon, homes have been constructed on private Palestinian land.

"The media is busy with the outposts, but how many of these are really large settlements like Migron? In most cases, it's a matter of a few mobile homes. Spiegel's study shows the real situation in the settlements themselves - and it is a lot more serious than what we knew to date," one of the sources said.

A senior security official expressed concern that with Spiegel's retirement, the data base will not be updated and the data will be lost.

"The [defense] establishment does not necessarily have an interest in preserving this information. It may cause diplomatic embarrassment vis-a-vis the Americans and cause a political scandal. It is not unlikely that there will be those who will seek to destroy the data," the senior officer says.

Other relevant sources said it is necessary for an objective, external source, like the State Comptroller's office, to intervene in this matter.

A statement issued by the Defense Minister's office in response said that "the matter is being examined internally and staff work will be completed soon, and the parts of the report that can be published will be made available. The Defense Minister will discuss the matter with Prime Minister Ehud Olmert."

Meanwhile, construction in the new outposts has intensified. Sources in the Yesha Council say that since the Lebanon War, "Junior officers on the ground are in our favor and in many instances turn a blind eye regarding mobile homes in place."