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Government sources believe that one of the aftereffects of the massive money-laundering and illegal organ trading case that broke this week will be a sharp decline in donations to Israeli yeshivas, particularly those linked with the ultra-Orthodox party Shas and its spiritual leader, Rabbi Ovadia Yosef.

Three New Jersey mayors and several rabbis were arrested last Thursday in a sweeping federal investigation into political corruption that also uncovered human kidney sales and money laundering from Brooklyn to Israel.

Sources say that the wave of donations received by Israel's Sephardic yeshivas will significantly diminish as the scandal breaks, even by Jewish bodies unrelated to the affair who want to distance themselves from it.

One of the main suspects in the money laundering case is Rabbi Eliyahu Ben-Haim, who is a close associate of Rabbi David Yosef, Ovadia Yosef's son. Ben Haim is also very active in the Yechavei Da'at organization, headed by Rabbi Ovadia Yosef's family.

David Yosef heads the Yechavei Da'at kolel, an institute for advanced studies of the Talmud and rabbinic literature, in Jerusalem. Ben-Haim has helped elicit donations from rich U.S. Jews for the institution in the past. These donations are expected to cease.

Another suspect in the case is Rabbi Edmond Nahum, who is considered to be a close confidant of Rabbi Ovadia Yosef himself. Nahum also transferred donations to the Yosef family.

The Israel Police is set to investigate several Sephardic yeshivas, among them those linked with Shas, under suspicion of money laundering as related to the case. Police sources speculate that the investigation may expand to include banks that may have been involved in the possible money laundering operation.