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Israeli police have broken up an Israeli-American crime ring specializing in tax fraud and money-laundering in an operation codenamed "American Pie." Seven people were arrested yesterday on suspicion of involvement in massive tax fraud in the United States following a joint investigation by Israeli and American law enforcement authorities.

The suspects, six Israelis and one American, were remanded by the Tel Aviv Magistrates Court yesterday, on charges of money laundering, fraud and forgery.

Further arrests are likely, Israeli police sources say.

The ringleader is allegedly a 62-year-old American named Marvin Berkowitz, an expert on tax, who holds dual Israeli and U.S. citizenship.

The suspects defrauded the U.S. internal revenue of tens of millions of dollars and deposited the money in Israeli bank accounts, according to the police statement.

Police say Berkowitz obtained personal details of inmates in U.S. prisons and then used the data to falsify claims for income tax refunds in their names for the period before their arrests.

While residing in Israel, he is believed to have pocketed around $12 million. Police believe that he fled the United States and settled in Israel in 2003.

The investigation was launched at the request of legal authorities in the United States a few months ago.

Several people were also arrested last month on suspicion of defrauding elderly persons in the United States, following a 'sting' operation in September of last year.

In this case the suspects, who operated out of offices located at the Ramat Gan Diamond Exchange district, are believed to have extracted money from dozens of elderly persons all over the States - telling them they needed to pay fake 'fees' in order to claim supposed lottery winnings.

The first nine suspects in the affair were arrested about six months ago, and the extradition applications filed by the American authorities are currently being deliberated in the Jerusalem District Court. A hearing on the request to temporarily remand 13 others for extradition, filed by the U.S. authorities, is scheduled for this Thursday.