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At 9:15 A.M. yesterday in the courtroom of Judge Khaled Kabub of Tel Aviv District Court, the attorney representing Gregory Lerner made an announcement that shocked everyone present, not least the judge himself. Fifteen minutes later, the evidentiary stage of the proceedings - involving suspicions that Lerner defrauded some 2,500 investors of some NIS 62 million - was to begin. Government tax experts were preparing to screen a video presentation documenting parties Lerner organized for his investors, many of them immigrants from the former Soviet Union.

The prosecution prepared the presentation carefully, assured that everything was going smoothly, not knowing that all of their plans would soon be sidelined.

As the hearing began, Lerner's attorney, Eitan Inbar, suddenly rose and declared: "The defense does not intend to present evidence in this case."

In a written statement to the judge, he explained: "Tomorrow a petition will be filed to the High Court on whether the plea bargain reached between the two sides after year-long negotiations is binding upon the state."

Inbar then asked to include his declaration in the protocol, and to cancel the evidentiary hearings scheduled for the rest of the trial.

Over many months of negotiations, lawyers on both sides had worked out a plea agreement. Indeed, Inbar said defense attorneys had already agreed with prosecutors that Lerner would be sentenced to nine years' imprisonment, but at the last minute State Prosecutor Moshe Lador refused to authorize the arrangement, without bothering to clarify his decision.

"After a year of negotiations, we received a letter stating that the state prosecutor is unwilling to reach any kind of plea bargain - without offering any reason," Inbar told Haaretz.

According to the indictment, Lerner placed announcements in Israeli Russian-language media outlets calling for investment in his company in return for generous interest payments, and presented himself as a businessman specializing in the international gasoline trade.

Instead, Lerner allegedly transferred the money given to him to sources abroad, after which he presented those same investors with fictitious, gasoline sales-related transactions with nonexistent or shell companies.

Yesterday, Judge Kabub sought to determine whether Inbar's announcement was actually tantamount to an admittance of guilt. In the interest of clarity, the attorney responded: "After the petition is filed, the suspect will admit to the charges ... The defendant confesses to the charges attributed to him, but requests not to announce this formally, as such."

When the judge asked whether Lerner was aware of his attorney's actions, he rose and said: "I agree with what my attorney has said." With that, the hearings were summarily canceled.

Inbar said his client's petition would be filed today. Lerner may find that the sentence meted out by the High Court is far tougher than the nine years he would have served under the plea bargain.

A Justice Ministry official told Haaretz: "No plea agreement was reached in the case, and in any event, the state prosecutor did not cancel an unrecognized plea agreement at the last minute."