Police suspect that senior Balad officials have systematically transferred millions of shekels to the party's coffers illegally while carrying out a number of fraud offenses.
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Details of the investigation, which began a few months ago, were released on Sunday morning, as police searched a number of homes and offices. More than 20 people have been detained for questioning, including senior party members such as former secretary-general Awad Abd al-Fatah and members of Balad's political bureau and central committee.
Balad's Knesset members were not investigated by police.
Haaretz reported the investigation in June, when the party linked it to a report on Balad's funding in the 2013 local elections that was submitted to the State Comptroller's Office in March. Balad MK Basel Ghattas said then that "this is about a report on the funding of the 2013 elections." A party official noted that at least 150 people were investigated or testified.
On Sunday, police confirmed that "the investigation began with the authorization of the [former] attorney general, according to the recommendation of the state prosecutor and following the findings of the state comptroller's report."
The police said the comptroller report's findings and a covert investigation consolidated suspicions that senior Balad officials allegedly misrepresented the source of millions of shekels that made their way to the party's coffers and were used to fund its activities while deceiving authorities. They suspected the funds were ostensibly obtained from different sources in Israel and abroad were falsely reported as having been originated from hundreds of local donors.
Balad vehemently denied the allegations on Sunday morning, saying that "this is another dangerous escalation and another element of the political persecution campaign against the Arab minority in general and against the political parties in particular. Balad strongly rejects the allegations against it and against its members, and emphasizes that it manages its party and financial matters in accordance with the law."
Referring to Sunday morning's raids, the party said "it was carried out under a general climate of fascism and racism against the Arab public as a whole. All of the attempts at political persecution of Balad have failed, and here too it will become clear that a mountain was made out of a molehill."