Israeli law enforcement officials say they want to question Lev Leviev, the business baron whose companies allegedly are at the center of a vast diamond-smuggling ring that has operated for years.
Among six people the police detained for questioning Monday are two of Leviev’s relatives and four people who are or have been involved in his companies in Israel and Russia. The police have asked a court to extend the detention of the six suspects.
A source close to the Uzbekistan-born Leviev said he might return to Israel voluntarily for questioning.
“This is an investigation that began at the end of March 2018,” a police spokesman said, putting a value on the suspected offenses of $81 million (300 million shekels). “The criminal offenses are attributed to all the suspects in the operation, in the framework of their work with [Leviev diamond company] LLD, with the exception of one suspect.”
Amit Hadad, the lawyer for one of the Leviev relatives, said his client did not work for LLD.
“True, he owns 1 percent of the shares, he was chief executive and was replaced in 2011 by Zvulun Leviev,” the police spokesman said, adding that there was a dispute in the Leviev family.
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LLD responded in a statement: “Mr. Leviev and the companies under his control are acting in accordance with the proper norms, while adhering to the law, and we hope that the matter will soon be clarified and the suspicions proved baseless.”
In his decision to extend the suspects’ detention, Judge Guy Avnon wrote: “Let it be said that the suspicion is that hundreds of millions of shekels have been smuggled into Israel over many years, and that I have found documents linking the suspects to the offenses. There are more-senior people and less-senior people involved.”
The arrests followed the arrest of a so-called mule at Ben-Gurion International Airport months ago. That triggered a joint police and customs investigation; the state suspects that for years people working for Leviev took part in a diamond-smuggling operation.
The police and tax authorities suspect crimes including money laundering, the breaching of tax laws, conspiracy to commit a crime, the forging of documents and fraud.
A witness for the state, whose name arose in connection with another corruption case, is helping the police in the investigation, the details of which are under a gag order imposed by Judge Avnon at the Rishon Letzion District Court.
The investigation began a few months ago when customs officers at Ben-Gurion Airport by Tel Aviv caught a man, associated with Leviev's business group; the man was suspected of trying to smuggle diamonds worth hundreds of thousands of shekels into Israel. He and a person accompanying him tried to pass through the "nothing to declare" path.
The police questioning the two suspects led them to believe that they had uncovered a vast diamond-smuggling business, which had been managed by the state's witness. With his cooperation, an undercover investigation began.
The probe lasted several months and found evidence of methodical diamond smuggling into Israel.
The extent of the smuggling may have reached hundreds of millions of shekels, all within the framework of Leviev's group.
However, as said, the police have arrested his brother. Sources in the diamond industry and in the brothers' social circle claim the two have been fighting for years and have not been in touch during that time. However, the brother could still own shares in Leviev's businesses.
Among the six arrests is the former manager of a diamond polishing plant that Leviev owns in Russia. The others all work or worked for his companies in Russia and in Israel.
The man who broke De Beers
Lev Leviev was born in the Soviet Uzbek Republic and immigrated to Israel at age 14. He became one of the world’s most successful and diversified businessmen. Leviev is most famous for cracking the monopoly over the world’s diamond market held by the De Beers cartel back in the 1980s.
He also invested heavily in construction and real estate, including through publicly traded companies in Israel, in locations ranging from the West Bank to Wall Street. The real estate company most associated with his name was Africa Israel Investments, which he acquired from Bank Leumi, and which wound up in a debt arrangement with creditors. In September, the court approved Africa Israel's takeover by Israeli businessman Moti Ben-Moshe and assured that bondholders would get most of their money – 2.3 billion shekels out of the 3 billion owed to them.
Though a hero to the Chabad ultra-Orthodox movement to which he belongs, including for his expansive philanthropic endeavors, Leviev has been criticized, and his businesses boycotted, over construction projects in West Bank settlements. He has also been dogged by accusations of abuse at gem mines in Angola.
The close relationship between Leviev and Russian president Vladimir Putin has been widely reported.
Leviev had been targeted by multiple inquiries in recent months, but the enforcement authorities say the present the investigation is confined to his diamond business.
Why his group might be involved in smuggling diamonds the first place is unclear. A diamond company's tax is based on sales turnover, not profit. Therefore, there is no tax advertising in smuggling diamonds into Israel unless they were then smuggled back out, and the sale was registered in some third country with lower tax rates (such as Belgium or Dubai).
One reason to smuggle could be that the stones were of dubious origin; either their seller had no license to market them; or they were mined illegally, for instance. In any case, bringing them into Israel without declaring them is illegal.
Eyal Besserglick, lawyer of one of the suspects (who is not kin to Leviev), said he is confident the suspicions will be disproved, and stated that his client has nothing to do with the whole affair. "He worked with the businessman more than six years ago and there is no evidence linking him to criminal activity," Besserglick said.
Another unclear aspect is how this case will affect Israel's diamond industry. On the one hand, Leviev is one of the biggest raw diamond importers in the country; his businesses supply work to dozens of other companies that polish and market the stones through the Ramat Gan Diamond Exchange. These companies employ hundreds of people. If his business hurts, so may dozens more. And this is not a good time for the Israeli diamond business: demand has been tanking and profits are down.
On the other hand, the businessman in question mines the stones partly in Russia, where the name of the game is ties in the Kremlin. In this respect, his business is apparently safe.