Tip of the Iceberg of Israeli Organized Crime?

The Margalit Tzan'ani affair that broke this week could shed new light on the increasingly long arm of organized crime, and specifically gang members' determined efforts to enter into a wide range of legitimate business dealings.

The Margalit Tzan'ani affair - involving her alleged connections with convicted crime leader Amir Mullner's gang and mob kingpin Shalom Domrani - is training a spotlight on organized crime's increasing activities in the economic realm. It appears that the gangs are no longer content to control activities such as bottle recycling, sand quarrying or loan sharking: They are trying to gain control of companies that are traded on the stock market, and to serve as mediators in business disputes involving legitimate companies. And they are apparently trying to make inroads in the Mizrahi music industry.

The indictment submitted in March 2010 in Be'er Sheva District Court against the head of a crime gang in the south, Hagai Zaguri, and seven of his "soldiers," reveals involvement in a stunningly large and diverse amount of economic activity. From May 2008 and until his arrest in January 2010, Zaguri managed to establish an organization that spread throughout southern Israel, controlled 15 gambling clubs on land and one on a cruise ship, and engaged in cigarette and liquor smuggling, drug trafficking and loan-sharking.

Margalit Tzan'ani
Oren Ziv

According to the charge sheet, in order to establish itself as an economic power, Zaguri's organization committed a number of violent crimes, including extortion, attempted murder and murder. Yaniv Boublil, a state's witness in the affair, is defined in the indictment as the "organization's economic consultant." The police investigation found that three of the 15 gambling clubs operated by Zaguri in the south took in some NIS 2 million in one year. At least NIS 8 million was distributed in loans by the gang; on some occasions, the rate of interest collected by the organization was as high as 128 percent.

According to data compiled by the Organization for Economic Cooperation and Development, profits raked in by crime groups in developed countries generally range from 3 to 5 percent of a country's GNP. Law-enforcement agencies in Israel estimate that illegal gambling in this country is a NIS 15-billion-a-year business. The value of drugs seized by the police in a given year is estimated at hundreds of millions of shekels. Revenue generated by prostitution in Israel was estimated by a Knesset investigation committee in 2002 as NIS 1 billion a year. And another statistic: Every year, prosecutors manage to seize about NIS 150 million of property held by criminal gangs, before the courts can even hold proceedings related to these cases; in the end, assets worth much less than NIS 150 million usually reach the state treasury.

Dr. Shahar Eldar, an expert on criminal law at Ono Academic College, in Kiryat Ono, who has investigated mob activities in the country - and represented gang leader Asi Abutbul in a Supreme Court proceeding - says that since Israel passed its crime organization law, in 2003, the courts have begun considering indictments involving some traditional areas of organized crime.

"Up to now," Eldar says, "heads of crime organizations who have been convicted in courts were prosecuted for involvement in such activities as drug dealing, threats and extortion, gas-station fraud, including the sale of diluted petroleum, and prostitution. Gang members have yet to be convicted in Israel on illegal gambling charges, but this apparently will happen."

A senior official in the local law-enforcement sphere, who is familiar with organized crime activities, says: "Crime organizations have in recent years decided to establish legitimate enterprises, and to operate them alongside clearly illegal activities. The reason for this decision is simple: They need an organizational infrastructure through which they can launder money and underwrite ongoing activities, and so they can supply loans. Each organization has a money-changing branch, which operates like an actual bank. Sometimes an organization has two or three such businesses. If you already have expertise in collecting debts, why not operate a legitimate debt-collection business? At a later stage, we witness violence in debt collection; that happens when the name of a criminal is used to open doors."

Bar-Moha and his men

For half a year, Jerusalem crime boss Itzik Bar-Moha sat in his prison cell in the Sharon jail and directed a loan-shark enterprise, which was shut down after six months by the police. Investigators discovered that Bar-Moha directed from afar the provision of 370 high-interest loans to some 250 borrowers in Jerusalem, as well as in the center and north of the country. With the assistance of his wife, who sometimes organized conference calls with seven men in the field, Bar-Moha disbursed loans worth a total of NIS 3.3 million. Data compiled in the investigation indicate that he was even more aggressive than Zaguri: He demanded annual interest of 208 percent, and 4 percent weekly, for his loans. Most of the borrowers were made to pay the weekly rate, while the size of the principal loan remained unchanged until the loan was paid off.

Revenue accrued by the organization as a result of interest rates, and often because of collection activities that involved the use of violence, reached a monthly level of NIS 350,000, at least.

For more than a year, the Rishon Letzion Magistrate's Court has been considering a case involving 22 people accused of operating a website for sports gambling, which operated 24 hours a day and allowed people to bet on matches in Israel and around the world. An undercover police investigation, one that went on for 18 months, exposed the site's illegal activity. Each week, police found, site operators calculated users' wins and losses, and the site's representatives would collect the debts. The site is alleged to have generated NIS 290 million of activity while it was in operation. No crime boss has been indicted in the affair, but some of the suspects have been identified as persons with links to the Domrani gang; ultimately, however, prosecutors could not charge Domrani with direct involvement in the affair.

One police source close to the investigation stresses the huge scope of criminal activity in this affair - hundreds of millions of shekels. The source says there is no doubt that the website was operated with the hidden assistance of a crime gang.

Eldar points out that the Japanese crime organization the Yakuza and the Italian mafia in the United States have over the years earned huge sums of money from fraudulent sales of stock of Internet and high-tech companies. Crime gangs entered these areas partly because they promised quick profit.

The senior official in the law enforcement system predicts that crime gangs in Israel will try increasingly to enter similar realms. "When crime organizations enter into legitimate economic fields," he says, "we start to see changes in the ways these fields operate; suddenly, there are threats, violent acts and instances of fraud."

Seizing 'soldiers'

In another case, an indictment was submitted in 2006 against Sagiv Netzia, who had a controlling interest in a company called Orline Development and Investments, and against other employees of the firm. The company was purchased in July 2003 by Aharon Liluf (who committed suicide after the affair was exposed ); Liluf purchased the company via a straw man. Netzia and Liluf were accused of acts of fraud that entrapped stock-market investors in Tel Aviv and artificially inflated share prices; the two suspects also allegedly floated phony stock valued at NIS 10 million, and deposited money from the sale of the worthless stock into their own, or associates', bank accounts. Netzia had apparently also made bogus reports to the stock exchange so that investors would receive a false picture about the company's status.

Last April, Netzia received a five-year prison term and was fined, in the framework of a plea-bargain deal. Attorney Ronen Rosenblum, who represented one of the suspects in this case, confirmed this week that the police investigation unearthed evidence showing the involvement of a crime organization in this affair; no indictments were issued against such a group, however.

One source close to the affair reveals that "the case file had indications suggesting that the Abergil crime gang, headed by Yitzhak Abergil, was behind an effort to gain control of the company, and thereby take control of a legitimate economic enterprise and launder funds, but in the end the leads didn't go as far as [implicating the Abergil gang]." He adds: "The problem is that heads of crime organizations keep their hands clean. They are evasive. It's hard to reach them - you can seize a 'soldier' who works for them, but you can't get to the gang kingpins."

The same Abergil whose gang was thought to have been involved in the Orline affair participated in a well-publicized business dispute that pit the gas and oil exploration company Ratio against the Globus construction firm. Abergil even took part in the selection of a mediator in the dispute, and thus cast his shadow over the arbitration. He recruited crime boss Shalom Domrani as his representative; Domrani turned up at Globus' offices, to summon its directors to an arbitration session at Abergil's home in Kfar Truman.

A lawyer who frequently represents crime figures says: "They're trying to go legitimate, and they look for legitimate economic fields of activity. I think a head of a crime organization would prefer to serve as an arbitrator in a legitimate business dispute, one that can be called 'prestigious,' and exploit his name and reputation as someone who has the last word, than to deal with recycled bottles or gambling activities, even though they also generate money. It appears that even the biggest criminals want to appear in public as legitimate figures."

Well-known crime figures, including Domrani, Amir Mullner, and Meir and Yitzhak Abergil, have served as mediators in business disputes. In some cases, fees earned by a mediator are based on the amount of money paid out in the end.

"I've heard that for such mediation, the head of a crime gang can demand fees worth 50 percent of the sum in dispute," one lawyer says.

The fact that a crime organization, whose "field of expertise" is debt collection, is behind such a mediator provides a sense of security to the side that wins in arbitration; it knows that the mediated settlement is likely to be implemented.

In any event, revelations in the Tzan'ani affair, which police investigators seem to see primarily as a case against Mullner's crime gang, have only just begun to come to light. This week, persons close to the investigation insisted that the affair represents just the tip of the iceberg. They claimed that it constitutes just one small part of intensive activity being undertaken by crime organizations in any area where large sums of money are involved - and these include Mizrahi music.