18 in Isreal Accused of Spying

Israeli authorities have cracked a large industrial-espionage ring in which top business executives and investigators allegedly used sophisticated software to infiltrate their competitors' computers, police said Sunday.

The probe implicated car importers, cell-phone providers and the nation's main satellite television company. Police said they were still sifting through documents and computer files to figure out the extent of the damage.

"This is one of the gravest scandals in ... industrial and market espionage in Israel," said police Superintendent Roni Hindi, head of the special fraud investigation team.

Police said 18 people are in custody, including the software programmers, an Israeli couple living in London.

According to police, a computer programmer developed special software, called a Trojan horse, on behalf of three of the country's largest private investigation firms. The private investigators then sneaked the program into the computers of their clients' major competitors via seemingly benign e-mail attachments.

The Trojan horse gave the private investigators complete access - over the Internet - to their victims' computers, police said.

Police accused a car company that imports Volvos of spying on another company that imports Volkswagens. Two cell phone companies, Cellcom and Pele-phone, were accused of spying on a third company, Partner, the local branch of Orange, police said.

Other victims included the main TV cable company, called HOT, a leading bottled water company and the local branch of Ace Hardware.

Victims lost competitive bids and thousands of customers because of the spying, police said.

Police were unable to estimate the extent of the damage from the espionage, but "it appears we are talking about a lot of money," Hindi said. "There are also companies abroad that were damaged. This is still being investigated," he said.

Many of the 18 people arrested in recent days in the case denied breaking the law. The case was under a gag order until Sunday.

"The software is totally legal. The question is if the use that my client made of the software was illegal - and the answer is definitely not," said Ofir Katz Neriah, a lawyer for one of the suspects.

Those arrested included a top executive from the YES satellite television company, security officials who worked for Pele-Phone and Cellcom, and several private investigators. Shares in Bezeq, which owns Pele-Phone and controls YES, dropped as much as 3.4 percent on the Tel Aviv exchange following release of the news.

The program was allegedly designed by Michael Haephrati, 41, who was arrested last week in Britain along with his wife, Ruth Brier-Haephrati, 28, police said. The two were detained pending a June 3 extradition hearing.

Police were first tipped off to the espionage when author Amnon Jackont began discovering that excerpts of a book he was in the process of writing were showing up on the Internet. More documents from his computer began appearing on the Internet, and someone tried to use his bank details to make transactions.

Jackont realized his computer had been invaded and told police he suspected the spy was his stepdaughter's ex-husband - Michael Haephrati.

Rami Shalmor, a top executive at Shalmor Avnon Amichai advertising, said the program was planted on the computer of one of his account executives and was in their system for two or three weeks before it was discovered.

"Even if it is planted for 10 minutes, it is liable to wreak terrible damage by draining all the information on the computer," Shalmor told Army Radio.

Shalmor said the spies, whom he declined to identify, tried to find out about marketing campaigns of their competitors so they could counter them.

He said he had no idea how much damage was done, but "I imagine there will be civil suits here."

by Ken Sanders www.dissidentvoice.org

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