State to indict MAI president
The Economic and Tax Crimes Unit of the State Attorney’s Office has informed Manufacturers Association president Shraga Brosh and his associates that he will likely be indicted for aggravated fraud.
Brosh, his brother Yariv and their accountant, Michael Bar Levav, are being given a pre-indictment hearing before the charges for a NIS 1.5 million tax fraud are finalized, including attempting to cover up the fraud by falsifying documents.
According to the letter of charges sent by the State Attorney’s Office to Brosh’s lawyers, the tax fraud and cover-up scheme centered on an approximate NIS 8.6 million profit that one of their companies made through a sale of shares in 2015.
The sale of shares related to a company that produced natural gas from the Tamar Reservoir.
Only after selling the shares did the Brosh brothers realize that they had incurred a 50% tax rate on the sale, but that if they had incorporated their entity as a family company from the start, they could have paid a far lower tax rate.
While this issue might seem semantic, every kind of tax entity has different costs and benefits, and parties must live with both when they choose how to establish their entity.
Because of the importance of these decisions regarding how an entity is formed, Israeli law requires that an entity that a party wants to establish as a family company must be declared a family company within three months of registration.
Unhappy with this situation, the Brosh brothers, in coordination with their accountant, allegedly concocted a scheme to get the company retroactively registered as a family company so as to avoid the additional tax.
Sometime around June 2016, they allegedly falsified a series of three registration-related documents to present to the Tax Authority as if they had requested the entity be registered as a family company as early as 2014, with the Tax Authority having failed to attend to their request.
Unfortunately for the Brosh brothers, the document they allegedly falsified came from the Tax Authority’s online documents, which had been updated and changed in mid2015.
Although the Tax Authority initially fell for the alleged scam and registered their entity as a family company, a later investigation easily revealed that the document being used could not have been filed in 2014, since the format itself was not even created until mid-2015.
At this point it became apparent to investigators that the Brosh brothers had perpetrated a fraud and cover-up.
In addition to that initial alleged fraud, the Brosh brothers then had Bar Levav as well as an additional accountant present follow-up documents to the Tax Authority in 2016 and 2017, based on the allegedly fraudulent premises that their entity had always been a family company.
The letter to the lawyers said that all of the accountants knew that they were aiding in perpetrating the fraud.
The suspects were arrested in 2018, but to date, Brosh still retains his powerful and influential position as president of the association.
According to its website, the association is the largest organization in the Israeli economy representing the industrial sector. The association even sometimes represents Israel in foreign forums, such as the World Trade Organization.
The association says its objective “is to work for the advancement of the Israeli economy, and industry in particular, as a driving force in the local economy.”
Among its activities, the association “encourages the opening of new factories in Israel and the expansion of existing ones, helps local and foreign investment in industry, grants and long-term loans for factories, promotes professional-technological education in Israel, connects factories to natural gas and improving energy efficiency, reduces regulation and bureaucracy, and shapes Israel’s foreign trade policy.”