In November 2010, then-State Comptroller Micha Lindendstrauss caused an earthquake in the health system by publishing a special audit report on Meuhedet Health Services. The report, described as one of the harshest reports ever issued by the State Comptroller, depicted a series of corrupt acts by management and individuals in Israel's third largest health fund, which has one million policyholders.
Lindenstrauss referred six separate affairs examined in the report to the Attorney General for a decision on whether or not to open a criminal investigation. A criminal investigation was subsequently opened that cast suspicion on former senior Meuhedet executives, many of whom were also arrested.
This large-scale investigation led to today's indictments. The Tel Aviv State Prosecutor's Office (taxation and economics) today filed indictments against 11 accused and 10 companies in the affair in the Tel Aviv District Court.
The accused are being charged with bribery, aggravated fraud, false registration in corporate documents, use of a forged document, money laundering, tax violations, and many other offenses.
The accused include former Meuhedet advertising department head Yehuda Eliash, former Meuhedet Jerusalem district manager Moshe Hevroni, Avraham Siboni, Yosef Meir Senior, Aviad Levy, Nahman Ben David, Freddy Gad Pitusi, Eliyahu Arush, Raid Haj Yehie, Khaled Tamimi, and Zvi Lemberger.
The case against Yigal Nahumi, Aliash's former deputy, who was represented by Adv. Yinon Sartel, was closed, following a hearing conducted for him.
The indictment states, "In their actions, the accused fraudulently diverted the Fund's money received from the Ministry of Health for health purposes to forbidden marketing activity, while deceiving the Fund, the auditors, and the Ministry of Health."
According to the indictment, Meuhedet paid marketing companies over NIS 40 million in 2003-2008 for recruiting policyholders from other health funds on the basis of fictitious invoices.
11 companies related to the accused, through which some of these payments were made, were also indicted. The indicted companies are Or Yitzhak, Or Shlomo, Masivi Kidum Briut, Shever Shivuk Vekoah Adam, A.N. Or Hahesed 2005, Atid A.S.R. Medical Services, Senior Capital, Mt. of Olives, Kids Refuah Veyiutz, and Gesher Hahayim.
Illegal policyholder recruitment
By law, the health funds are entitled to use marketing agents, and to offer supplementary medical services to their members, such as supplementary insurance. A fund is forbidden, however, to use agents to recruit new policyholders from other health funds, or to market supplementary insurance to anyone other than its policyholders.
All expenses for self-marketing, including marketing efforts directed at policyholders of other funds, are subject to the annual spending ceiling set forth in the marketing regulations, and to the ban on using sales agents and sales representatives.
As described in the indictment, Eliash, one of the main figures in the case, who headed Meuhedet's advertising and marketing department in 1992-2007, is accused of illegally contracting with agents and sales representatives to recruit new policyholders for the fund.
The indictment alleges that in order to conceal this forbidden activity, Eliash, in cooperation with the marketing agents, instituted a system of false accounting records, in which the forbidden money paid to external marketing companies for recruiting new policyholders from the fund's budget was represented as money spent on marketing supplementary insurance and additional services for the fund's policyholders - permitted activity that is not subject to the budgetary restrictions.
Hevroni, Meuhedet Jerusalem district manager in 2001-2007, is accused of recruiting a chain of clinics in the Arab sector with 38,000 patients who were members of Leumit Health Fund, and turning them into clinics exclusively for Meuhedet. Patients of the chain wishing to obtain treatment from it were forced to switch to Meuhedut.
Hevroni and Aliash are accused of illegally promising the owners of the chain, without written documentation, NIS 275 for each patient switching to Meuhedet, and concealing the agreement from the fund's management and finance committee.
According to the indictment, Aliash transferred over NIS 10 million in forbidden payments to the owners of the chain through marketing companies owned by Avraham Siboni, one of the accused, who was Meuhedet's chief marketer in the Jerusalem district, and through a marketing company owned by former Israel Bar Association general director Adv. Yuri Guy-Ron and his wife, Kinneret.
According to the State Prosecutor, the marketing companies were paid NIS 7 million for these actions, thereby serving as the sole channel for transferring money from Meuhedet to the chain of clinics and for the production of fictitious invoices. "The fund paid a total of over NIS 17 million for recruiting policyholders from the clinics, for which the marketing companies supplies the fund with fictitious invoices," the indictment states.
The indictment states that Aliash asked the lawyer who represented the clinics for a bribe. Aliash is also accused of transferring tens of millions of shekels over the years to the marketing companies owned by Siboni and the Guy-Ron couple, involving a conflict of interest, since they employed Aliash's relatives in their companies.
Fictitious invoices
According to the indictment, Siboni issued fictitious invoices totaling over NIS 50 million. In addition, given the large-scale income produced by his activity with Meuhedet, Siboni is accused of conducting a system of false invoices for the purpose of evading taxes on this income by fraudulently inflating his companies' expenses.
Yosef Senior, a relative of Eliash, is accused of cooperation with Siboni in defrauding the Israel Tax Authority by distributing fictitious invoices for large amounts through his companies. It is alleged that these invoices were designed to give the impression that Senior's companies had provided various services to Siboni and his companies.
The indictment charges the accused with a series of other offenses relating to the fictitious invoices and money laundering. Also listed in the indictment are offenses involving discounting of the fictitious invoices produced by Senior, and tax violations by doctors and clinics in the Arab and haredi (ultra-Orthodox) sector.
The affair involved a joint investigation by the Israel Police (Lahav 433 unit), the Jerusalem investigative tax assessor, Jerusalem customs duties and VAT investigators in the Tax Authority, and the Israel Money Laundering Prohibition Authority.
The indictment was filed by Advocates Noam Uziel, Tal Tabor, and Adi Appleboim-Gruzman.
Published by Globes [online], Israel business news - www.globes-online.com - on December 31, 2015
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