Israeli Police Investigating ‘sickness’ of Industrial Espionage

Fear of infiltration is again sweeping Israel. This time, though, the threat isn’t a cross-border raid by Arab terrorists. Instead, the uncovering of an industrial espionage ring has Israelis running to their computers.

It began Sunday, when police announced the arrest of at least 18 people from top Israeli telecommunications companies — including licensed private investigators — on suspicion of using a “Trojan Horse” virus to steal secrets from competitors’ software.

“This is one of the gravest industrial and corporate espionage scandals ever in Israel,” said Roni Hindi of the Tel Aviv police fraud squad.

The companies said to be under investigation included mobile telephone providers Pelephone and Cellcom, and the satellite television service YES. Those traded publicly took a tumble.

But the shock was felt beyond the privileged ranks of the shareholders.

“In a country where there is a national ethos of military secrets and everyone competes aggressively with everyone else, the idea of a rival sitting on your computer or servers is distressing,” wrote Guy Rolnik of the Israeli business magazine The Marker. “Now this can also be explained as another expression of the erosion of established norms in Israel.”

By Monday, even The Marker had become unwittingly embroiled in the affair, with police saying it may have been targeted by a Trojan Horse.

So too was The Marker’s rival, Globes. The concerns reached as high as the Knesset, where National Religious Party lawmaker Shaul Yahalom demanded that all parliamentary computers be scoured for spy software.

The Justice Ministry announced it was setting up a computer-fraud unit. The move could not be more timely, given reports that the Trojan Horse virus found in Israel may be linked to similar espionage cases in Europe and the United States.

It all began with a prank. Last November, Israeli author Amnon Jacont was astounded to discover, on the Internet, extracts of a novel he was writing secretly.

An investigation led police to conclude Jacont was a victim of a Trojan Horse virus planted by Michael Haephrati, an estranged former in-law of Jacont’s wife. Haephrati, a London resident, is believed later to have peddled the spy program to the Israeli telecommunications firms under investigation.

Israeli authorities have asked Britain to extradite Haephrati.

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