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updated 5/31/2011 2:29:53 PM ET 2011-05-31T18:29:53

One of Israel's wealthiest families has kicked up a furor for doing something the country's leaders have campaigned against for years: trading with Iran.

The Ofer Brothers Group is now facing a widespread public backlash, fueled not only by its alleged dealings with Israel's fiercest foe but also by popular sentiment against the fabulously rich and new friction between Israel and the U.S. over the affair.

"I think this is very serious. We preach to the world to impose sanctions on Iran, and it turns out that an Israeli company might be involved in dealing with them," said Nachman Shai, a lawmaker with the opposition Kadima Party.

He said it would be critical to find out what the government knew, wondering whether other Israeli companies have illicit dealings with Iran. "I have lots of questions and no answers," he said.

The scandal has entangled a family that many Israelis love to hate because of the vastness of its holdings in the heavily centralized Israeli economy.

Octogenarian brothers Sammy and Yuli Ofer own Zim Integrated Shipping Services, one of the world's biggest container shipping companies, and control The Israel Corp., Israel's largest holding company, with assets in shipping, chemicals, energy and transportation. They also have holdings in real estate and banking.

This year Forbes magazine estimated their fortune at $10.3 billion, ranking them among the world's wealthiest men and putting them among Israel's most generous and high-profile philanthropists.

Last week, their reputation took a major hit when the Ofer Brothers were among seven foreign companies sanctioned by the U.S. for doing business with Iran that helps fund its nuclear program. The Ofers were accused of selling an oil tanker to Iran through a Singapore subsidiary.

The brothers have not commented publicly on the matter. Through a spokesman, they have said the $8.5 million deal, small for the massive conglomerate, was conducted unwittingly with an Iranian shell company. Nonetheless, the company said it was embarrassed.

Such explanations have done little to calm the uproar.

Israeli leaders repeatedly have identified Iran to be the greatest threat to Israel. Israel, like most of the international community, believes Iran is developing nuclear weapons, despite its denials and its concerns have been heightened by Iranian calls for Israel's destruction and Tehran's support for anti-Israel militant groups.

The sale of the ship could violate Israeli law as well, under legislation barring ties with an enemy state. The Ofers may also have run afoul of this same law by transporting Iranian oil — an activity not outlawed in the U.S.

Prime Minister Benjamin Netanyahu denied the family's claims that the government authorized its activities.

"The prime minister's office did not authorize these contacts," a Netanyahu associate cited the prime minister as telling parliament's foreign affairs and defense committee on Monday. "They were not authorized to go (to Iran) or to deliver cargo to Iran. We have a clear-cut policy on this matter."

The associate spoke on condition of anonymity because the meeting was closed.

Calls for a criminal investigation into the Ofers' dealings with Iran are mounting, and the attorney general's office said it was considering a probe.

"The attorney general undoubtedly has to order a criminal investigation because we are talking about a grave criminal offense," Israel Radio's legal affairs analyst, Moshe Negbi, said on Tuesday. "We have a law that explicitly forbids trade with the enemy, carrying a penalty of (up to) seven years' imprisonment."

The recently retired head of the Mossad, Meir Dagan, said this week that the case had been blown out of proportion. Israeli defense officials said a joint investigation with the U.S. concluded the Ofers had not committed any security offenses. A TV report Tuesday hinted that the Ofers have worked with Israeli security in the past. It cited anonymous defense officials but gave no evidence.

The U.S. sanctions, which ban the Ofer Brothers and their Singapore subsidiary from obtaining U.S. export licenses and American bank loans topping $10 million, came at an embarrassing time.

Netanyahu was in the U.S., winding up a strained visit to Washington in which he publicly differed with President Barack Obama over Mideast peacemaking. Throughout his visit, Netanyahu repeatedly voiced concerns about the Iranian nuclear program.

The affair, known as "Ofergate" in the Israeli media, is the latest public relations fiasco for the family. Critics have long charged they were allowed to buy up privatized government assets, including the Zim shipping company, on the cheap. The family's chemical and energy businesses have also been accused of polluting the environment and playing a significant role in the alarming shrinking of the fabled Dead Sea.

Several years ago, the Ofers took a beating in the media after Sammy Ofer, an art collector, withdrew a planned $20 million donation to the Tel Aviv Museum of Art after other donors objected to naming the museum for him and his wife. The shipping magnate later gave large donations to an Israeli hospital around the corner from the museum and to Britain's national maritime museum.

Some critics saw a pernicious sign of the Ofers' influence when major television channels refused to broadcast a documentary film about the connection between big money and government in Israel that focused on the family. Eventually the film was broadcast on state TV after the station agreed to show a filmed response produced by the Ofers.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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