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Israelis nab 18 in computer espionage case

Eighteen people have been arrested in one of Israel's largest industrial espionage schemes, charging investigators with using sophisticated software to infiltrate competitors' computers.
/ Source: The Associated Press

Eighteen people have been arrested in one of Israel's largest industrial espionage schemes, police said Sunday, charging that business executives and private investigators used sophisticated software to infiltrate competitors' computers.

The investigation implicated a car importer, two 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, but maintained that victims lost competitive bids and thousands of customers because of the spying.

"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.

Among those arrested were the programmers, an Israeli couple living in London.

According to police, a computer programmer developed software known as 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 program 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, police said. Another victim was the main TV cable company, called HOT.

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.

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, the lawyer for one of the suspects.

The program was 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.