Israeli Contractor Sentenced to Prison for Fictitious Invoice Tax Fraud

A construction contractor, Daoud Alhai, has been sentenced to nine months in prison and fined for serious tax offenses related to fictitious invoices. The Petah Tikva Magistrate's Court also fined his construction company.

Between June and November 2017, Alhai's company received eight fictitious invoices totaling approximately NIS 2 million from a legitimate company, despite no actual transactions occurring. Alhai, a director and shareholder, then deducted the input tax credit, amounting to about NIS 300,000.

Alhai collaborated with Mordechai Plotzer, who was convicted last year for distributing the fictitious invoices. Plotzer had taken control of a company without its owner's knowledge and used it to issue the fake invoices to Alhai's firm. In return, Alhai paid Plotzer 3% of each invoice's value. To conceal the scheme, Alhai's company issued checks to Plotzer's controlled company, which were recorded in the company's books. Alhai also had Plotzer personally guarantee these checks.

Plotzer cashed some checks, kept NIS 60,000, and returned the rest in cash to Alhai. Alhai's purchasing manager, Nader Alhai, cashed most of the checks. A portion of these funds was used to pay workers from the territories who worked at one of Alhai's event halls and for repairs at the same venue. Ultimately, all funds paid by Alhai's company to Plotzer's shell company were returned to Alhai in cash.

The court considered the defendants' lack of responsibility and the lengthy trial, as well as Alhai's prior criminal record, which did not involve tax offenses, and the company's previous settlements. However, the court also factored in the full restitution of the illicit gains. Alhai received a nine-month prison sentence, a suspended sentence, and a NIS 50,000 fine. His company was fined NIS 50,000, and Nader Alhai was sentenced to 100 hours of community service and a NIS 10,000 fine.

Alhai's legal representation stated they respect the court's decision but believe the sentence is disproportionate, given that the financial restitution was made years ago and the trial was lengthy. They intend to appeal the verdict.