Man Sentenced to 22 Months for $11 Million Tax Fraud Scheme

A Jerusalem court has sentenced a man to 22 months in prison for his role in a scheme involving fictitious invoices totaling NIS 42 million (approximately $11 million) between 2018 and 2020. The sentence, handed down by Deputy President of the Jerusalem District Court Ram Vinograd, is considered lenient for such offenses, which are often described by courts as a 'plague on the state.' The proceedings continue against Yitzhak Schreiber, whom the state alleges played a more significant role in the crimes.

The convicted man, who owned the manpower company Migdalor Human Resources, which supplied crane operators to construction sites, agreed to a plea deal. As part of the criminal plan, his company would supply crane operators, paying them partly in cash and partly with reduced salary slips. To lower Migdalor's tax liability and facilitate the withdrawal of cash wages and other payments, fictitious tax invoices were issued in the names of various businesses for 'crane services.'

To create an appearance of legitimate business activity, bank transfers and checks were made to the accounts of these businesses against the fake invoices. The funds were then withdrawn in cash, through methods like check discounting and bank withdrawals, and used for cash salary payments, payments to group members, and other undeclared expenses. The man pleaded guilty to dozens of severe tax offenses, including income tax and VAT violations, which carry potential sentences of up to seven years per offense. An original charge of obtaining property by aggravated fraud was dropped as part of the plea agreement. He also admitted to aiding in illicit financial transactions under money laundering laws, rather than directly committing them.

The state had sought a 42-month sentence. The defense argued that the man and his wife have debts of NIS 2.4 million, and the Tax Authority imposed a NIS 1.8 million penalty. The couple and their six children are facing eviction from their home to sell it to cover debts. The defense proposed a sentence of 12 to 30 months. The defense claimed the man was led into the scheme by Schreiber, but the judge noted this was not supported by the amended indictment.

Judge Vinograd stated that the scale of the convicted man's actions represented a significant blow to protected values, describing the scheme as sophisticated and systematic, involving repeated use of fictitious invoices and substantial financial transactions. Despite the severity, the judge cited the man's confession, which saved court time and indicated remorse, his agreement to forfeit significant assets, and his participation in a rehabilitation program as reasons for the lighter sentence. The parties agreed to the forfeiture of NIS 270,000 from the man's assets and NIS 1.4 million from Migdalor's funds. A NIS 10,000 fine was imposed, with the judge noting the man's difficult financial situation made a larger fine impractical and could lead to an extended prison term.