Israel denied reports that it agreed to pay millions of shekels in compensation to the family of Ben Zygier, the Melbourne-born Mossad agent who committed suicide in his cell at Ramle’s Ayalon Prison in 2010. Israel’s position, in fact, is that unless negligence is proven in Zygier’s case, there is no legal reason for compensating his family, Channel 2 reported Friday.

Haaretz had reported earlier Friday that a compensation arrangement was made six weeks ago, after Zygier’s family was notified about an internal investigation that concluded the 34-year-old had indeed killed himself in his cell.

The state is reported to be looking into filing negligence charges against those who failed to prevent Zygier’s suicide.

Zygier’s family in Australia has refused to comment on the case. “I really don’t want to talk about it,” his father said earlier this week before hanging up the phone on an Israeli TV reporter. “I’ve lost my son.”

Reports Friday said the family was not told the specific charges that had prompted Zygier’s arrest and incarceration, and nor had the Australian government requested additional information about the case.

A senior Israeli official told The Australian newspaper Friday that Canberra was unlikely to make a request for more information because the Gillard government already had detailed knowledge of the case through the Australian intelligence service’s intimate investigation of Zygier’s activity in Melbourne.

“Every day that goes by you see how deeply involved they were,” the source told The Australian, referring to Australia’s intelligence service. “They interrogated him, they suspected him, they knew many things. It is clear they were in the know long before he died.”

“Then when the coffin was returned to Australia, they knew he was not some backpacker who got lost trekking.”

Meanwhile the long-retired senior Mossad official Rafi Eitan, who “ran” American spy-for-Israel Jonathan Pollard in the 1980s, said Friday it was quite possible that there were other “Prisoner X’s” — people held in Israeli jails under assumed names, as Zygier was, for reasons linked to intelligence work.

Israel is not like other countries, given the regional challenges it faces, Eitan, 86, told Army Radio. “We’re in an ongoing war, that requires certain technologies.”

A top Justice Ministry official told reporters on Thursday that there were no “Prisoner X’s” in Israel and objected to the term, which was widely used at first to describe Zygier before his name became public knowledge. The official said it created the false impression that Israel was some kind of dictatorship or Third World country that strips its citizens of their rights. Zygier had been granted all the rights afforded to him by law, including family visits and a fair judicial process.

“There are no Prisoner X’s in Israel,” said the official. “The allegation that Israel behaved like a dictatorship that makes people ‘disappear’ is nothing but irresponsible and malicious nonsense.” The official added that the entire process under which Zygier was held, and his case handled, was overseen by the most senior legal official in the judicial system.

Zygier’s family was notified as soon as he was arrested, he received legal representation, and he was granted family visits, the official said. He was being tried in a regular criminal proceeding, albeit behind closed doors.

He said Zygier had been granted all the rights and protections due to him under Israeli law. Even the unusual fact that his identity was kept secret was a security measure to which Zygier himself consented, the official said, recognizing that this was beneficial to national security and to his own and his family’s protection.

The official, who spoke on condition of anonymity, did not provide details of why Zygier was arrested, and what charges had been leveled against him. Avigdor Feldman, a defense lawyer who met with Zygier two days before he died, said the 34-year-old father of two had been charged with “serious criminal” offenses and faced many years in prison. Conflicting, unconfirmed reports have indicated that Zygier had spilled Mossad secrets to the Australian authorities or media, or was believed to have been about to do so.

Although he was being held in a top-security jail cell under constant camera surveillance, and was reportedly considered a suicide risk, Zygier killed himself in the bathroom where there were no cameras, Israel’s Channel 2 TV reported on Thursday evening. A transcript of the prison officials’ panicked call for medical assistance to Magen David Adom — “He’s hanged himself,” the caller reportedly wailed — was read out on Channel 10 news.

According to reports, Zygier immigrated to Israel in 2000, was recruited by the Mossad, and worked for the agency for years, including heading a front company that sold electronics to Iran, a country he was said to have visited several times utilizing his Australian passport. Back in Australia in 2009, he was reportedly called in for questioning by Australian security authorities. He was arrested and jailed in Israel in early 2010.

The official did not rule out the possibility that ongoing restrictions on reporting the affair may be further eased, but also stressed that the state would seek equally comprehensive media blackouts in the future, in cases that pose a national security risk.

Official handling of the affair has been greatly criticized in the past few days, since Australian media broke the story. Knesset members used parliamentary privilege to bring the case to the public’s attention by asking about it during a Knesset session. One legislator said he had made a formal inquiry into the matter while Zygier was being held and was assured the matter was being properly handled. And an effort to persuade editors to suppress the story has been derided as anachronistic and heavy-handed.

Dalia Dorner, a former Supreme Court justice and current president of the Israel Press Council, said in a Friday interview with Israel Radio that “self-censorship of journalists is unacceptable.” She added that there’s a possibility that some judges issue gag orders too easily.

Government officials and the military censor’s office, however, have argued that gag orders and other restrictions on the case have been necessary to minimize the damage to Israel’s national security.