Seven years after French law enforcement began receiving complaints about a sophisticated advertising scam operated from France and Israel, hundreds of victims of the 20 million euro ($23 million) fraud are being notified by the French authorities that they will receive partial restitution.
On October 20, for example, La Voix du Nord, a local French newspaper serving the Lille region, reported that a local florist had been notified by authorities that two of the convicted scammers would be required to pay her a total of €14,000. The florist was a victim of the scam in 2013.
The two convicted masterminds, dual French-Israeli citizens Antoine Ilan Frau and Michael Nedjar, were sentenced by a Paris criminal court in January 2018 to two years in prison with an additional three years’s suspended sentence.
According to the newspaper report, other members of the criminal gang that perpetrated the advertising scam are still at large and believed to be in Israel. There were 27 defendants in the case.
Some monies have been recovered from Latvia. Most of the profits from the scam were channeled to Israel, and have not been recovered. Israeli law enforcement authorities have been unhelpful in enabling further investigation of the scam and in recovering the stolen funds, according to the French verdict in the case.
The scam, known as the “arnaque aux annuaires” or the “directory scam,” involved individuals in France who would call or email French small business owners and offer them the opportunity to advertise in a prestigious business directory or a website with supposedly high Google rankings. If they agreed, they often discovered that the fee they had agreed to pay had turned into a recurring monthly charge. Sometimes the fraudulent salespeople told new targets of the scam that they had in fact already subscribed to the monthly service and that the transaction was irreversible.
If a small business owner tried to cancel the charges, they would receive harassing mail and phone calls from bailiffs, lawyers and even police, all of whom were fictional. Some victims reported that the scammers even contacted their family members and neighbors about their supposed unpaid “debt.”
The directory scam is one of the oldest scams carried out by a Tunisian-Jewish group of criminals, some of whom went on to perpetrate the infamous carbon VAT scam. (In 2008 and 2009, multiple groups of fraudsters took advantage of differing tax rules in different EU countries to buy and sell carbon credits, or permission to emit carbon dioxide, on exchanges in Europe. The fraudsters would buy the credits in a country with no value-added tax, and quickly sell them in France or other countries that did charge VAT. Generally, merchants have 90 days to remit the VAT they collect to the French government. The fraudsters took advantage of this time window to divert the money offshore and transfer it through a series of shell companies until it effectively vanished. The French government has estimated it lost €1.6 billion in unpaid VAT taxes this way and the total loss to all European countries is estimated at €5 billion-€10 billion.) According to French journalist Fabrice Arfi, a number of Tunisian immigrants to France began carrying out a version of the advertising scam in the late 1980s.
According to the January 16, 2018, verdict in the criminal case, of which The Times of Israel has obtained a copy, there were 3,000 French victims of the latest directory scam as well as 6,980 individual acts of fraud, totaling a loss of €20 million. The victims were owners of small businesses including delicatessens, car repair shops, plumbers and churches throughout the country. Twenty-seven suspects were tried, some of whom were convicted in absentia because they failed to show up for their trial. Several of those who were convicted, both in person and in absentia, are French-Israeli dual citizens.
‘Israel failed to cooperate’
In 200 pages of matter-of-fact legal prose, the verdict paints a picture of Israeli authorities unwilling to cooperate with their French counterparts.
Antoine Ilan Frau (aka Ilan Frau) and Michael Nedjar, both of whom resided in Israel at the time, are described in the verdict as the masterminds of the scam. The pair were arrested by French police at Roissy Charles de Gaulle airport in April 2016 as they prepared to return to Israel following a business trip to France.
According to the verdict, Frau and Nedjar directed the scheme from Israel while making frequent trips to France to open multiple bank accounts, since banks frequently closed their accounts due to bounced checks from victims of the scam. The pair opened about fifteen companies in France, many of which were nominally headed by French citizens living in Israel, who were paid a fee averaging €3,000 a month to serve in this capacity. A woman named Karine Nedjar served as the secretary of the scheme in Israel while two men, Jacky Freoa and Michael Brakha, according to the verdict, would retrieve mail from the fraudulent companies’ headquarters in France and deposit checks in the companies’ multiple French bank accounts.
More than €15 million of the €20 million stolen by the scammers between 2011 and 2016 found its way abroad, according to the verdict, mostly to Israel.
Frau and Nedjar set up a network of shell companies which they used to open bank accounts in Latvia as well as in the UK, Cyprus, Germany, Romania, Georgia and Slovakia. Money was then transferred from bank accounts in France to these bank accounts abroad. French authorities sent official requests for judicial assistance to all of these countries.
According to the verdict, Latvian authorities told their French counterparts that the principal destination of most of the fraud proceeds in Latvian banks was Israel and that the principal beneficiaries were bank accounts registered in the names of Michael Boukhobza, Ilan Frau, his father Eugene Frau, Michael Nedjar, Jacky Freoa and Yohann Lugassy.
But when the French authorities tried to learn more about these bank accounts, obtain the addresses of the people behind them, or get Israeli banks to freeze these funds, they hit a brick wall, according to the verdict.
“It was not possible to obtain more information or to seize the funds,” the French three-judge panel led by Rose-Marie Hunault wrote in the verdict. “Israeli authorities did not carry out the requests for judicial cooperation that were addressed to them.”
According to Belgian-Israeli journalist Serge Dumont, the author of the 650-page French volume “La criminalité organisée en Israël (Organized Crime in Israel, 2016),” there are between 80,000 and 90,000 French Jews living in Israel. The vast majority are law-abiding.
A minority, however, moved to Israel to avoid criminal prosecution in France as well as to pursue criminal activities from Israel, which has proven thus far to be a safe haven for the vast majority of cybercriminals who operate here. Several hundred French-Israelis own companies targeting French speakers abroad through telemarketing and internet scams, of which the advertising scam is but one instance. Other scams involve forex, CEO fraud, solar panels, diamonds, sports teams and cryptocurrencies. Several thousand French immigrants are estimated to be employed in such enterprises.
According to the verdict in the Frau/Nedjar case, the convicted fraudsters used the services of a notorious now-defunct company known as France Offshore to set up twelve of the shell companies they had used to open bank accounts outside of France. France Offshore’s owner, Nadav Bensoussan, was sentenced to two years in prison by a French court in July 2017, for helping French tax evaders and scammers to launder money through Latvia’a Rietumu Bank to the tune of hundreds of millions of euros.
Among Bensoussan’s other alleged clients were Richard, Mike and Fabrice Touil, Tunisian Jews who are alleged to have been involved in a massive carbon tax fraud scam in 2007-2009. The Touil brothers are currently suspects in an ongoing criminal trial [French] in France.