Israeli Government Controls Broker Dealer, Appoints Directors, to Pursue Israeli Political Interests
(Washington D.C., April 8, 2024) – Israel Bonds should register as a foreign agent under the Foreign Agent Registration Act (FARA) because it is fully controlled by the Israeli government, its directors are political appointees of the Israeli government, and it acts to advance the discretionary political interests of the Israeli government, all of which require it to register under the Act, said DAWN in a referral to the Department of Justice's FARA Unit submitted today. DAWN further urged the Departments of State and Treasury to investigate Israel Bonds for potential violations of Executive Order 14115 prohibiting material support for violent and destabilizing settlements and settlers in the West Bank, and in particular, to sanctioned individuals and entities.
"The Justice Department has been sitting on very clear and convincing evidence that Israel Bonds is acting as a foreign agent for Israel while failing to register under FARA," said Sarah Leah Whitson, Executive Director of DAWN. "Meanwhile, Israel Bonds is raising untraceable funds that it can't prevent from flowing to the extremist, violent settlements on which the Biden Administration has imposed financial sanctions."
Israel Bonds
Israel Bonds, the U.S. based underwriter of debt securities issued by Israel, was launched in 1951 and registered with the Securities and Exchange Commission in 1955 as a brokerage to raise funds from the Jewish community — first in the United States and then around the world — in the early years of the State of Israel, which was struggling financially at the time. Since then, Israel Bonds has developed into a full-time operation with branch offices across the United States, exclusively selling Israeli government issued bonds, not only to individuals, but also to investment funds, pension funds, civic and religious institutions, and local state governments. According to the Israel Bonds website, an "Israel bond is a loan you can make to the State of Israel" and is "backed by the full faith and credit of the State of Israel."
For decades, Israel Bonds has raised billions of dollars and lobbied to change laws in U.S. states to support the political and public interests of the government of Israel by targeting the American public, while avoiding the mandatory oversight and transparency the FARA statute requires. In light of this conduct, DAWN has previously urged the Justice Department to require Israel Bonds to register as a foreign agent.
Just after Israel's military campaign began, Israel Bonds launched a campaign to raise funds for Israel's war effort. On October 10, Israel Bonds announced in a Twitter/X post:
Israel Bonds has launched an international campaign to raise funds for the Jewish state that is at war. Invest in Israel bonds to provide the nation with financial resources at its darkest hour.
The social media post included a link to register to purchase bonds.
On its website, Israel Bonds presented a video message from Israeli President Isaac Herzog, in which he rallies "unwavering support for the Jewish state and emphasizes the crucial role of Israel Bonds during this time of conflict and war." In the video, President Herzog notes that Israel Bonds has been acting on behalf of Israel for eight decades and calls for Americans to at now:
Israel Bonds served as a primary organ of the Jewish people in building the infrastructure of our young country. And it is no surprise that it is there for us now, helping mobilize world Jewry in immediate and urgent action for the state of Israel. I applaud Israel Bonds and I applaud each of you; each and every one of you is stepping forward to do your part to help our people in this critical hour. I encourage all of you to continue supporting Israel through Israel Bonds and through every other means.
On October 12, 2023, Israel Bonds President and CEO, Dan Naveh posted a video to Twitter/X to solicit the public to purchase Israel Bonds and in which he touted bond purchases by state and local governments in the U.S.:
As of Saturday, just hours after Hamas started a vicious and murderous attack on the citizens of Israel, Israel Bonds launched a campaign in support of Israel. In a few days we raised $200 million, of which $150 million came from state and local governments such as New York, Florida, Texas, Ohio, Pennsylvania, Illinois and Palm Beach County, as well as from thousands of Israeli supporters around the world…If you ask yourself, what can I do for Israel, go today on israelbonds.com and make an investment in Israel Bonds. Exercise and express your support for the state of Israel and its people.
Plausible sanctions violation
Funds that Israel Bonds raises in the United States go to the general budget of the State of Israel, which the government allocates at its discretion. After the Hamas attacks of October 7, 2023, Israel Bonds began specifically advertising and soliciting purchases by stating that proceeds will go toward the Israeli war effort and has sold almost $2 billion in bonds in the United States as part of this campaign. In addition, Israel Bonds imposes no restriction on how the Israeli government distributes the revenues from the sale of the bonds, nor does it require the Israeli government to ensure that such revenues are not used in violation of U.S. laws and regulations, including Executive Order 14115 (the "Executive Order"), which prohibits providing material support to designated violent settlers and settlements.
The Israeli government is the largest funder and protector of unlawful settlements in the Occupied Palestinian Territories, including through indirect financing and material support of violent settlers. Israeli governments fund settlements and outposts, as well as the infrastructure (roads, water, electricity, etc.) to support them, from its general budget each year. In the 2023 budget, $107 million was allocated to the Settlements Division of the World Zionist Congress, "a semi-government agency whose task is to fund and develop rural Jewish communities both within the Green Line and in West Bank settlements." The WZO Settlements Division is a signatory to the land allocation contract for Zvi Bar Yosef and Zvi's Farm, which were added to the OFAC sanctions list on March 14, 2024. Additionally, Israeli NGO Peace Now has documented recent budget maneuvers to shift money to the Ministry of Agriculture for illegal outposts in the West Bank.
Because the money raised by Israel Bonds goes into the general fund of the Israeli state budget and is distributed at the discretion of the government, there is no segregation of the funds raised by Israel Bonds from financial support for violent settlers. The funds become opaquely commingled once transferred to the Israeli state budget, meaning that neither Israel Bonds nor the state governments purchasing Israel Bonds can confirm that the money they provide to Israel complies with the Executive Order or otherwise does not support sanctioned Israeli settlements and settlers.
Failure to Register as a Foreign Agent
As previously referenced in DAWN's letter to FARA, Israel Bonds appears to be a foreign agent acting on behalf of Israel, representing the public and political interests of the state to the American public. Israel Bonds, at the direction and control of the Israeli government, acts as a publicity agent for Israel; promotes the public and political interests of Israel; and disperses government-issued bonds for Israel in the United States. These are elements that constitute a "foreign agent" according to FARA, and for which there is no commercial exemption. The funds raised by the sale of the bonds go to the general budget of the State of Israel. The operating budget of the State of Israel is used for political purposes, including illegal settlement activities in the Occupied Palestinian Territories and now the military campaign in Gaza.
"It is incomprehensible how a company like Israel Bonds, which is directly working on behalf of and in the interest of a foreign government, can escape mandatory registration," said Michael Schaeffer Omer-Man, Director of Research for Israel-Palestine at DAWN. "The DOJ should ensure that Israel Bonds – and its American investors – are not violating US sanctions against Israeli settlers, which President Biden called 'an unusual and extraordinary threat to the national security and foreign policy of the United States.'"
DAWN calls on the Department of Justice to immediately investigate Israel Bonds and enforce the Foreign Agent Registration Act, including imposing punitive measures for failing to register, per the statute. DAWN further calls on the Department of Justice and Department of Treasury to investigate whether Israel Bonds is plausibly violating the Executive Order and the SEC to examine whether those sales put state and private investment funds at risk due to possible sanctions violations.
