Department of Justice Should Investigate Israel Bonds' Failure to Register under FARA, Impose Sanctions
(Washington D.C., June 22, 2023) – The Development Corporation of Israel for Israel/Israel Bonds (commonly known as "Israel Bonds") appears to be an unregistered foreign agent in violation of the Foreign Agent Registration Act (FARA) and should be investigated by the Department of Justice (DOJ), said Democracy for the Arab World Now (DAWN) in a referral filed to the FARA Unit at the DOJ. For decades, Israel Bonds has raised billions of dollars and lobbied to change American laws 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 foreign agent statute requires.
"Israel Bonds is a sophisticated operation to enlist American public support for Israel's political projects while dodging the minimal transparency and scrutiny our laws require," said Adam Shapiro, Director of Advocacy, Israel/Palestine, at DAWN. "Americans need to know that foreign government agents are lobbying to change U.S. laws and to solicit their political and financial support for Israel's occupation, apartheid policies and human rights abuses."
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."
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.
Israel Bonds effectively serves as a slush fund for the Israeli government, deposited into the general account of the Israeli treasury. Douglas Bloomfield, a lobbyist and former American Israel Public Affairs Committee (AIPAC) legislative affairs director, cites a former Treasury Ministry official telling him that the money raised by Israel Bonds "is fungible and not earmarked," in a recent op-ed in the Jerusalem Post. A longtime investor in Israel Bonds, Bloomfield notes, "If buying Bonds was a traditional way of showing support for the State of Israel, refusing to buy Bonds can demonstrate disapproval of [the government's] settlement and annexation policies." In testimony to the Minnesota Investment Board in 2015, former U.S. Senator James Abourezk noted that "American money plunged into Israel Bond sales is fungible, meaning that the money is lumped into Israel's General Fund, and then used for anything Israel wants, without restriction. That also means that the money sent to Israel is used for settlements," which, he noted, were illegal under international law and were also considered illegal by the U.S. government.
In addition to sales to individuals, Israel Bonds pursues investments from state-run pension funds across the United States. As often noted by Israel Bonds officials, purchases are intended both as financial investments and as political expressions of support. In May 2022, Ohio Treasurer Robert Sprague announced the purchase of $22.5 million of Israel bonds. Applauding the move, Steven Greenberg, Israel Bonds Cleveland Advisory Council General Chairman, said, "This is a vote of confidence in Israel's dynamic economy and an expression of advocacy for the State of Israel" [emphasis added].
In 2004, Israel Bonds lobbied successfully to have four U.S. states – Indiana, Louisiana, New Jersey and New Mexico – change their laws to allow the purchase of bonds issued by foreign governments. In 2019, Mississippi also changed its regulations on where it could invest state funds, seemingly in response to lobbying by Israel Bonds.
Israel Bonds organizes events around the United States, a speakers' bureau, and advertising, including on social media platforms solely to promote the sale of the bonds to the American public. These appeals are largely devoid of investment information or arguments for the financial benefit for the investor. In May 2023, Israel Bonds held an online event to promote sales to mark Israel's 75th anniversary. Early in the program (2:27 – 2:43), a short promotional video shows a map of Israel without any demarcation of Occupied Palestinian Territory (OPT), indicating that the entirety of the land is the State of Israel. Among those appearing in the video program are: a singing group from the Israeli military, dressed in military uniform (6:25 – 10:38); Israeli President Isaac Herzog (11:08 – 13:14); and Prime Minister Benjamin Netanyahu (13:30 – 15;11). The speakers do not make an economic argument for investing, rather, as Netanyahu states, "it's investment in our common bond and that is what Israel Bonds is so important for. It allows us to keep a network of committed people, committed to the State of Israel, to the one and only Jewish state, to our common future."
On Sunday, March 12, Israel Bonds Conference held its 2023 Annual Meeting in Washington, DC, and hosted Israeli Finance Minister Bezalel Smotrich. The annual conference brings together U.S. business, political, government, and community leaders to promote the sale of State of Israel issued bonds. Normally attended by U.S. government officials, the Biden Administration announced that no officials would attend this year due to Smotrich's remarks following attacks on the Palestinian town of Hawara, in which he said, "I think that the town of Hawara needs to be erased. The State of Israel needs to do it." As Finance Minister, Smotrich oversees the Israeli treasury, into which Israel Bonds money is deposited.
Worldwide sales of Israel Bonds have exceeded $48 billion since 1951, and in 2022, sales in the United States amounted to over $1 billion.
DAWN calls on the Department of Justice to investigate Israel Bonds and enforce the Foreign Agent Registration Act, including imposing punitive measures per the statute.