A Digest of debkafile Round-the-Clock Exclusives in Week Ending June 2, 2005:

Two Suspected Israeli Computer Hackers Face Extradition from London

29 May: A pair of Israeli hackers was remanded in custody at Bow Street Magistrates’ Court in London Thursday, May 26. Michael Haephrati, 41, and Ruth Brier-Haephrati, 28, were arrested by Scotland Yard on an Israeli extradition warrant and held respectively in Brixton and Holloway prisons until a further hearing on June 3. The charge on the warrant is “unauthorized modification of the contents of a computer.”

In professional intelligence literature, this locution usually refers to industrial espionage by the illegal invasion of computers. The kind of software used is not new; it derives from the PROMIS program developed in the United States in the 1980s to help the US Justice Department and the FBI crack financial crime cases. The targets of PROMIS and its offspring never know they are raided, their firewalls penetrated and their passwords cracked.

Over the years, many intelligence agencies, including Israel’s, upgraded the earlier PROMIS, and developed better protective software against these silent invaders. Some of their experts ended up on the world market, notably in the US, India, Russia, and probably Israel too. They can be found selling their expertise to security and financial companies – or even to organized crime.

The Scotsman reports that before he was arrested on the Israeli extradition warrant, Michael Haephrati, who also has German nationality, was questioned by detectives from the National Hi-Tech Crime Unit on a “separate matter.” He was released by the unit on police bail Wednesday, May 25, pending further inquiries into allegations of “offences under the Computer Misuse Act 1990.

British legal experts told debkafile that Haephrati is suspected of computer offenses in Britain as well as Israel. The British can be expected to insist on precedence for their inquiry and legal proceedings before handing him over to Israel. This could hold up the Israeli process for many months.

How Will the Hi-Tech Espionage Inquiry Affect the Bezeq Sale?

30 May: In the second shockwave from the discovery of the large-scale computerized espionage ring targeting Israel and foreign companies, the big question is this: how will it affect the recent sale to private purchasers of Bezeq, the Israel Communications Corporation, for a reported $900?

debkafile‘s business sources report the sale was completed after the police fraud squad’s inquiry into the case was well underway. Bezeq’s spokesmen are acting as though the company was itself a victim of the Trojan Horse virus used to upload competitors’ computers. However, its two subsidiaries which are included in the sale – mobile phone operator Pele-Phone and TV satellite YES – are leading subjects of investigation. They are also likely to face multimillion suits by the victimized companies, some of the biggest in Israel, including the Hong Kong-based Partner Ltd., Israel’s second largest mobile phone company, and HOT cable TV.

The new owners of Bezeq, Haim Saban of Los Angeles and Ronald Cohen from London, have so far made no comment on the grave charges brought against their new acquisitions. Israel’s finance ministry and central bank are bracing for a demand to reopen the sale or at least reduce the price and its terms. They must also expect some hard questions about why they allowed the signing of the transaction to go through when a criminal investigation against Bezeq or its subsidiaries had been going on for months.

Lebanese Poll Results Preset by US-French-Endorsed Deals

30 May: The stunning election victory in the Beirut region attributed to Saad Hariri, son of the assassinated former Lebanese prime minister Rafiq Hariri, is no more than hyperbole. Nine of the 12 seats his camp carried Sunday, May 29, were sewn up in advance.

Beirut’s electorate knew it was being fed a done deal and only one-third therefore turned out for the first round of the first parliamentary election to be held in post-Syrian Lebanon.

The only stunning development was the hectic pace at which Lebanon’s political factions made and broke alliances with an astonishing array of partners in the days leading up to the poll.

Round two of the four stages held on successive Sundays will take place next week in the predominantly Shiite south. All four ballots to elect a 128-seat parliament are the products of Lebanese-style prearrangements endorsed by Washington and Paris.

In an important turnaround, the US and French have decided to back away from their former insistence on the Hizballah being disarmed forthwith. They are leaving the task to the new Lebanese government and will demand that the Palestinian militias be disarmed first. The Shiite terrorist group can therefore run for election to parliament free of US pressure to give up its weapons.

Neutralizing armed Palestinian groups in the refugee camps of southern Lebanon, the Americans and French believe, will weaken Hizballah and its ties with terrorist elements within the Palestinian Authority.

debkafile adds: The shape of the new Lebanese regime is more or less a foregone conclusion, barring last minute betrayals such as are endemic to this country. But one of its first challenges will be the release of Hizballah’s grip on the south and its forced retirement to the Beirut region. Israel is therefore casting an interested eye on the next chapter of Lebanon’s post-Syrian history, in the hope that the terrorist Shiite group and its bristling array of 12,000 pointing missiles will be finally removed from its northern border.

Euro-Dive Enhances Dollar

1 June: Holland’s potential rejection of the European Union constitution Wednesday, June 1, in the wake of France now looks like another nail in the euro’s coffin.

Tuesday’s initial seven-month low against the dollar of one euro: $1.2350, steadied slightly the next day at around $1.2320 Wednesday. But for several weeks, the currency markets have been dominated by the strengthening of the US dollar at the euro’s expense. The downward trend was further confirmed by the euro’s dive earlier this week against other important world currencies, sterling and the Japanese yen.

The euro’s nosedive has three main causes:

1. France’s rejection of the European Union’s charter is a stinging setback to euro zone champions – especially if as expected the Netherlands follows suit – and a stumbling block to the zone’s planned enlargement to embrace more East European countries and Turkey. The constitution is designed to speed up the Union’s integration and knock over trading walls among members that fragment the European Union as a bloc.

All 25 member-states must ratify the constitution; 9 have done so with 7 to go after Holland. Even though the French non was widely predicted, the markets reacted with a euro sellout for dollars, sterling and Swiss francs.

2. Low interest – 2% p.a. basic held down for two years in the euro zone in comparison with the climbing US Federal Reserve rate which stands now at 3.25% and the United Kingdom’s 4.7%. Miniscule growth in the euro zone keeps interest low. Some economists predict a further tumble after the summer vacation.

The European currency’s attractions are fading and, according to the latest reports, some strategic investors intend using it as a funding currency, i.e. they will sell off euros to buy more appealing financial assets and currencies.

3. The European Union at large is generating a slew of negative economic indicators, particularly for its leading members. Germany, France and Italy are in the throes of a slowdown and rising unemployment, declining business credibility and unstable consumer price indeces.

While a weak euro against the dollar may be advantageous for European exporters, rejection of the charter means the European economy is resisting change and essential reforms that would ease competition across European borders and fuel future growth within the EU.

The next EU summit taking place in Brussels on June 16 will be a crisis meeting to deal with a volatile economic reality and the falling fortunes of the world’s youngest currency.