Legal Updates

Funds received as a result of a tender won due to coordination between the tender participants will be forfeited by the State

June 17, 2020

Contractors who participated in a tender conspired that some would win the tender by way of the others intentionally submitting high offers, thus creating false competition. In return, the winners would hire the others or compensate them.
The Supreme Court held that the actions constitute money laundering because the tender receivables were fraudulently transferred to the winners’ accounts, and thus are actions in forbidden property and are to be forfeited by the State. The Israeli Prohibition on Money Laundering Law allows the forfeiture of property that is the result of one of the offences stipulated in the law, was used to commit the offense or to facilitated, and was obtained as consideration for the offence or as a result of the offense. This aligns with the two rationales of the forfeiture arrangement: Deterrence by reducing the economic incentive to commit such offenses, and the proprietary related rationale, taking the property from the hands of those who are not legally entitled thereto. There are circumstances where forfeiture will be avoided and are related to the individual and the procedure taken, including lack of priors, but such exceptions would be construed under the rationales of the law. Here, the contractors committed a felony of restrictive arrangement and coordination of a tender and thus all tender receivables are property on which actions were taken under the knowledge of such being a forbidden property. The fact that tax was paid on the forbidden funds does not matter and expenses incurred in order to create such receivables will not be deducted.