Israeli supermodel Bar Refaeli and her parents face indictments for tax evasion and money laundering, as well as using foreign accounts and corporations to conceal income earned abroad totaling more than 23 million shekels ($6.14 million).
The Israeli state prosecutor issued the warning Jan. 3 to Refaeli and her parents, Tzipi and Rafi. Bar is a former fashion magazine cover model and former girlfriend of Leonardo DiCaprio. She hosts Israeli television’s The X Factor and is one of the country’s most visible celebrities.
Refaeli and her parents are suspected of filing false tax returns for the period 2009 to 2012 that hid “relevant information” from the authorities, the justice ministry said in an emailed press release Jan. 3.
The supermodel told local authorities she wasn’t an Israeli resident, but in tax returns to the U.S. authorities during the same period—where she was mostly living with DiCaprio—she claimed to be a non-U.S. resident on the basis that she lived in Israel, the ministry said. Her mother, Tzipi, tried to conceal her daughter’s involvement in real estate deals in Israel by presenting false information to the authorities, the ministry said.
Tzipi also tried to conceal income of 3 million shekels in commission earned as her daughter’s agent by depositing it in accounts abroad, the ministry said, adding that the relevant bank records were secured only after a two-year legal battle.
The two women are also suspected of “barter deals” worth millions of shekels in which they secured the use of luxury apartments and vehicles in return for publicity services that weren’t reported to the tax authorities, the ministry said.
In accordance with Israeli law, the suspects are entitled to a final tax assessment and hearing before the prosecutor makes a final decision on whether to file charges.
The ministry’s notice is “unprecedented in its scope and content,” said Ofer Rachmany, a tax lawyer at Udi Barzily law firm in Ramat Gan who is representing Zipi Refaeli.
Residency is a “civil issue” that doesn’t warrant an indictment, Rachmany said in an emailed statement Jan. 3.
“The entire issue is in civil proceedings before the district court, but the state attorney’s office is eager to avoid waiting for the decision of a high-ranking tax judge, which is expected very soon,” he said. Rachmany accused the prosecutor of “choosing to thwart a thorough and professional legal process in a district court, while determining ‘facts’ in the form of a draft indictment, which paints as criminal a clearly civil dispute.”
Tzipi Refaeli “acted only with close professional advice, approved the issue of residency with the tax assessor and even signed an assessment agreement on the matter, with all the certainty that accompanies it,” he said. Rachmany accused the authorities of denying the agreement, ignoring the civilian nature of the case and doing “serious damage to the reputation of my client.”
“The attempt to turn a civil issue into a criminal one, using interrogation methods intended to combat real crime such as aggressive threats only attests to excessive motivation and lack of discretion, while wasting public funds,” he said, adding that he still hoped for a “genuinely attentive and open-minded” hearing.
Issues Raised in Civil Proceedings
Bar Refaeli’s legal team, also headed by Udi Barzily, said in an emailed statement that “most of the issues were raised and examined in the civil proceedings that were held in the District Court and are awaiting judicial decision.”
“Precisely with regard to these points, the judge initiated a discussion aimed at negotiating a compromise, because according to the judge, this is a case that is not ‘black or white,’” the statement said.
“It is important to emphasize that this is not a matter of ‘concealment of hidden income.’ All the income and all the numbers were before the tax assessor, and the question was only about the classification of income as exempt or liable,” according to the law firm.
“As for residency, it was determined that as of 2007 Bar is a foreign resident,” after the U.S. Internal Revenue Service did two years of in-depth checks, the firm said. “Clearly, anyone who holds such a permit from the IRS has no reason to try to deceive the system, which of course she did not.”
To read more from Daily Tax Report: International pleaseOR Request Trial
(Updated with attorney comments.)