The police recommended on Monday that two senior tax officials and a former top aide to Prime Minister Ehud Olmert be indicted on charges of bribery, fraud and breach of public trust.
Investigators suspect that former Tax Authority heads Jacky Matza and Eitan Rob received bribes from businessmen in return for allocating key posts to cronies who would grant their businesses illegal tax breaks.
The police investigation found that Shula Zaken, the suspended bureau chief of the Prime Minister's Office, mediated between Matza and her brother, one of the businessmen at the center of the affair.
Zaken's businessman brother, Yoram Karshi, is suspected of using his sister's connections in the Finance Ministry to advance Matza's career in the Tax Authority, which culminated in his appointment as the authority's top man early last year.
Shula Zaken served under Olmert during his time as finance minister under former prime minister Ariel Sharon.
Matza returned the favor by appointing Karshi cronies to key posts where they used their powers to grant him as well as other businessmen hefty tax breaks.
The affair came to light when police officers broke into the houses of Zaken, Matza and other tax officials last November following months of investigation.
The police launched the investigation following a complaint by an employee that he was unjustifiably removed from the Tax Authority's intelligence branch to another unit.
Suspects' lawyers not surprised
The lawyers of the suspects in the Tax Authority affair were not surprised by the police's recommendation to indict their clients, particularly due to "the way the investigation was launched."
Shula Zaken's lawyer, Attorney Micha Fetman, told Ynet, "We were not surprised. This notion began at the start of the investigation, and as it continued we were no under the impression that something had changed.
"The investigation does not deal with a classic bribery affair. There are no suspicions that Shula Zaken asked for or received anything for herself. The suspicions refer to her involvement in the appointment of then-Tax Athority chief Jacky Matza, a matter which is simply untrue. I believe that the issue will be handled by the court, where we will be able to convince the judges that this never happened," he said.
He slammed the police for deciding on the investigation findings in advance, and said he did not have great hopes that the State Prosecutor's Office would make a different decision.
"The State Prosecutor's Office was part of the investigation and backed it. I believe that the conception was not formed by the police on its own, and therefore I expect to see a hearing before a person who has not been involved in the investigation so far," Attorney Fetman said.
Jacky Matza's lawyer, Attorney Navot Tel Tzur, told Ynet that "the State Prosecutor's Office will have to deeply examine this decision, as a lot of material has been collected there. The gap between the police's final report and the case's real fate is very big. The decision was perhaps not surprising in light of the way the case was launched and the headlines which accompanied it."
The attorney noted that Matza "cooperated throughout the entire investigation. At no stage did he face claims of personal corruption. The investigation focused mainly on his and other people's appointments. These are not unusual talks. Determining that such talks are a criminal offense is unprecedented."
Aviram Zino contributed to the report