The decision came following a column by Yedioth Ahronoth journalist Yair Lapid, who expressed his protest of the content of the film, as outlined in a brochure he received seeking investors and distributors ahead of the film's release.
Israel Film Fund Director Katriel Schory wrote a letter in response describing the steps taken by the fund leading to its decision to have a hand in the production of the film.
Schory noted that the screenplay submitted to the fund was approved in a meeting held at the end of 2006. At the time, the fund pledged to invest over NIS 1 million (roughly $270,000) in the film. So far, NIS 852,000 (about $228,000) has already been transferred to production.
In October 2007, Segal informed the fund that he had changed the location of the plot. "We got an updated script that was different from the screenplay that was approved for investment," Schory said in his letter.
"The film about two Jewish girls turned into the story of two Palestinian girls in Ramallah," he added.
Schory wrote that funding was temporarily suspended and the new screenplay was sent for review by the artistic advisors who had read and approved the initial script.
Despite the problematic screenplay, the artistic advisors decided to ratify their decision and recommended the film receive support from the fund.
"In its new version, the film does not hint of any comparison between what is going on in the territories and the Holocaust," Schory said in his letter.
In April 2008 the fund notified Segal of the renewed approval, and the parties signed a contract in August that year. Work on the film took place in London in recent months, and filming is slated to conclude in Israel by the end of the week.
In his letter, Schory wrote that he was contacted by Lapid, who told him about a brochure he received about the movie. The journalist said the document compares the Israeli occupation in the Palestinian territories to the Holocaust.
"It turns out this is a marketing brochure prepared by a British production company," Schory wrote, "After reading the document, we expressed our shock at its content."
'Poor and cynical use'Last Thursday Segal was called to the fund's offices, and confronted with the document. Segal said he was unaware of its existence, and that it was written without his knowledge some two years ago by a British production partner trying to raise funds for production.
The director said that the British producer was fired.
The Israel Film Fund launched an inquiry into the matter at the instruction of Culture and Sports Minister Limor Livnat. The letter, which details the chain of events, was sent to Israel Film Council Chairman Micha Harish, with a copy addressed to Minister Livnat.
"All producers write prospects in order to raise investments in Israel and abroad," Schory wrote. "In this case, poor and cynical use was made of the fund's name, in a document that has no relation to the fund."
The fund announced that it would consider the matter further and decide on its next steps.
In addition, the fund is considering requiring all producers to receive authorization to use the fund's name in marketing brochures.
"The fund's board will hold a session on the matter after receiving a legal opinion," Schory wrote in sum.
Director surprised by allegations
Segal on Wednesday said the allegations against him were false. "'Odem' does not compare between life in the territories and Jews' life during the Holocaust. There is no room for such a comparison," he said.
"The film tells the story of two Palestinian women, but does not compare in any way Israel's actions in the territories and the actions of the Third Reich," Segal claimed.
"I would like to add that I am against measuring suffering. The question of who suffered more is insignificant. The terrible suffering the Jewish people went through during the Holocaust does not cure the suffering we case someone else and does not justify it. We must examine ourselves on this matter again and again. It's our duty and we fail in doing so too often."
Segal clarified that he was surprised by the responses he received following Lapid's column. "I was shocked by the attacks against me and by the desire to silence me using false claims, just because I am producing a film which does not pat consensus on the head.
"When I embarked on this long road several years ago, I knew that the film would not be welcomed by certain sectors, but this is my artistic truth and I will fight for my right to express it."
Amir Kaminer and Yoav Birenberg contributed to this report