Israel espionage case points to new Net threat

Jealousy and booby-trapped CDs
The tale has all the makings of a made-for-TV movie. The only reason authorities caught on, apparently, was jealousy. The scheme unraveled when Israeli author Amnon Jackont stumbled on portions of a book he was writing — but had not published or shared with anyone — on the Internet.  After initial confusion, Jackont suspected his computer was bugged. His suspicions soon focused on his daughter's ex-husband, Michael Haephrati; the couple went through a messy divorce eight years ago.

When police investigated Jackont's computer they say they found the "Rona" Trojan horse program and were able to trace it back to Haephrati, who now lives in Britain. The investigation quickly widened, however, as police uncovered scores of other bugged computers. In addition to what reads like a who's who of Israel's telecom industry, victims included the local divisions of Hewlett-Packard and the Ace hardware chain.

Police accuse Haephrati, 41, of selling the program to private investigators, knowing they intended to use it to commit corporate espionage. In addition to Haephrati, executives from three of Israel's biggest private investigative firms have been arrested. One, 54-year-old Yitzhak Rath, who heads the Modi'in Ezrahi agency, fell from a three-story building earlier this week. Rath sustained head and spinal cord injuries, according to the Israeli newspaper Haaretz. Police are unsure whether it was an accident, an attempted suicide or even an attempted murder.

Gindin said the attackers were clever — they apparently send CD-ROMs with business proposals to the target firms. Once the CDs were loaded, the Trojan horse was secretly installed. The CDs were often sent to marketing managers and others who would be in a position to have early knowledge of company product development, he said.

How common are such cases?
John Fialka, author of "War by Other Means: Economic Espionage in America," wrote seven years ago about the threat U.S. firms face from widespread espionage efforts. The drama of the Israeli incident doesn't surprise him.

“People seem shocked when it happens. They shouldn’t. The threat has always been there. The risk is huge,” Fialka, now a reporter at The Wall Street Journal, said.

“There’s not more information because companies keep it a secret," he said. "There is incredible disinformation that surrounds this area. If you are a big corporation and you find a Trojan horse in your computer, the first problem you have is, ‘Do you tell anybody or just absorb the information?’ ”

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