Administrators in the Israeli branch of the Chabad Hassidic sect are allegedly embroiled in a multi-million shekel embezzlement, tax evasion and money laundering scheme involving local businessmen, police said Wednesday. Police arrested four men on Tuesday connected with the sect who are suspected of embezzling and aiding Israeli businessmen in tax evasion by accepting tax-exempt "donations" to Chabad which were later returned laundered. A Channel 10 report said that among the business leaders suspected of using the money-laundering facilities allegedly run out of Kfar Chabad was Arkadi Gaydamak. Gaydamak, according to Channel 10, had made NIS 1 million in donations to the fund - but was far from the only prominent business figure suspected of involvement. Police said that they would continue to investigate both Gaydamak as well as the other businesspeople. Police arrested Yosef Aharonov, director of the non-profit Young Chabad Association, which is the main supporter of Chabad activities in Israel. Aharonov's driver, Levi Edrei, and Young Chabad employee Dov Livitin were arrested, too. The Young Chabad Association represents mainstream Chabad leadership in Israel. It is differentiated from the overtly messianic camp within Chabad that preaches that Rabbi Menachem Mendel Schneerson, who passed away in June 1994, is really still alive and will reappear as the Messiah. Aharonov was behind the "Bibi is good for the Jews" campaign that mobilized Chabad to support Binyamin Netanyahu as prime minister in 1996. He also led an aggressive offensive against breakaway groups within Chabad. Yosef Segal, who was accused over a year ago by Chabad officials of embezzling NIS 17.5 million from Chabad coffers, was also detained by police Wednesday. Attorney Na'ama Zer-Kavod, who is representing Chabad along with attorney Gideon Fisher, said that all the accusations against Aharonov, Edrei and Livitin were concocted by Segal. "In an attempt to clear his own name, Segal is disparaging the names of dozens of upright Chabad families," said Zer-Kavod. "Chabad was the one that uncovered the crimes in the first place. Now, for some inexplicable reason, a year later, the police stage this publicized raid." Asst.-Cmdr. Avi Mansour, head of the criminal investigation against Chabad, rejected the claims by Zer-Kavod and said there was no connection between Segal's embezzlement and the present case. "Besides, even after Segal was uncovered as an embezzler he continued to be employed by Chabad," said Mansour. The investigation was launched after the Young Chabad Association aroused the suspicions of the registrar for non-profit organizations in the Interior Ministry who discovered evidence of mismanagement. "We are talking about huge sums of money that were pocketed by the four suspects and transferred to overseas accounts, including the US," said Mansour. The police requested that Aharonov be detained for 12 days. However, a Ramle court decided to extend the detention order for six days. On Thursday, the three additional suspects will appear before the court. Yoni Kahana, a Chabad hassid and advertiser, said that the criminal scandal that wracked the Hassidic sect would not have an impact on operations in Israel. "Chabad houses across the country are self-sustaining; they do not receive anything from the central administration." Kahana, who is identified with the more messianic camp in Chabad, estimated that the balance of power among the different camps within Chabad would not change. However, he added that he was concerned the scandal would tarnish Chabad's good name. "I hope Aharonov does not go to prison, but I do hope that he learns his lesson and retires. He has made a lot of mistakes and it is time for him to go home. "The man who replaces him should run Chabad the way the Rebbe wants."