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Finance Minister Avraham Hirchson spent seven hours being questioned under warning at the National Financial Crimes Unit on Tuesday.
Police originally believed he knew that funds were being stolen from a union he headed for 10 years. The investigation, officers now say, indicates that Hirchson may have enjoyed the fruits of the embezzlement.
Police suspicions center on Hirchson's tenure as head of the National Labor Federation in Eretz-Israel. Five of Hirchson's former employees were arrested in January, and since then, the NFCU's close-lipped commander, Lt.-Cmdr. Yoav Segelovich, has been managing the probe.
Initially, police believed that Ovadia Cohen, the former head of Nili, an organization that operated educational institutions under the umbrella of the workers' union, embezzled approximately NIS 5.5 million from the organization.
But Cohen, in his testimony, allegedly implicated Hirchson. Police are now investigating a theory that the minister received some of the embezzled money and may have used it to pay some of his son Ofer's gambling debts. Ofer Hirchson was also questioned in connection with the allegations.
Although the embezzlement occurred in 2003, accountants only discovered in 2005 that the money was missing and reported the matter to the police.
Police now believe the extent of the embezzlement was far greater than previously believed, perhaps surpassing NIS 10m.
Rather than probing Hirchson for administrative negligence - ignoring embezzlement - police are now investigating the minister on potential charges that include fraudulent acquisition under aggravated circumstances, violation of public trust, theft as a manager and of signing off on false accounting statements.
Police said Hirchson was likely to be questioned again before a decision was made on whether to recommend he be indicted.
Also on Tuesday, the remand of Itzhak Russo, former head of the National Labor Federation, was extended by the Tel Aviv Magistrate's Court until next Monday. His attorney requested a gag order against publishing his name, but the judge rejected the request.