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Secret police documents seen by judges in Rishon Lezion contain the true scope of suspicions facing Bat Yam Mayor Shlomi Lahiani, who was arrested on Monday morning during a televised police raid on his home.
The fact that a Rishon Lezion Magistrate's Court extended Lahiani's custody by a day, and that a Rishon Lezion District Court rejected an appeal by Lahiani to overturn the custody remand, is being viewed by police investigators as confirmation by judges of the severity of the case against the mayor.
Lahiani was released to house arrest on Tuesday night for a period of eight days, during which he will also be banished from entering the Bat Yam Municipality building.
"For a court to extend the custody of a council head is very rare," one law enforcement source told The Jerusalem Post on Tuesday.
Dozens of police officers from the Lahav 433 Unit's Anti-Economic Crimes department, along with Tax Authority officials raided the Bat Yam municipality after Lahiani's arrest on Monday, marking the end of a two year undercover investigation, which focused on suspicions of massive fraud, money laundering, bribery, and the alleged use of whole sections of the municipality for personal profit.
Lahiani has denied all charges. His attorney, Amnon Zichroni, accused police of spreading "fables" to the media.
Officially, police told a Rishon Lezion Magistrate's Court during a remand hearing on Monday that the Bat Yam mayor is suspected of using public funds to pay for a parking ticket, and of illegally pocketing advertising revenue by failing to declare that he owned a stake in a local newspaper chain which published ads by the Bat Yam municipality.
But in addition to those relatively minor suspicions, the court received confidential case files that encompass far more serious allegations. The case material details alleged receipt of irregular "grants" by the municipality's planning and construction committee, which police suspect could be bribe money.
Police believe Lahiani's brother, Avi, who was also arrested on Monday, played a key role in connecting the mayor to businessmen who wished to offer a bribe in exchange for receiving planning permits from the municipality.
Investigators say Avi Lahiani exploited his family connection to act as an intermediary.
In September, Avi Lahiani narrowly escaped an assassination attempt, when a gunman opened fire on him in the lobby of his apartment building. The mayor's brother owns Cafe Joe, situated on Bat Yam's promenade. The establishment was targeted in an arson attack in 2007.
In addition to alleged bribery, police believe the mayor operated a major money laundering scheme, in which employees from the municipality took out loans from their banks, transferred the sums to their boss, who then proceeded to pay them back in cash.
Police have arrested the head of a currency exchange store in Bat Yam, which police suspect was used by Lahiani to launder hundreds of thousands of shekels in cash.
Finally, investigators are focusing on a mysterious source of income which allowed Lahiani to pay off a good portion of a multi-million shekel debt he owes to a bank.
Prior to being voted in mayor in 2003, Lahiani had built up a debt of NIS 35 million to the Mizrahi Bank during his years of work as a contractor.
Part of the debt was paid off when Lahiani took an NIS 18 million loan from the Igud Bank before entering office, and the remainder of the debt was reportedly written off.
Since then, Lahani has somehow managed to pay off half of his NIS 18 million loan back to the Igud bank, though police and Tax Authority officials say that would be impossible for the mayor to do on his monthly salary of NIS 47,000.
One possibility being examined by police is that Lahiani used alleged bribe money, which was purportedly received via the municipality's construction and planning committee, to pay off part of the loan.
Police interrogators will ask Lahiani to respond to these and other suspicions in the coming days.
In August, State Comptroller Micha Lindenstrauss slammed Lahiani for appointing his own wife as elections campaign manager, and paying her NIS 430,000 for the job.
Lahiani had responded by threatening to sue Lindenstrauss.
"As a public official, I received a budget, and I will spend it how I want," he said in response to the state comptrollor's report.
In 2008, Lahiani was slammed by Lindenstrauss for promoting his mother to the position of manager of Bat Yam's kindergartens while failing to announce an open tender for the job.
Jpost.com staff contributed to this report.