A Possible “Foreign Agent”

Since the start of the Israel-Hamas war, Israel has received a record-setting influx of $5 billion in financing from public and private US investors to help address its mounting piles of debt. State and local governments make up $1.7 billion of that overall investment.

Bonds are fixed-income securities bought by investors to loan the government money and are paid back over a long period of time, anywhere from two to fifteen years, at a set interest rate.

Proceeds from these bonds return to Israel as a surplus budgetary fund for government projects, including to offset the costs of its military campaigns.

Some ninety states and localities already had millions of dollars of investments in Israel bonds on the books well before the Israel-Hamas war, but such efforts increased dramatically in the past year and a half.

All of this US investment is facilitated by the main underwriter and promoter of these government-backed instruments: the Development Corporation for Israel, also known as Israel Bonds. The operation has sales offices across the country, offering bonds to retail investors as well as public pensions, treasury funds, and institutional investors on Wall Street.

“Oct. 7 changed everything,” said Dani Naveh, the current president of the Development Corporation for Israel and former member of both the Israeli Knesset and a cabinet minister, earlier this month, announcing record US sales of Israeli debt. “What followed has been nothing short of extraordinary. This $5 billion isn’t just capital, it is a global vote of confidence in the Israeli economy.”

Israel Bonds, whose head is selected by Israel’s finance minister, dates back to the early years of the country and played a crucial role in corralling US financing for the Six-Day War in 1967 and later the Yom Kippur War in 1973.

The broker doesn’t just facilitate bond sales. Israel Bonds has transformed into an all-encompassing financial and political operation that lobbies for legislation to boost bond sales and hosts lavish private junkets to wine and dine politicians, according to an investigation by the International Consortium of Investigative Journalists last year.

These influence-peddling activities have raised legal questions about whether or not Israel Bonds is operating in the United States as an unregistered foreign agent. According to a letter sent to the Justice Department last year from Democracy for the Arab World Now calling for an investigation, Israel Bonds acts “at the direction and control of the Israeli government, acts as a publicity agent for Israel; promotes the public and political interests of Israel.”

Israel Bonds did not return a request for comment from the Lever.

Israel Bonds has successfully convinced numerous state governments, including Louisiana, Indiana, New Jersey, and New Mexico, to undo long-standing rules banning them from purchasing foreign government bonds. Israel Bonds has also gotten county governments to ease remaining local investment restrictions on foreign-issued debt.

It’s not just Florida that’s poured out its coffers to show support for the US ally. Under Republican Gov. Sarah Huckabee Sanders, Arkansas’s public pension plan authorized a $50 million investment in Israel bonds this spring. Ohio, meanwhile, has invested more than $50 million since October 2023, bringing the state treasury’s holdings up to $260 million. New York State has committed a total $267 million from its state employees’ pension fund into Israel bonds.

Yet these investments pale in comparison to those of Palm Beach County, which under its Democratic local comptroller Joseph Abruzzo has become the world’s largest investor in Israel bonds. When Abruzzo took office in 2021, Israel bonds were capped at 5 percent of the county’s portfolio. In his first year, Abruzzo doubled the cap to 10 percent. Last year, the county voted again to raise the cap to 15 percent.

Abruzzo has since increased the county’s Israel bonds holdings to $700 million, up from just $40 million in 2022. According to county finance documents, Israel bonds now make up 16 percent of Palm Beach’s holdings.

Like other public investors in Israel bonds, Abruzzo has explicitly described his investment calculus as politically motivated, in direct support of Israel’s military operations.

“There could be no greater advocacy that we could do in our office right now than support the state of Israel,” Abruzzo, a former reality TV star with a net worth of $16 million, said in the days after October 7, announcing an initial $25 million round of bond purchases. More recently, he has denied that the motivations are anything other than strictly financial. Florida state law bars any investments of public savings for ideological reasons.

In turn, as state and local treasuries ramp up their investments in Israel bonds, they have faced mounting public opposition. Protesters across the country have demanded public divestment from Israel bonds, citing their role in funding the carnage in Gaza.

Last May, several anonymous residents of Palm Beach County brought a lawsuit against Abruzzo over the mammoth investment in Israel bonds, arguing that the county’s $700 million purchase was “unprecedented,” “a great concentration of risk,” and violated its fiduciary duty to taxpayers, given the clear signs the bonds would be downgraded as Israel’s economy struggled. Florida statute, the plaintiffs noted, directs that local governments cannot invest to benefit “any social, political, or ideological interests.”

The plaintiffs in the case are Palestinian Americans, all of whom have lost friends and family members in Gaza, where tens of thousands of civilians have been killed since October 7.

“I feel such horror at my local taxes being used to fund such violence and destruction towards Palestinians in the West Bank and Gaza,” one plaintiff said in a declaration last year.

The suit highlighted Palm Beach County’s ongoing financial troubles, including a $730 million funding gap for capital projects — all worsened by security costs for Mar-a-Lago, which the county must foot. “If the State of Israel were to default on these bonds, then Palm Beach County would have to find a way to pay its bills without money that it had counted on being available,” one expert is quoted as saying in the lawsuit.

In a November 2024 legal filing, attorneys for Palm Beach called the lawsuit against the county “entirely devoid of legal support.”

The lawsuit was voluntarily dropped in January due to a procedural issue, but a lawyer working on the case, Lydia Ghuman, confirmed to the Lever that the team intends to refile the suit in the fall.

In the meantime, the ongoing legal battle — alongside national attention to Palm Beach County’s investments — may be an impetus behind the county’s efforts to get a carveout for Israel bonds passed at the state level.

Ghuman emphasized, though, that the legislation wouldn’t put an end to her team’s case. “It doesn’t change the fact that . . . we have a bunch of other statutes regulating investments that we’re suing [Abruzzo] under,” she said. “If anything, it shows how he is not listening to the voice of his constituents and is manipulating different processes to allow him to make unchecked investments.”

A “Striking” Shift

After Moody’s downgraded Israel bonds, Palm Beach County faced a conundrum: Palm Beach’s local investment policy, like those in other counties, prohibits investment in bonds rated lower than an A credit rating. Not only did the policy threaten future county investments in Israel, it also exposed county officials to legal scrutiny over their current investment portfolio.

In February, Florida lawmakers unveiled a bill that aimed to solve Palm Beach County’s problems. The legislation would amend state law to bar any local government from setting a minimum credit rating exclusively for Israel bonds. The legislature’s own bill analysis specifically cites the Moody’s downgrade and Palm Beach County’s investment policy as part of the rationale for why the legislation is necessary.

Abruzzo, the Palm Beach County treasurer, brought the bill to the legislature, and he testified in support of the legislation at a March public hearing.

“I cannot thank the committee enough for taking up this bill to ensure we keep supporting what I consider our greatest ally Israel and investing in Israel bonds,” he told lawmakers.

Behind the scenes, the Development Corporation for Israel used its lobbying muscle to push for the bill’s passage. The group hired the well-connected Florida lobbying shop Capital City Consulting, which includes numerous former DeSantis aides and staffers.

Meanwhile, Palm Beach County advocated for the legislation through the lobbying titan Ballard Partners, whose Florida alumni include Trump’s chief of staff, Susie Wiles, and attorney general, Pam Bondi.

Both chambers of the Florida legislature subsequently passed the bill unanimously. A DeSantis spokesperson confirmed to the Lever that the bill “has not reached his desk.” There are a number of bills still awaiting a signature from the governor in the remaining weeks of the Florida legislative session.

Should DeSantis sign the bill, it could set a precedent for other states and localities to take on more financial risk to finance Israel’s war effort. Abruzzo, Ghuman noted, holds a position with an Israel Bonds’ leadership group, composed of treasurers across the country. “He’s already in a position of power where he can spread his ideas to other states,” she said.

Daniel Garrett, a professor of finance at the University of Pennsylvania, told the Lever that while he didn’t think that the guidance would have much impact on local investment decisions, he wasn’t aware of any comparable legislation.

“I can’t think of any other kind of encouragement to invest in risky securities,” he said, although he added that most states set various “restrictions on how investment policies can be written.”

Marlowe at the University of Chicago emphasized that the bill was part of a “striking” government investment shift allowing a “serious concentration of risk in these portfolios in a way that we had never seen before.”

He added, “It’s one thing for a county to buy up these bonds in the first place, it’s another to explicitly de-diversify the portfolio, which flies in the face of the philosophy of how to invest public money.”