by John Helmer, Moscow
@bears_with [2]
Just days before Iran and Arab forces launched their October 1 operation to expose Israel’s military vulnerabilities, four Palestinian Americans launched the most serious threat to Israel’s survival in the economic war that is under way in parallel.
On September 24 they filed an 89-page brief in a Florida state court to declare illegal US financing of Israel’s war against Palestine through the purchase of Israeli government bonds with American taxpayer money. Their target is $700 million worth of Israel bonds purchased by the Palm Beach County treasury of Florida on the order of a single man, the county’s chief financial officer Joseph Abruzzo [3].
Starting in September 2023, one month before Hamas launched its break-out from Gaza, Abruzzo signed a purchase of $40 million in Israel bonds. Then from October 10 through March 2024 Abruzzo used county taxpayer funds to buy $660 million worth of securities the Israeli government was issuing to cover its warfighting costs.
Altogether, the Israeli plan [4] is to raise at least $58 billion in new debt this year, with an increasing proportion of this debt to be covered from the US where Goldman Sachs and Bank of America are placing the bonds with small-town officials like Abruzzo [5].
In Abruzzo’s case, the court papers relate, “Palm Beach County is currently the world’s largest investor in Israel Bonds due to the Defendant’s [Abruzzo] $700 million dollar investment in Israel bonds. These $700 million dollars, sourced from Palm Beach County taxpayers’ property taxes, are being poured into a foreign economy that has an increased risk of default. Defendant purchased $700 million dollars of Israel Bonds amidst a housing crisis in Palm Beach County, an education crisis, and a funding shortfall of $732 million dollars in Palm Beach County’s budget that is leading to several capital-improvement projects such as athletic centers, parks, animal shelters, and bridges to be either delayed or cancelled. At the time the $732 million dollar shortfall in Palm Beach County’s budget was announced, Defendant had already invested $160 million dollars in Israel Bonds.”
After his own budget deficit and treasury debt were announced, Abruzzo “invested an additional $540 million dollars in Israel Bonds.”
In his public justification, Abruzzo told the Miami press on October 10 [6], 2023: “I am proud to show solidarity with the people of Israel and make Palm Beach County the first county in the nation to increase its investment in Israel Bonds following their declaration of war against Hamas.” Six months later, Abruzzo attacked critics of Israel in the Democratic party as it began the presidential election campaign. “Do I hear, especially from the far-left wing of my Democratic party, concerns about investing in Israel? Yes. Are the public leaders in D.C. of the Democratic Party condemning support for Israel? Yes. . . But I would say to them, we’re not going to be deterred. They need to back off and we need to stand united with our greatest ally, Israel [7].”
At the same time Abruzzo has claimed: “everything I do financially is, down to the penny, putting personal feelings aside,” Abruzzo said [7]. “None of my purchases was done for a political purpose whatsoever. It’s the dollars and cents and getting the most we can for taxpayers. It’s all economic driven.”
Abruzzo has also tweeted [8] that “if we don’t balance the federal budget and curb spending, our nation’s future will be unrecognizable. With interest payments on the national debt now exceeding $1 trillion, the urgency for fiscal responsibility should have been addressed…”
Between supporting Israel with Florida state funds and meeting his county and state taxpayer needs, Abruzzo says [9] Israel should come first. “We must prioritize Israel’s security, not reward nations that enable terrorism and extreme hatred towards the United States. At the same time, let’s focus on helping Americans at home—like the people of North Carolina and Florida still struggling after recent disasters. U.S. aid should reflect these priorities: support our allies and take care of our own.”
The Palestinian American court challenge declares Abruzzo has been lying about his domestic priorities, and that his Israel bond buying is illegal under the Florida state constitution, several state laws, and Palm Beach County policy. “Defendant’s [Abruzzo] investments in Israel Bonds are putting the county’s funds at risk and are ignoring vital local needs… Notwithstanding any other law, when deciding whether to invest and when investing public funds pursuant to this section, the unit of local government must make decisions based solely on pecuniary factors and may not subordinate the interests of the people of this state to other objectives, including sacrificing investment return or undertaking additional investment risk to promote any non-pecuniary factor. The weight given to any pecuniary factor must appropriately reflect a prudent assessment of its impact on risk or returns… Defendant’s Investments in Israel Bonds on and after October 10 Violated His Fiduciary Duty, Local Investment Standards, and The Florida Trust Code as Defined by Florida Statutes 218.415, 518.11, 736.0801, 736.0802, 736.0803, and the Palm Beach County Investment Policy.”
The lawsuit asks the court “[to rule] that Defendant’s role in the Israel Bonds Government, Industry, and Financial Services Leadership Group violates Defendant’s duty of impartiality. Order Defendant to terminate his role in the Israel Bonds Government, Industry, and Financial Services Leadership Group. Permanently enjoin Defendant from investing in Israel Bonds while the war in Gaza is ongoing, as this poses an economic threat to Palm Beach County’s general fund and endangers Palm Beach County taxpayers.”
The court papers do not accuse Abruzzo of personal corruption in his contacts with Israeli bond salesmen, and there is no record of the contacts Abruzzo has had with the bond placement banks, Goldman Sachs and Bank of America, or with Israeli government agents — except for an email and letters of receipt from the Development Corporation for Israel, the bond issuer, after Abruzzo had paid over the Palm Beach money. An archive of emails and other evidence, indicating inducements to local officials from the Israelis, including the Florida state chief financial officer but not Abruzzo, have been reported here [10].
There is no also no mention in the court papers of Abruzzo’s re-election campaign. November 5 [11] is his election day.
Local press reports indicate, however, there has been a surge in the number of Jewish voters in Abruzzo’s county constituency since he was first elected to the state legislature, and then comptroller in November 2020 [12]. A local rabbi invited to preside at Abruzzo’s official swearing-in said [13]: “if anyone can protect our public records and our public funds with integrity and honesty and responsibility, Joe Abruzzo, you are the one to do that.”
Jewish voters comprise 16% of the registered voters in the 22nd US Congressional district which includes Palm Beach [14]. In the Palm Beach County population of 1.5 million, the Jewish community adds up to less – just 9% [15]. That minority, however, has dominated Abruzzo’s campaign for re-election to the comptroller’s post.
Israel’s war against the Palestinians is also a war by the Jewish community in Florida against Arab Americans in the state. The plaintiffs in the case against Abruzzo have asked the court to protect their identities because they have testified to “significant concerns for personal safety, privacy, and potential harm to themselves and their family based on their involvement with Palestinian issues and advocacy.” These include threats of death and arrest by Israeli forces against their family members in Palestine. In Florida, “given the state’s willingness to conflate speech protected by the First Amendment with criminal activity, Plaintiffs’ admissions that they have sent thousands of dollars to family and friends in Gaza exposes them not only to criminal liability, but to life in prison.”
Abruzzo, [16] 44, an Italian American Catholic, has been running for office in southern Florida for his entire career and has held no other professional employment [17]. He was elected to the Florida state legislature for three terms between 2008 and 2020 before winning election to the higher paid comptroller’s post in charge of the Palm Beach finances, taxes and investments. This is acknowledged to be the most powerful post in local politics.
Left, Palm Beach County Comptroller (chief financial officer)
Joseph Abruzzo. Right: Miami attorney for the Israel war bond challenge,
David Pina. A graduate of Harvard Law School in 2021, Pina is a member
of the Florida community protection group, Chainless Change [19].
Abruzzo uses his official Twitter account to mobilize support for Israel’s attacks on Arab targets in Palestine and Lebanon. On September 20, 2024 [21],
he endorsed the Israeli bombing of Beirut which killed a Hezbollah
commander and dozens of others. The air strike was the deadliest on a
neighbourhood of Beirut since Israel and Hezbollah had fought the war of
2006 [22]. Then on October 6 [9],
following the air attack killing the Hezbollah leadership in Beirut
and the Israeli ground force invasion of southern Lebanon, Abruzzo
tweeted: “Israel faces constant threats from Hamas and Hezbollah, who
exploit Lebanon’s borders. We must prioritize Israel's security, not
reward nations that enable terrorism and extreme hatred towards the
United States.”
The September 24 court filing of the Israel bonds case against Abruzzo can be read in full here [23]. “We expect the frivolous case brought against me in my capacity as Clerk will be quickly dismissed with prejudice,” Abruzzo responded [10].
This is an expansion of the initial filing of the case in the Palm Beach County Circuit Court on May 15. Local reporters covered the story briefly, and it was picked up by The Nation [24] on May 30. In May also, David Pina, the Harvard Law School-educated attorney for the Palestinian American case, filed for identity protection orders for the plaintiffs. Read those papers here [25] and here [26].
For the first analysis last March of the secrecy surrounding the placement of the Israel bonds in the US, click to read [5]. In this report, sources reported the scope for prosecution of US bankers and Israel bond marketers for committing Section 17(a) fraud under the federal Securities Act. The vulnerability of Israeli state financing to changes in the legal situation for bond sales in the US is analysed here [27].
In an attachment to the new court filing in Palm Beach, this is the official listing of Abruzzo’s purchases of Israel bonds since last September.
Source: https://drive.google.com/ [23]
The argument of the court papers is the only one of its kind in the US at present. Arab American leaders and organizations have yet to acknowledge or endorse the case; James Zogby, a well-known pollster and head of the Arab American Institute in Washington, has refused requested comment.
The legal case for the court is that Abruzzo in Palm Beach, like other “county government officials must competently manage a county’s financial portfolio and ensure that the county’s money is utilized to address vital local needs in order to deliver on the faith entrusted to them by the American public and fulfill their role of administrating essential local services… Defendant is required to invest Palm Beach County’s excess funds composed of taxpayers’ money in the safest sources possible that will generate the highest market rate of return and that have sufficient liquidity.”
“When Defendant took office in 2021, only 5% of Palm Beach County’s portfolio could be invested in Israel Bonds. In 2023, Defendant requested and obtained permission from The Palm Beach County Board of County Commissioners to raise the amount of the county’s portfolio that could be invested in Israel Bonds to 10%. On March 12, 2024, Defendant requested and obtained permission from The Palm Beach County Board of County Commissioners to raise the amount of Palm Beach County’s portfolio that could be invested in Israel Bonds from 10% to 15%.”
Public finance experts are cited, and are expected to testify in court, that they are not “aware of any other jurisdiction that has 15% of their holdings in one type of investment…[this represents] a greater concentration of risk in any portfolio for a public entity than [he’s] seen in a long time.”
In a presentation of the Florida constitution, statutes and regulations which govern Abruzzo’s performance in his post, the court brief argues that Abruzzo has violated the required fiduciary duty “to invest and manage investment assets as a prudent investor would considering the purposes, terms, distribution requirements, and other circumstances of the trust. This standard requires the exercise of reasonable care and caution and is to be applied to investments not in isolation, but in the context of the investment portfolio as a whole and as a part of an overall investment strategy that should incorporate risk and return objectives reasonably suitable to the trust, guardianship, or probate estate.”
Applied to the Palm Beach county’s investment decisions, the prudent investor test in the county policy and laws requires that with “each investment opportunity, the following objectives, in order of priority: A) Safety of financial assets, B) Liquidity of funds adequate for timely satisfaction of financial obligations, and C) the maximum achievable investment income given prudent safety and liquidity objectives.”
The political objective of supporting Israel, which Abruzzo has repeatedly declared to be his priority, is unlawful, according to the state and county laws. “Florida Statute 218.415(24)(b) [29] states “Notwithstanding any other law, when deciding whether to invest and when investing public funds pursuant to this section, the unit of local government must make decisions based solely on pecuniary factors and may not subordinate the interests of the people of this state to other objectives, including sacrificing investment return or undertaking additional investment risk to promote any nonpecuniary factor. The weight given to any pecuniary factor must appropriately reflect a prudent assessment of its impact on risk or returns.”
A series of data displays in the court file shows that before the outbreak of war on October 7, Israel’s financial indicators were already in decline, and that this decline has accelerated sharply since then. Measures of Israel’s state budget deficit, stock market price trajectory, investment indexes, and interest rates have been tabulated to confirm that Abruzzo’s decisions to buy more and more Israel bonds were breaches of the statutory rules, motivated by his personal and political convictions.
For more detail on the measurement of Israel’s economic decline and rising Israel economic risk in the Arab war of attrition, read this [30].
Source: https://ratings.moodys.com/ [32] .
The international rating company’s credit risk metrics just published
reinforce the three conclusions in the court papers: “Liquidity
violation: “Furthermore, Israel Bonds are not traded in a secondary
market. A secondary market is a financial market where investors buy and
sell securities that have already been issued, such as stocks and
bonds. This means that Defendant [Abruzzo] cannot divest from Israel
Bonds before they mature without finding a private buyer, which could
lead to a loss in value. Market rates of return violations: From the
period of June 2023 to March 2024, Israel Bonds consistently
underperformed money market funds (MMF) by 0.5% to 4.04% (this is the
range that Israel Bonds underperformed MMF within the period of June
2023-March 2024, from lowest to highest) and SBA pool [US Small Business
Administration loans guaranteed by the US Treasury] by 0.6% to 4.28%
(this is the range that Israel Bonds underperformed SBA pool within the
period of June 2023-March 2024, from lowest to highest). This is
significant because as of December 2023, Defendant more than doubled
Palm Beach County's investment in Israel bonds and decreased the
county’s investment in SBA pool to do so. The portfolio would have
generated higher returns if Defendant had maintained the investment in
SBA pools. Starting in January 2024, Israel bonds modestly outperformed
the T-Bill and inflation.The 2-year T-bill is a U.S. debt obligation.
Because Israel Bonds modestly outperformed the 2-year T-bill, it would
have been safer to invest in the U.S. debt obligation instead, given the
better credit rating of the United States compared to Israel. Investing
in the 2-year T-bill also would have guaranteed a higher market rate of
return.”
The independent international ratings agency Moody’s analysed the evidence for a downgrade in February of this year; click [27]. Moody’s then issued a second, sharper downgrade on September 27 [33]. The new Moody’s report [32] warned explicitly that Israel’s negative creditworthiness and default risk for its bonds was rising. “The key driver for the downgrade is our view that geopolitical risk has intensified significantly further, to very high levels, with material negative consequences for Israel’s creditworthiness in both the near and longer term. The intensity of the conflict between Israel and Hezbollah has increased significantly in recent days. This is in the context of Israel’s publicly-stated objective to return its evacuated residents back to the North of the country. Achieving this objective is likely to involve a yet more intense conflict. At the same time, prospects for a ceasefire in Gaza have receded and we assess that domestic political risks have increased alongside geopolitical risks.”
The Moody’s report is signed by Kathrin Muehlbronner, who is Senior Vice President of Moody’s Sovereign Risk Group. “Longer term, we consider that Israel’s economy will be more durably weakened by the military conflict than expected earlier. With heightened security risks (a social consideration), we no longer expect a swift and strong economic recovery as in previous conflicts. In turn, a delayed and slower economic recovery in combination with a more prolonged and broader military campaign will more persistently impact public finances, further pushing out the prospect of a stabilisation of the public debt ratio, compared to our earlier projections. In our view, the significant escalation in geopolitical risk also points to diminished quality of Israel’s institutions and governance which have not fully mitigated actions detrimental to the sovereign’s credit.”
The Times of Israel responded with an editorial warning [34]: “A lower credit rating increases the riskiness of government bonds, which is reflected in a decline in the price of the debt and an increase in yields, that overall lowers the value of savings portfolios.”
The Palm Beach court challenge was filed three days before Moody’s issued its new warning. The court papers conclude that Abruzzo as county comptroller “is required to prioritize safety of principal, liquidity, and market rate of return with his investments. Defendant’s investments in Israel Bonds on and after October 10, 2023 did not prioritize safety of principal, liquidity, and market rate of return…Defendant is also required to make impartial investments, investments that comply with the prudent investor rule, and investments that comply with his fiduciary duties. Defendant’s investments in Israel Bonds on and after October 10, 2023 were not impartial, did not comply with the prudent investor rule (which assesses how reasonable the investment was given prevailing social and economic circumstances on the date of investment, not the resulting return on the investment), and did not comply with his fiduciary duties. “
In the technical analysis of the Palestinian American court brief it becomes dramatically clear that Abruzzo has been favouring higher-risk, lower rate-of-return Israel bonds over US Government securities. No US reporter has noticed this is evidence of state capture.
The court papers [35] also reveal the risk to the Palestinian American plaintiffs that the Florida authorities may apply against them newly enacted state laws criminalizing criticism of Israel and support for Palestine. “Plaintiffs ask this Court to grant them leave to proceed anonymously for the following reasons: (1) Plaintiffs are challenging government activity; (2) the Complaint and subsequent pleadings will contain sensitive, personal information about their religious affiliation and political support, as well as information about their families living in warzones in which civilians have been systematically targeted; (3) through this action, Plaintiffs are admitting their intention to engage in conduct that the State of Florida has announced will be a priority for criminal investigation and prosecution; (4) Plaintiffs are at great risk of physical, professional, and emotional injury if identified (5) proceeding anonymously will not pose any unfairness to Defendants, given that Defendants are government actors, and the issues to be litigated revolve entirely around the conduct of the Defendants.”
“Plaintiffs regularly travel to Palestine to visit family and have concerns about potential harassment or adverse actions by Israeli forces upon entry into the region. Plaintiffs are aware of individuals in the United States who have faced threats and intimidation from Israeli forces due to their legal advocacy for Palestinians’ rights during visits to Palestine. Plaintiffs have family and friends residing in Gaza, where Israeli forces have a pattern of targeting vocal individuals during the ongoing conflict, putting those associated with them at risk. Plaintiffs know advocates in South Florida who have experienced severe consequences such as death threats and loss of employment due to their public support for Palestinian rights or criticism of Israeli policies.”
“In this instance, Plaintiffs are not merely voicing support or criticism; they are taking active steps to remove $700 million from the Israeli war effort. There is no analogous circumstance. And there is therefore no telling the extent of retaliation they might endure from all sectors: self-styled vigilantes, employers, and their own state and local governments. One other possible source of retaliation comes in the form of a new artificial intelligence known as ‘Where’s Daddy?’, which is being used to ‘track[] Palestinians on [a] kill list and was purposely designed to help Israel target individuals when they were at home at night with their families. The targeting systems, combined with an ‘extremely permissive’ bombing policy in the Israeli military, led to ‘entire Palestinian families being wiped out inside their houses.’”
“Plaintiffs’ concerns for the privacy of their identity therefore extend not only to themselves but also to what family they still have left alive in Gaza.”
Read the affidavit filed [36] by one of the plaintiffs, a resident in Palm Beach for twice as long as Abruzzo.
“In the last 6 months, over 40 members of my family have been killed,” she told the court. “I live with fear; every single minute of every single day I am afraid for my family. And unfortunately, this is not a situation where I can tell myself that I am simply worrying too much.”
“The sound of the phone ringing has become like the bell announcing death. Every time I hear the phone ring, my heart stops; my chest constricts, I become dizzy. What’s worse, though, is when I call family in Palestine and there is no answer. I begin to wonder— has it finally happened? Is there simply no one left? I can’t imagine torture being worse than this.”
“I tell my husband to send every dollar we can; we’re sending thousands. No one there is making money, of course; they are just trying to stay alive. I know my family shares when they can, and we send until we can’t send anymore, but I lose myself wondering how many more I can’t help. Who is helping them? If they aren’t getting help, they are literally starving.”
“If we make an exception for Israel to kill without consequences—in fact, to target civilians and be rewarded for it with $700 million dollars in bonds— what is this world [36]?”
Source: https://drive.google.com/ [36]