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Local and state US officials have been investing in sovereign bonds issued by Israel since 7 October, in deals that have raised ethical concerns, according to a report by the Guardian.

Since the start of the war on Gaza, US states and municipalities have bought around $1.7bn in Israeli bonds to support Israel, the report said.

Activists have demanded that corporations and institutions divest from investments that support the Israeli government after over 2,000 pages of emails and records found by the International Consortium of Investigative Journalism (ICIJ) showed Israel Bonds’ efforts to court US officials and deliver sales pitches with pro-Israel messaging.

The documents obtained revealed that officials who purchased the bonds were given access to gala dinners, cocktail celebrations and private meetings with top Israeli and military officials.

The dealings with Israel Bonds, headquartered in New York, often blurred lines between private and official business matters.

However, after the documents were revealed by ICIJ a spokesperson from Israel Bonds said that they prioritise building relationships with their customers for the sake of continuity and that the bonds were safe investments.

"Investors usually choose to invest for a simple reason: Israeli bonds offer strong credit as well as strong and steady returns," the Guardian reported Nathan Miller, a spokesperson for Israel Bonds, as saying.

"The state of Israel has never missed an interest or principal payment in almost 75 years of issuing bonds," he added.

Conflict of interest

Elected officials tasked with investing taxpayers’ money to buy government bonds are typically instructed not to take any actions which could be seen as a conflict of interest.

However, ethics experts believe the dealings with Israeli bonds constitute a conflict of interest and could have crossed a line.

Israel Bonds, also known as the Development Corporation for Israel, was launched in 1951 and focused mainly on leveraging funds from the Jewish diaspora in the US to further support the establishment of Israel.

Now, it has evolved and become an important source of government financing. It still sees itself as securing the future of Israel but it has also been involved with US states and municipalities.

A particular case that gained attention was that of Ohio Treasurer Republican Robert Sprague, who had allocated millions in state funds to bond purchases and made arrangements to join an exclusive guided trip to Israel.

On 11 October, Sprague announced plans to invest an additional $20 million in Israeli bonds, saying: "Now is the time to stand with Israel".

His planned October 2023 trip read like a luxury holiday and state visit, according to reports, with lavish hotels, a controversial archaeological site not yet open to the public as well as meetings with politicians and tours of Israeli military bases. The trip reportedly ended with a meeting with Israeli President Isaac Herzog.

Ohio's ethics laws forbid officials from taking substantial gifts from "improper sources" including people or organisations seeking to do business, which includes lavish meals, entertainment or exotic trips. However, Sprague’s financial disclosure from 2023 does not list any of his visits and gifts received through Israel Bonds.

Israel Bonds has raised around $3 billion worldwide since the start of the war on Gaza despite the NGO Democracy for the Arab World Now (DAWN) submitting a complaint to the US Department of Justice alleging Israel Bonds appears to be violating federal law.