— Israel’s business sector has been rocked by a major computer espionage scandal that was uncovered when a husband-and-wife book-writing team complained to police that someone had hacked into their computer system and stolen files.

Police said investigators traced the alleged theft to the wife’s former son-in-law, a computer programmer, and determined that he had also sold copies of so-called Trojan horse software to private detectives, who used it to spy for corporate clients on competing firms.

Last week, police arrested 16 people in Israel, including senior executives of some of the country’s leading high-tech companies and the private investigators they had allegedly employed. At the same time, British authorities, acting on an Israeli request, arrested the former son-in-law and his wife in London and are holding them pending an extradition hearing this week.

Israeli newspapers, which had been alerted to the case last week but were prohibited from publishing details until the roundup was completed over the weekend, characterized it as the biggest case of industrial espionage in the country’s history. “No one remembers a case like this in Israel — an affair with such scope of investigation involving technology at this high level,” said Chief Superintendent Rafi Levy, spokesman for the national police force.

It began when mystery novelist Amnon Jackont and his wife and co-author, Varda Raziel Jackont, a popular radio talk-show host, discovered portions of their new novel, “L For Lies,” on various Internet sites several months before it was published in August.

In a telephone interview Monday, Jackont said he soon discovered other letters and unpublished materials on various sites, often with words and phrases altered in ways designed to humiliate or defame him. “It became bigger and bigger and really sort of monstrous,” he recalled. “There was no place to hide.”

Jackont, who also teaches history and writing at Tel Aviv University, said that at first he feared one of his students had placed the material online. But as time went on and the materials multiplied, his wife suggested the culprit had to be someone who had had access to their computer. They immediately focused on Michael Haephrati, 41, who had undergone a bitter divorce from Raziel Jackont’s daughter eight years earlier -- and who, according to Jackont, was the model for a shady character in the novel.

When the couple approached the police in September, they expected little. In their novel, Jackont said, the police are characterized as cold and inefficient. But the computer fraud squad was highly effective, and by November investigators were suggesting that Haephrati was involved in a much larger criminal conspiracy.

In a statement released over the weekend, police said they had discovered a Trojan horse on Jackont’s computer that they were able to trace to an unnamed source. The Trojan allowed the person to control the computer, make changes to its programs, monitor everything it contained and raid it for information -- all without leaving any hint of the Trojan’s existence. Investigators also discovered that the same person had sold the software to three of Israel’s largest private investigation companies, which allegedly used it to illegally collect data for their corporate clients.

Police said the Trojan was planted via e-mail or a promotional computer disk supposedly sent to the target company by a well-known and reliable business partner. They said dozens of companies -- possibly including U.S. and European firms -- might have been spied upon without realizing it.

Last week’s arrests included an executive of a major satellite television company, suspected of spying on a cable television rival, and officials of two cell phone companies, suspected of eavesdropping on a mutual rival. Also accused in the scheme was the Israeli importer of Volvos and Hondas, suspected of spying on the company that imports Audis and Volkswagens.

Lawyers for the companies denied the allegations, with the executives generally insisting that they had been unaware that the corporate intelligence they had received had been obtained illegally and with the private investigators denying that the methods they used were illegal.

The police statement did not name the alleged author of the scheme but said two Israelis had been arrested in London for allegedly manufacturing and distributing the Trojan. Scotland Yard confirmed that Haephrati and his wife, Ruth Brier-Haephrati, 28, were being held for extradition to Israel for “unauthorized modification of the contents of a computer,” according to the Associated Press. They have made no public comment on the charge.

Jackont said he thought the corporate espionage would have gone undetected had Haephrati not decided to harass him and his wife. “He’s been obsessive, and this was his tragic flaw,” Jackont said. “The companies could never have figured out that things were leaking out of their computers. But in order to upset me, he spread this material all over the place, like he wanted us to know who was doing it.”

Special correspondent Samuel Sockol contributed to this report.