Israeli officials confirmed that the State Department called in the Israeli ambassador to demand that Israel halt plans to build 20 apartments for Jews in east Jerusalem, the section Palestinians claim for their capital.
The land, it turns out, belongs to Irving Moskowitz, an observant Jew with deep pockets and a hand that has generously doled out funds to settlers determined to cement Israel's hold on disputed areas of the holy city.
Moskowitz's land purchases over the past two decades have made him a household name in Israel and the bane of Palestinians.
"The holy city faces today a real threat with the continued attempts to Judaize it and change its Islamic and Christian features," Palestinian President Mahmoud Abbas said Sunday.
Israel claims it carefully protects the holy sites of the three religions, but the hawkish government of Prime Minister Benjamin Netanyahu has revoked the hints of compromise from previous governments, insisting that Israel must remain in control of the whole city.
Israel captured east Jerusalem in the 1967 Mideast war. Unlike the West Bank and Gaza, Israel annexed east Jerusalem. Though no other country recognizes the annexation, Israel claims that construction there is not the same as building settlements. About 180,000 Israelis live in the east Jerusalem neighborhoods built over the past 40 years.
Moskowitz has been a key, if shadowy, figure in the drive by some to cement Israeli rule in all of Jerusalem.
"For more than 20 years now, he has been bankrolling and supporting settler activity," primarily in east Jerusalem, said Danny Seidemann, a lawyer for Ir Amim, an Israeli group that supports coexistence in Jerusalem.
"This is Netanyahu and Moskowitz coming back for a repeat performance," Seidemann added.
Also, he was involved in the restoration of an ancient tunnel in Jerusalem's Old City in 1996, during Prime Minister Benjamin Netanyahu's first tenure. That touched off Palestinian riots in which 80 people were killed.
Attempts to contact Moskowitz or representatives through his foundation were unsuccessful. His lawyer in Jerusalem declined to comment.
In the past, Moskowitz has been quoted as saying that Israeli-Palestinian peace talks represented "a slide toward concessions, surrender and Israeli suicide."
Moskowitz, a former physician, made his fortune selling hospitals, then augmented his wealth with bingo and casino operations in the Los Angeles area.
This project has raised the ire of the Obama administration, which is trying to pressure a resistant Israel into announcing a total settlement freeze.
On Sunday, Netanyahu rejected the U.S. criticism of Moskowitz's Shepherd Hotel project.
"We cannot accept the fact that Jews wouldn't be entitled to live and buy anywhere in Jerusalem," Netanyahu declared, calling Israeli sovereignty over the entire city "indisputable."
Moskowitz also has varying degrees of ownership in plans to build hundreds of apartments in other neighborhoods around east Jerusalem.
The projects, while all permitted under Israeli law, are extremely contentious because they are in the middle of Palestinian neighborhoods that surround the most volatile site in the walled Old City of Jerusalem - a shrine known to Jews as the Temple Mount and to Muslims as the Noble Sanctuary and distinguished by its well-known golden dome.
Jerusalem was divided between 1948 and 1967, when Jordan ruled east Jerusalem. During those 19 years the city was divided, Jews were cut off from the Western Wall and other Jewish holy sites.
By Associated Press Writer Amy Teibel