Context: in summer 1967, right after the Six Day War, Israel unilaterally defined a piece of the West Bank as East Jerusalem, and annexed it. The area defined was far greater than the Jordanian municipality of East Jerusalem. The 70,000 Palestinians living in this area were given a legal status of permanent residents in Israel; for the next 20 years or so they could also acquire full Israeli citizenship if they wished, but only a small number asked for it.
Permanent residence or full citizenship, both offer the same set of social security benefits, health care, access to the Israeli economy and wages, and freedom of travel in Israel that the Palestinians of the West Bank don't have, since they're not Israelis. The value of these things is very significant: no one would want to lose them, which is why many East Jerusalem Palestinians will tell in private that they have fears of the Day After the partition of the City, whenever it happens.
When the Palestinians forced Israel to set up its security barrier a few years ago, it suddenly become apparent to everyone that many thousands of Palestinians who used to live in Jerusalem had moved elsewhere, but were still drawing the benefits. That's the background of the story.
From there, you'll take the story wherever your political inclinations direct you. If you're critical of Israel, you'll bemoan the horror of it all:
Officials at Hamoked, which obtained the ministry data via the Freedom of Information Act, said they were concerned that some of those who lost their residency rights may not even know it. "The phenomenon of revoking people's residency has reached frightening dimensions," said Dalia Kerstein, Hamoked's executive director. "The Interior Ministry operation in 2008 is just part of a general policy whose goal is to restrict the size of the Palestinian population and maintain a Jewish majority in Jerusalem. The Palestinians are natives of this city, not Johnny-come-latelys."
If you're willing to accept that Israel doesn't owe financial support and other benefits to Palestinians who no longer live here to be eligible, you'll defend the measures,perhaps even applaud them:
Sheetrit, however, insisted that the operation was necessary. "What we discovered is just the tip of the iceberg," he said. "The State of Israel pays billions of shekels a year in stipends to people who don't even live here. We sent notices to every one of them about the intention to revoke their residency; we gave them time to appeal. Those who appealed weren't touched."
The ministry data shows that 89 Palestinians got their residency back after appealing. Sheetrit said the probe revealed very serious offenses - such as 32 people listed as living at a single address that did not even exist.