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Half a year after Clubmarket's implosion into bankruptcy under debts passing a billion shekels, the court-appointed investigators Avner Cohen and Giora Hartug have filed an interim report, pointing at several instances of mismanagement.

In a notice appended to the report, they say they found no real evidence of anything criminal in nature. But they did find things that should, in their opinion, be brought to the knowledge of creditors, insofar as a creditors assembly is held to approve the owners' offer to pay NIS 15 million in exchange for assurance that no further clams shall be made against them.

In late 2004 the company entered a state of severe cash flow deficit, the investigators report. Clubmarket's financial officers warned that there were no resources to meet regular payments. As a result the company deferred NIS 47 million in payments during 2004, and deferred NIS 10 million in early 2005.

Clubmarket did not issue audited financial statements from 2004 until the chain collapsed. A draft opinion by its auditors, that was supposed to be appended to financial statements, contained a sort of "going concern" warning. But the note did not reach the banks with the draft financial statement, nor were they informed of it otherwise.

During 2003 and 2004, Clubmarket returned NIS 60 million out of NIS 109 million  shareholders' loans. On December 31, 2004, the investigators say, when the company was deferring payments to suppliers because it was out of cash and its cash flow forecast for January-February indicated serious shortfall, it paid another NIS 12 million back to the shareholders.

Moreover, they allege, Clubmarket repaid shareholders loans even though it was not in compliance with its financial covenants signed with the banks, including profitability, liquidity and equity. Repayment of the loans had been contingent on its compliance with these covenants. But the loans were repaid because the banks agreed, in exchange for receiving attachments to the company's assets and to credit cards.

The investigators also found that during 2002-2004, the shareholders were paid NIS 11 million in management fees. The chain also extended loans to top officers: In March 2002 Yacov Ginzburg, the CEO, borrowed NIS 1.25 million. In April he borrowed a further NIS 400,000. At the time of the second loan, it was agreed that both would be repayable from January 2006. The loans have not been repaid.

The chain also lent NIS 200,000 to its chief financial officer, Ofer Makov, in July 2005, shortly before filing for bankruptcy protection. The loan had been approved shortly beforehand and was to be repaid starting from 2009. That loan has not been repaid either.

The investigators note that their work is not done and that Clubmarket officers, directors and former owners have yet to be questioned. At this stage all findings are interim, not final, they add.