The Tax Authority has fined insurance magnate Shlomo Eliahu NIS 2.8 million for failing to report that he took NIS 74.3 million out of the country. Under police questioning, Eliahu, who owns Eliahu Insurance and is seeking a controling interest in Migdal Insurance, admitted he used a large chunk of the funds to gamble legally in London casinos.
Oded Sarig, the Finance Ministry's capital markets and insurance commissioner, will require that Eliahu appear at a hearing on the matter before receiving permission to to gain control of Migdal.
Observers could cite no precedent of a candidate for control of a major Israeli financial institution being required to submit to a hearing as part of the approval process for acquisition of the interest. Sarig is expected to demand an explanation from Eliahu of the unreported transfer of tens of millions of shekels in bank checks out of Israel. Eliahu did not face a criminal trial over the infraction and instead simply paid a fine.
The initial allegation against him claimed there were 39 separate occasions in which he failed to report the transfer of NIS 92.5 million, but nine of the cases were dropped due to insufficient evidence. The transfer of the sums are believed to have been made between January 2007 and August 2009. Eliahu admitted to 30 of the initial 39 instances. He underwent a quasi-judicial process for first-time offenders and those whose offenses are mitigated by extenuating circumstances. In Eliahu's case, the administrative approach was invoked because he paid taxes on the funds involved.
His acknowledgment that he used a portion of the funds to gamble at London casinos poses no problem for him because gambling there is legal, and there is no evidence Eliahu used the funds illegally overseas. However, Israeli government officials may be somewhat uneasy with his admission that he gambled for such a large sum - NIS 13.5 million. Another subject of possible concern is his failure to explain to the Tax Authority what he did with the rest of the funds.
Such discomfort and unanswered questions are thought to be major reasons why Sarig has scheduled the hearing as a precondition to approving Eliahu's control of Migdal. Sarig has wide powers when it comes to approving control of insurance firms, and can deny permission even in the absence of criminal wrongdoing.
According to the Tax Authority's initial allegations, Eliahu removed most of the funds in bank checks denominated in British pounds, although some were also allegedly in euros. On January 7, 2008, for example, it was alleged he took bank checks worth about 710,000 British pounds out of Israel.
Regarding the nine cases that were dropped, Eliahu said these checks had been voided. He also said the sums he transferred abroad were from his personal account and not from a business account. When questioned by police, Eliahu said the sums were for his personal use but declined to be more specific. Under police questioning a second time, he said he had not deposited the funds in his account abroad, but put them to his "personal use."
To the Tax Authority, he acknowledged gambling at British casinos. The panel said it received documentation for NIS 13.5 million used for gambling, but not for the other roughly NIS 60 million.
In a related development, the board of Italian insurance giant Generali, which is due to sell its interest in Migdal to Eliahu, ousted its CEO, Giovanni Perissinotto, on Saturday, after the Italian firm's share price dropped to a 26-year low.
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