Nochi Dankner, the chairman and controlling shareholder of IDB Holding Corporation, was questioned Monday on suspicion of securities fraud in connection with the company's NIS 321 million offering of shares and warrants in February.
Dankner, who was released under restrictions after posting a NIS 5 million bond, is suspected of securities fraud, embezzlement, breach of trust and money laundering.
He has been banned from leaving the country based on what the Israel Securities Authority, which is conducting the investigation, called "a real suspicion" that he is a flight risk.
It is believed that Dankner was questioned again on Tuesday.
The February stock offering was intended to enable IDB Holding Corp. to meet its liabilities and to avoid a "going concern" warning in its financial statement. IDB Holding Corp. owns major fixtures on the Israeli business scene such as the Cellcom mobile carrier and Super-Sol, the country's largest supermarket chain. In the end a going concern warning was attached to the company's August financial report.
IDB Holding Corp., the public company topping the IDB group's corporate pyramid, is in turn owned by Dankner's privately-held Ganden investment company. IDB Holding Corp. Tuesday notified the Tel Aviv Stock Exchange that Dankner was being questioned by the securities agency.
The Israel Securities Authority suspects that Dankner, together with broker Adi Yehuda Sheleg and a Dankner associate who deals in securities, manipulated shares before the IDB public issue in order to increase the sum to be raised. A gag order bans disclosure of the third suspect, an independent stockbroker.
During the period under investigation, Sheleg, who is married to City Brokers Corp. owner Maya Sheleg, served as CEO of a brokerage firm. Sheleg and another associate are suspected of making deals involving tens of millions of shekels on the days preceding the public issue in accounts belonging to the brokerage and to City Brokers.
The ISA suspects that Adi Sheleg and the unnamed broker bought IDB shares on the market at their traded price and resold them at a discount to associates of Dankner, who reimbursed Sheleg and the broker for their losses and the cost of additional shares.
In a statement the securities authority said: "This fraudulent activity was carried out with Dankner's knowledge, his instruction and his funding," added that its investigation had determined that it was "Dankner who initiated the fraudulent plan, was among the main beneficiaries and also saw to funding it in a significant way."
The ISA also stated that shortly after the issue Dankner deposited NIS 8 million into the account of the unnamed broker.
Dankner said in response: "An investigation by the Israe Securities Authority is underway. I respect the procedure and I am fully confident that it will quickly become clear that all my activity in every matter was and is always legal and carried out honestly and irreproachably."
Israel Securities Authority chairman Shmuel Hauser succeeded Zohar Goshen, who stepped down last year. After leaving the agency Goshen helped broker Discount Investment Corporation's sale of Ham-Let, a valve manufacturer based in Upper Nazareth, for which he was paid about NIS 3 million in commissions.
Since Hauser's appointment the securities authority has stepped up pressure on the IDB group, including attempts to close loopholes that allowed IDB subsidiaries to distribute dividends to companies higher up in the IDB pyramid after its Koor subsidiary lost about NIS 3 billion in an investment in the Swiss bank Credit Suisse.
Dankner is represented by attorney Roy Blecher and the law firm of Eli Zohar, which has also represented former Prime Minister Ehud Olmert. On Tuesday, Ram Caspi, who has also represented Dankner, said: "I have known Nochi Dankner for many years and he is careful to follow the rules down to the last letter. He is endowed with a conservative [manner] and meticulously follows what the law requires, and I have no doubt that at the end of the examination, he will remain innocent and untarnished."
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