Bottom Shekel / Look who's leading the attack on our pensions
It's possible that not everybody remembers who Izzy Cohen is. These days Cohen is the chief executive of Africa Israel Investments and Lev Leviev's man. He's the man who's leading the attack on all our pension savings on Leviev's behalf. He has been quoted as saying, not with attribution of course, that the only thing standing in the way of a debt arrangement at Africa Israel is Roy Vermos.
Vermos is the CEO of Psagot, an investment house that manages a lot of money in long-term savings and pension vehicles. Vermos has been leading an aggressive stance against the outlines of an arrangement that Africa Israel has been proposing. After Africa Israel said it can't meet its liabilities after 2010, Vermos began insisting that Lev Leviev, Africa Israel's controlling shareholder, can't keep control of the company without injecting a serious amount of money into it.
Cohen, a former Migdal CEO, has been whispering to the press that everyone - meaning the managers of Israel's insurance companies, meaning his former colleagues - are perfectly amenable to having our pension savings savaged. Only that nervy whippersnapper, Vermos, is standing in his way. "Roy is inexperienced and wants publicity. One should work behind closed doors, not through populism," Cohen says. "At Africa Israel it's hard to understand Psagot's agenda."
How interesting, we thought to ourselves: This man who had once run Israel's biggest insurance company, who managed hundreds of billions worth of public assets, doesn't understand Psagot's agenda.
How could it be that he doesn't understand Psagot's agenda? It's simple enough. It boils down to this: A company that borrowed NIS 7.5 billion from savers and investors must do what it takes to return the money. Psagot's agenda says that to return the money to Israel's provident fund and pension funds, Africa Israel will have to sell its assets and forgo the controlling interest in some of its group companies.
The agenda is looking out for the interests of widows and orphans, not fat cats and their rich managers; it's looking out for pensioners, who unlike Cohen don't get a NIS 5 million check from their employer every year, and who unlike Africa Israel's media adviser Moshe Theumim, can't charge the company thousands of dollars a month to weave media spins.
Then suddenly we were reminded of a remark Cohen made six years ago, in a private conversation, evidently not thinking it would reach the papers one day. We were reminded that when he was Migdal CEO, he didn't really look out for the public's interests. We grasped that for years, Cohen has been mainly looking to preserve his own power and that of his shareholders.
In 2003, the managers of Israel's insurance companies were bitterly fighting the treasury's insurance commissioner at the time, Eyal Ben-Chelouche, who sought to introduce a reform that would have benefited insurance customers. He wanted to change the risk/savings ratio in life insurance policies from 80% savings and 20% risk to 90% savings and 10% risk. That would have reduced the fees people pay.
Inflating the risk element in executive insurance policies beyond their economic value was how insurance companies inflated their fees. They sold executive insurance policies as a package deal, so the customers wouldn't realize they were paying far too much for risk. Ben-Chelouche wanted more transparency. He wanted to ban the companies from concealing the inflated price of risk, and he wanted to let customers move between companies, for the sake of competition.
To which Cohen said: "The reform will cause a mess in the economy. It will ruin the industry. We won't be able to sell these policies, and 50% of the workers in the sector will be made redundant. The program must be fought. Its execution would create pressure among clients to improve the terms of their existing policies. Ben-Chelouche wants to force the companies to give the clients information about the level of savings and risk components. That is a bad thing that will mean that nobody will save money."
To sum up what Cohen said: If the reform went through he couldn't continue to finance the bloated marketing divisions of the insurance companies at the expense of the general public, and warned of looming disaster. Namely, that insurance clients, realizing they'd been screwed royally for decades, would demand better terms. No, no, no: In his view, the clients should be left bereft of information so the insurance companies could continue to party on at the public's expense.
Vermos must continue to stand strong. He must not succumb to Cohen, who'd like to take his colleagues aside and quietly, behind closed doors, divvy up the loot, leaving the general public out in the cold.
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