Clubmarket paid owners while stiffing suppliers
Clubmarket was repaying loans to its owners and issuing new loans to senior executives even as it was refusing to pay suppliers because it claimed to have no money, a court-ordered investigation of the supermarket chain has discovered.
In an interim report submitted to the Tel Aviv District Court on Sunday, investigating attorneys Avner Cohen and Giora Hartog said that to date, they have uncovered no suspicions of criminal wrongdoing. However, they said, they have uncovered evidence of serious managerial failures that ought to be presented to the chain's creditors before a settlement.
In response to the report, Clubmarket's unsecured creditors are considering demanding that the former owners - the Mozes, Borovich and Rosen families - significantly improve their offer of an immediate payment of NIS 15 million in exchange for a promise not to file any suits.
The report found that Clubmarket had repaid NIS 12 million in loans to its owners at a time when it claimed that it lacked the money to pay suppliers. It also found that the chain gave several loans to senior executives that have still not been repaid, including a NIS 1.6 million loan to former CEO Ya'akov Ginsburg. Another senior executive received a NIS 200,000 loan just two weeks before the company finally collapsed.
In response, Judge Varda Alshech acceded to a request by a group of Clubmarket suppliers that the agreement with the chain's former owners be put to a vote at a general assembly of Clubmarket creditors, which is expected to take place in a few weeks.
In her ruling, Alshech said the NIS 15 million seemed very low, despite the former owners' argument that they are also waiving NIS 80 million the chain still owes them.
Even though the investigators found no evidence of criminal wrongdoing, Alshech explained, it is clear their findings could result in "significant" monetary awards in civil proceedings. Moreover, she said, if the investigators' tentative findings are verified, the former owners might well lose any suit aimed at reclaiming the NIS 80 million they are still owed - meaning that their agreement to waive this sum might actually be no concession at all.
In light of the investigators' findings and Alshech's ruling, the suppliers are now rethinking the tentative agreement with the Borovich group. Some suggested they would be better off retaining the right to sue - particularly since any agreement would automatically end the investigation.
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