Computer glitch wipes out NIS 30m at insurer Menora

Still aquiver from exposure of a habit of backdating investments, Menora Mivtachim finds itself wriggling in the spotlight again, this time because a computer glitch made somewhere between NIS 25 million to NIS 30 million vanish - but the insurance company didn't tell the public.

The Menora Mivtachim management, led by Ari Kalman, learned about the computer malfunction two months ago, in the course of an internal inquiry into the backdating affair.

In the backdating affair, which was broken by TheMarker, the insurance company unequivocally stated that savers had not been affected: The damage would be done only to its own proprietary account. In the case of the vanishing money, however, savers were affected. The company has promised to return missing money.

During the internal audit it turned out that a computer glitch had caused mistakes, apparently in calculating interest, regarding profit-sharing insurance policies back in 2003. The computer error caused thousands of shekels to be deducted from accounts of profit-sharing policies. Menora Mivtachim says the sum involved is NIS 20 million, but based on its own report to Yadin Antebi, commissioner of capital market, insurance and savings at the Finance Ministry, the sum is between NIS 25 million and NIS 30 million.

Though the Menora Mivtachim management decided to give back the money to savers, while discussing the matter they decided to keep it quiet, given that the company was already under fire for the backdating affair.

The management consulted with Pini Rubin, chairman and senior partner of the Gornitzky & Co. law firm, and at his urging orally divulged the information to Antebi two weeks ago. Antebi insisted on receiving a written report, including details on the computer error and on the extent of damage. Menora Mivtachim has not yet delivered the report, although Antebi has repeated his demand. Management is now considering how to return the money to savers. The main problem concerns policies that were redeemed before the glitch was discovered. Sources close to Menora Mivtachim management said yesterday that the company hadn't meant to announce the affair to the Tel Aviv Stock Exchange, on the grounds that damage of NIS 20 million is not material to its business.

Menora Mivtachim confirmed the main points of the report and added that it itself had discovered the problem, and is taking action.

The backdating affair came to light in early September. Employees of Menora Mivtachim who had owned executive insurance policies and who had lost money as stock markets dived in 2008, retroactively changed the nature of their policies' investments. Meaning, they shifted money from high-risk investment avenues to lower-risk tracks - dated to their convenience. Reportedly dozens of employees were involved in the illegal practice.

Menora Mivtachim confirmed the main points of the TheMarker expose but clarified that its clients had not been affected, only it itself, and not by much. But while these things were coming to light, it turned out that Menora-Mivtachim had been granting illegal loans, unsecured by collateral, between the years 2004 and 2007. That revelation led Antebi to appoint investigative accountant Yehuda Bar-Lev to probe affairs at the insurance company.