Eli Reifman Put in Receivership

Emblaze founder reveals he has hidden assets all over the world.

The Tel Aviv District Court yesterday appointed a receiver for Eli Reifman, a cofounder of the information technology holding company Emblaze. This is probably a step on the way to declaring him bankrupt.

Judge Varda Alshech also ordered Reifman not to leave the country and submit a report to the official state receiver detailing his assets, income, expenditures and debts, in addition to the receivership order. Reifman will also have to submit a monthly income and expense report to the state receiver.

In appointing the receiver Alshech criticized Reifman harshly, calling many of his claims to the court in connection to the case baseless and bordering on the absurd. She also ordered him to pay NIS 50,000 in legal costs to the plaintiffs.

Alshech said Reifman's businesses and lifestyle seemed to have made him forget the fact that "Just like everyone else he is subject to the law and to basic rules of good faith and acceptable behavior." She added: "Therefore, it is almost impossible to think of a more appropriate case where there is an urgent need to put an end to the misdeeds of this debtor, to place a receivership order against him and appoint an official to examine the state of his assets and the legality of his actions."

Reifman also replaced his lawyers in a surprise move yesterday, appointing Emblaze's attorneys Doron Afik amd Shlomi Turgeman to represent him.

While responding to questions from an attorney representing foreign hedge fund CCM Master on Tuesday, Reifman confirmed that he has told the hedge fund and others that any effort to seek out his assets would fail, and that they would find none registered in his name. CCM says Reifman owes the fund 5.1 million pounds sterling for the purchase of Emblaze shares, which the fund says was due to be paid in late September. CCM submitted its bankruptcy petition against Reifman two months ago.

Another petition for bankruptcy was filed the day after CCM's, by New York's Rockmore Investment Master Fund. This petition was also heard yesterday. Rockmore alleges that Reifman admitted in writing that he owes the company in excess of $2 million. In addition, Rockmore says that Reifman demonstrated contempt of court because he used his Emblaze shares as collateral even though the court had prohibited him from making any use of the shares before a ruling in the case.

The last pledge was registered on March 8 in favor of Yigal Gerbi, for receipt of 2.4 million Emblaze shares, even though a court order dated March 4 prohibited dispensation of the shares. Yigal Gerbi is the brother of Hanni Gerbi, who is suspected of heading a Hadera crime ring.

Reifman's attorney argued in the hearing that his client owes the funds nothing. He said a review of his contracts with them shows they had misled him.

In response to Reifman's claims he was unaware of some of the agreements or had not paid attention to the wording, as well as being mislead by the funds, Alshech said: "Did the debtor and his learned attorneys think they would find a court that would place any faith whatsoever in claims of this type? Do they think that an unthinking robot without any judgment is conducting this trial?"

Reifman tried to avoid answering questions. He said at the bankruptcy hearing on Tuesday that he has run up debts of $35 million, $17.5 million of which are to gray-market lender Shelly Narkis.

Reifman also said he has many assets in Israel and abroad, but none are registered in his own name, as a result of which his creditors will be forced to search for assets to collect Reifman's huge debts to them.

He called Narkis a legitimate lender with a permit from the Bank of Israel to issue loans.

"If anyone has any complaints, they should direct them to [Bank of Israel Governor] Stanley Fischer," Reifman said. "Narkis is an enormous help to me with bank transfers, and everything is legal and is registered with the Registrar of Pledges."

The judge said Reifman answered very few questions directly and simply, instead trying to avoid the issues. She said Reifman's testimony "did not make a credible or positive impression."

Reifman also claimed ownership of factories in Poland and Namibia and numerous assets all over the world worth tens of millions of dollars, and denied that he is bankrupt.

After the hearing, when asked whether he felt that he was under the control of organized crime figures, Reifman replied that he judges people on their own merits.

"These are people who have paid their debt to society," he said. "All the debts that I have undertaken were for a goal that I have faith in: saving Emblaze and thousands of jobs, and continued development in the country."

Reifman said that in addition to the gray market he borrowed money from anyone who could lend him money, including friends, family, international and local banks and other financial institutions. The only ones pressing him for repayment, he said are institutional lenders.

Emblaze is the holding company for a 51% stake in Formula Systems, which owns Matrix IT, Magic Software Enterprises and Sapiens International. Emblaze subsidiary Emblaze Mobile has developed the Monolith, a multifunctional cellular device in which it has already invested over $100 million. It is expected to be launched this year.

The firm's principal shareholders are Yuval Cohen's Fortissimo Capital Fund (16.1%) and Reifman (15.3%), the U.K.-based Schroders Fund (15.2%), Emblaze chairman Naftali Shani (13.9%) and businessman Donald Sturm (8.9%).

Reifman has been involved in a takeover fight for the control of Emblaze. Just last week Roy Gill and Eitan Eldar lost their struggle for control of the company. Gill and Eldar wanted to replace the current board members with themselves and John Knoeckel, Donald Sturm, Lior Tal and Orit Barzilay. Shareholders controlling 52 million shares voted to leave the board as is, compared to 27 million for the replacement.

Capital market sources have said that if Eldar and Gill gained control of the company, they would likely sell its subsidiary holdings and liquidate its assets.

Founder and board chairman Naftali Shani said in a letter to shareholders that he feared such moves, writing, "Based on Eldar's declarations to the board, the management believes [Eldar and Gill] have identified Emblaze as an opportunity for short-term profits."

Shani further argued that Eldar and Gill have no experience managing a technology company like Emblaze.