How Hapoalim under Dankner approved the RP payment: Five-minute glance for $25m

"They talked about it for no more than three minutes. Maybe five minutes."

"Are you sure?"

"They didn't talk about it for 10 minutes. I'd stake my life on it," a top banking industry source told TheMarker with regard to the approval by senior Hapoalim management of a $25-million payment to the RP Explorer Master Fund as part of Hapoalim's acquisition of Turkey's Bank Pozitif Ve Kalkinma Bankasi A.S. from C Faktoring A.S. in late 2005. The investment fund is registered in the Cayman Islands and is owned by Rafael Berber and Petr Kellner.

Bank Hapoalim's board also approved the deal quickly at a later stage, despite the apparent conflict of interest for then deputy bank chairman Dan Dankner. Dankner was a partner in an East European property venture with RP through Elran Investments, in which he had a 12.8% stake. RP and Elran were also partners in another investment, Romanian satellite TV company DTH.

This deal is at the center of a police national fraud squad investigation into suspicions of fraud, breach of trust and violations of banking regulations on the part of Dankner, as well as allegations of improper provision of credit by the bank.

The RP case is also the center of a civil dispute. Shareholders are threatening to sue Hapoalim, Dankner and other directors unless the bank itself sues the directors.

In 2005 Bank Hapoalim's board decided to buy the Turkish bank in partnership with RP. RP was to buy 7.45% of Pozitif for $15 million and receive an option to buy some shares from Hapoalim, but not enough to lower the Israeli bank's holding below 50.1%. It appears that the board was not familiar with RP, but Dankner himself was. Dankner and Berber were already partners in attempts to invest in real estate in Eastern Europe.

The banking source worked in the sector for years and now serves as a director for a major company. He explained how the management found it easy to make a decision on the matter: "Alberto [Garfunkel, the former head of the bank's international banking division] and Zvika [Ziv, former CEO], pushed the decision through. Alberto started to explain that the decision had to be approved, and quite quickly Zvika took command and said that was the significance of the deal that had been signed in the past. He presented is as there being no choice. Sometimes members of management are presented with a done deal," said the source.

The source said that to the best of his memory, the management meeting was a normal one, with 12 or 13 people in attendance. Dankner, who was deputy chairman but not a member of management, did not attend. The source said there was no in-depth discussion of the deal and that Dankner's conflict of interest was not mentioned.

"I assume that Zvika knew of it," he said. "They spent a lot of time on the Turkish bank [deal]. Danny is not totally the bad guy and Zvika totally the good guy in the affair. There was sort of an alliance between them. A bank chairman cannot pass a decision without the CEO. Zvika is a smart guy with a high IQ. If he shut his eyes, then he chose to shut his eyes. We should not be naive, especially as Danny is not a banker but a businessman," said the source.

A former member of Hapoalim management confirmed the source's statements, saying mangement did receive the information on the matter but only discussed it briefly.

Garfunkel retired in 2009. He refused to comment. Zvi Ziv and Dankner's lawyer also refused to comment.

Bank Hapoalim did not respond.