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Tel Aviv Magistrate's Court yesterday released on bail two controlling shareholders of the publicly-traded Middle East Tube Company, Ian Davis and Aviv Algor.

The two had been investigated by the Israel Securities Authority for misleading the company shareholders' general meeting when it approved deals in which the two had personal interests. The deals included a December 2000 contract that paid them a monthly retainer of NIS 250,000 for consulting services and a May 2002 approval for insuring the company directors for $6 million.

Deals that involve controlling shareholders, as in these two cases, must receive approval from at least two-thirds of those shareholders not connected to the agreements. According to the Securities Authority's investigation, Davis and Algor received the necessary approval with the help of the votes of an English investor and personal friend of Davis, who allegedly bought 6.5 percent of the company with money received from private companies controlled by Davis and Algor. The two deny the charges.

The authority also accused the two of receiving millions of shekels in management fees without receiving the necessary approvals.

The Middle East Tube Company markets pipes for oil, gas and water. The company was sold by the Koor concern, and its current owners include Benny Gaon (38 percent), Davis (25 percent), and Algor (13 percent), with the rest held by the public.

According to the authority's investigation, the accused were aware in June 2000 that their proposal for the monthly consultancy retainer would not pass the general assembly's vote. As a result, the matter was postponed four times until it passed in December of that year. During the intervening period, according to the investigation, the British investor bought the 6.5 percent stake for NIS 5.2 million.

In yesterday's court hearing, Davis' attorneys argued that even if the authority's claims were true, they were technical and not criminal offenses. Algor's attorneys claimed that the money the British investor received was bridging loans that were to be repaid.

The judge agreed to release the two on bail, and rejected the Securities Authority's request for a gag order on the case.