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The Israel Securities Authority (ISA) has thus far refrained from opening criminal proceedings against Bezeq and its management in expectation that the company will do its own house cleaning.

Before the Passover holidays, with Bezeq's accounting and approval process under scrutiny, the ISA ordered the firm to immediately take steps to correct matters. Dr. Yoram Danziger was appointed by the board to review the so-called "procedural failures" of the past month.

The problems include how NIS 111 million in stock options were approved for executives, as well as NIS 7.5 million in an incentive plan for top executives. Most serious of all was why cellular telecoms subsidiary Pelephone failed to write off NIS 300 million worth of equipment, which inflated its shareholders' equity by NIS 220 million.

If Bezeq's internal inquiry process is found to be insufficient and its conclusions not decisive enough, there is a good chance the company will be investigated. The ISA thus intends to adopt the internationally accepted policy allowing self-regulating by companies first.

The controlling shareholders at Bezeq are appalled, and given the mood at the firm, a consensus developed ahead of the holiday that Gelbard's tenure as CEO would be short. Danziger's interim report is expected to be published today.

It can be assumed that the ISA expects the company's board of directors to conduct a thorough investigation, including policy changes and conclusions against management. The ISA apparently expects Bezeq CEO Jacob Gelbard and Chairman Dov Weissglas to resign, and the company's general counsel, Bosmat Chelouche, may also be expected to shoulder the blame.

Gelbard, Bezeq CEO and former Pelephone CEO, was involved in all the problems in question. Bezeq's board and Chairman Weissglas also bear a heavy responsibility in the approval of perks and option plans granted to management, including Weissglas. The affair comes only one month after the ISA issued instructions on approving benefits for senior officers in publicly traded companies.

Gelbard also bought a floor in the Migdal Hashalom skyscraper in Tel Aviv from the company for $630,000, which the watchdog is investigating.

Nevertheless, assuming Danziger finds no other malfeasance during his inspection, Gelbard is not likely to be required to take personal responsibility for the problems and can be expected to resume in his job. The ax will probably fall lower down the leadership, probably at the company's general counsel.

It is now widely estimated that Danziger's interim report will indeed be relatively lenient and enable Gelbard to resume his position as Bezeq CEO after he was forced to take leave of absence on the eve of Passover. As a result, intervention by the ISA is more likely. Among the shareholders, Gelbard had support mainly from the Saban group, while the Apax group thought him better gone.

However, as one leading telecoms executive put it: "I don't think there's any particular lesson to be learned from the Bezeq case. At least I don't know what it is. If there's a lesson, it's procedural. After this Bezeq business, I summoned our general counsel and inquired into procedures and approval methods at our company."

Pressed to explain whether he thought there was something wrong in a company cutting back and laying off staff, giving its top brass NIS 120 million in stock options and perks, or doing real estate deals with its own CEO, he said no.