Shlomo Eisenberg's conviction Tuesday on several criminal charges, including fraud and reporting misleading information in connection with the sale of shares of the Isras real estate firm, was not his first loss in the courts this year on securities matters. In January 2003, a 14-year court battle that centered on Eisenberg's role as a portfolio manager for just a few months in the period 1983-1984 came to an end.
Following the bank share collapse in the early 1980s, four members of one family transferred their share portfolio to Eisenberg. Less than a year later, they took their business elsewhere when they discovered that they had made substantial losses. For some time after, the investment clients attempted to find redress from Eisenberg through negotiation.
Finally in November 1989, dissatisfied with lack of progress, the four filed a $233,000 lawsuit against Eisenberg, accusing him of acting in bad faith, by failing in his duty of trustee as manager of their securities portfolio. Some time later, the claimants added an expert opinion from accountant Boaz Yifat, who, as a member of the police's national fraud squad, had played a role in the investigation into the bank share manipulation scandal. He determined that the compensation due was $450,000.
Judge Itamar Pilpel determined that Eisenberg had been a shareholder in three companies, shares of which constituted a significant component of the claimants' investment portfolio. He also determined that Eisenberg had conducted a series of transactions which had not been profitable for his clients, but appeared to be for the benefit of Eisenberg in returns of bank commissions. However in the end, the judge ruled in favor of Eisenberg.
The case was appealed, and in 1999, ten years after the original suit was filed in Tel Aviv District Court, High Court Judge Izhak Englard overturned the lower court's ruling. Englard recognized that the claimants indeed had a basis of claim against Eisenberg, and that they were entitled to damages as a result of Eisenberg's failure to fulfill the duty of trustee.
The judge ruled that "Eisenberg's behavior was not a one-time event. A conflict of interest continued for the entire period. All transactions in the securities, in which Eisenberg had a personal interest, are suspected of having been conducted in order to preserve his own personal interest, and not for the benefit of the appellants."
The case returned to the district court to set the terms of compensation, although Eisenberg appealed to the High Court for a further hearing. His request was turned down. Judge Amnon Straschnov, who now handled the case, set the compensation at NIS 1.2 million. Neither side was satisfied, and the case moved up the legal ladder again.
Finally in January of this year, the High Court rejected Eisenberg's complaint over the size of damages, and accepted a new calculation of damages by accountant Yifat of NIS 3 million. In a somewhat exceptional court decision, Eisenberg was also ordered to pay lawyer's fees of 20 percent of the sum awarded.
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