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Israeli Tycoon Nochi Dankner's Trial Is a Warning. Who’s Listening?

Two cheers for the rule of law that can send a powerful tycoon to jail, but corruption is still widespread in Israel. It reaches the very top of business and government.

Rotem Shtarkman
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Nochi Dankner leaves court after his sentencing on December 5, 2016.
Nochi Dankner leaves court after his sentencing on December 5, 2016.Credit: Ofer Vaknin
Rotem Shtarkman

Nochi Dankner’s defense of his activities over those three fateful days in February 2012 never stood a chance in court.

Last July, Judge Chaled Kabub had little choice but to convict Danker of all the charges prosecutors brought against him. The list of reasons was long: Dankner’s connection with Itai Strum, who was also convicted in the share-manipulation affair, the millions of shekels from his personal accounts that he gave Strum, the loan he arranged for him from First International Bank of Israel, and the investors he sent to him.

Where Dankner did succeed was in winning the mercy of the court in his sentencing on Monday. Dankner settled his outstanding personal debts with his bank creditors and repaid tens of millions of shekels to them, which Kabub mentioned in his sentencing decision.

Dankner enlisted a star-studded list of character witnesses, including Shimon Peres, who has since died. He contrasted his philanthropic activities of the past with his situation today, in which he has lost of money, power and his reputation.

The two-year term Kabub gave Dankner is going to be unpleasant for the former tycoon as it would be for anyone. But it was the minimum the judge could have given considering the gravity of the offenses. Dankner would have been better off accepting a plea bargain, but he got second best with his sentencing-lite.

The rule of capital

Dankner’s conviction and sentencing marks a big victory for the Israel Securities Authority and its chairman, Shmuel Hauser. It’s also a big victory for the prosecution team headed by Hana Korin. It wasn’t too long ago that Dankner was one of the most powerful figures in Israeli business, controlling hundreds of companies, employing tens of thousands of people and having regulators and ministers at his beck and call.

It’s also a victory for the rule of law. Unless he successfully appeals, Dankner will join others who also once sat at the pinnacle of power, including a former prime minister, a former finance minister and a former president. But will Dankner’s sentencing serve as a warning to others?

Probably not. Today, after the Dankner story has passed from the headlines, we will again be reading about the submarines affair and the culture of corruption at the Yisrael Beiteinu party. Not only is corruption widespread in Israel, it reaches to the very top of government and business. We can be proud of the rule of law but we can’t be any more depressed about how often it has to be enforced.

Only six months ago, Prime Minister Benjamin Netanyahu appointed Avigdor Lieberman defense minister, a sensitive position that gives him control over a vast arms industry, a 70-billion-shekel ($18.3 billion) budget and our very lives. This is the Lieberman for whom the idea of clean hands is a strange notion. It all leaves a bad taste in the mouth of anyone who values transparency and the public’s trust.

The prime minister

The evening before Dankner was about to begin his exercise in share manipulation, he met with Netanyahu at the prime minister’s official residence in Jerusalem. Later that night, Dankner met with Strum. Another thing that happened the next day: Netanyahu released the report on business concentration, a document that would have been of great interest to Dankner.

What the two spoke about that night no one will ever know. (The fact that the meeting occurred at all only entered the public record when Dankner’s diary was examined by the police as part of the share investigation.)

For sure Bibi wasn’t party to Dankner’s plans, but it’s hard to believe they didn’t talk about Dankner’s legitimate business interests, just as Netanyahu talks with Yitzhak Tshuva about natural gas or with Shaul Elovitch about telecommunications. The public, of course, never gets to have one-on-one meetings with the prime minister. The rule of capital isn’t just a slogan.

Bank Hapoalim

Nochi will be the second Dankner to go to prison; his cousin Danny has served time for two offenses during his tenure as chairman of Bank Hapoalim. There was a time when the two controlled vast swaths of the Israeli economy and cooperated for their mutual benefit, if not the public’s. Dankner got loans from Hapoalim, got involved with the bank’s management and even pondered getting control of the bank. He employed some of the directors who served on the bank’s board.

Danny Dankner was eventually forced out of Hapoalim by then-Bank of Israel Governor Stanley Fischer. But Fisher never succeeded in cleaning up the Augean Stables at Hapoalim. Eight years later, the bank is still managed by the same self-interested clique that ran it back then.

It’s no surprise that other rich and powerful men like Eliezer Fishman borrowed big time from Hapoalim and have failed to repay their debt. Nor is it a surprise that the bank has recurrent corporate governance problems, most recently the one that led to Chairman Yair Seroussi’s early departure.

When he sentenced Nochi on Monday, Judge Kabub quoted from his sentencing decision for cousin Danny about the need to send a message. It didn’t work last time, but maybe this time?

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