It’s all over. Ending more than a year of fighting for control of the IDB group, Tel Aviv District Court Judge Eitan Orenstein on Sunday pronounced Moti Ben-Moshe’s finances in order. Hours later, Nochi Dankner withdrew a motion for a stay of proceedings, thus forgoing an appeal to the Supreme Court.
- Court Rules: Buyers Can Have IDB
- IDB Stock Shot Up on Court Ruling
- IDB May Lose Super-Sol
- Argentines Vow Unity at Israeli Firm
With that, the debt settlement was completed, control has changed hands. The Dankner era at IDB is over, the era of Ben-Moshe and his partner Eduardo Elsztain has begun. Orenstein’s decision from three weeks ago stands. But that is not what’s important.
What matters now is what Ben-Moshe and Elsztain will do, and how their decisions will affect the old boys’ club made up of the few hundred individuals who control wide swaths of the Israeli economy and whose unofficial head Dankner had been for some years.
Until now IDB’s control, board and management rested on the shoulders of a number of individuals and organization who maintained complex relations of give and take with the concern and its controlling shareholder. They rested, for example, on Bank Hapoalim CEO and president Zion Kenan and the bank’s chairman, Yair Seroussi.
Kenan extended credit, only partly secured, to IDB Development Corporation and Dankner’s private investment firm, Tomahawk. He helped Dankner to buy the Hebrew daily Ma’ariv, and for the past year has made no serious effort to collect on Dankner’s personal debts, despite the writing on the wall.
Seroussi raised no objections, even though his main purpose is to oversee the decisions of the bank management. Seroussi was a cofounder of Mustang Mezzanine Fund, much of whose assets had been in IDB,
Dankner and IDB likewise maintained ties with Israeli newspaper publishers including Arnon Mozes of Yedioth Ahronoth and Eliezer Fishman, who owns a controlling share of Globes. They provided friendly coverage in return for advertising revenue and support for their battles. Dankner also had ties to the owners of the Gitam BBDO advertising agency, Mody Kidon and Moshe Theumim. He gave them work and they gave him strategic advice.
Dankner also had work relationships with public relations agents including Rani Rahav, Avi Benayahu, and Nir Hefetz, who were paid to generate media spin including smear campaigns aimed at competitors and critics.
For many years, and certainly since Nochi Dankner acquired control of the group, IDB regularly used the KPMG Somekh Chaikin accounting firm, headed by Gad Somekh, and Ram Caspi’s law firm. As if that were not enough, Dankner and top IDB figures were comfortable working with the heads of the regulatory agencies responsible for overseeing the company. These included then-Israel Securities Authority chairman Zohar Goshen and then-commissioner of capital markets Oded Sarig.
Not a matter of money
So the big question is what Ben-Moshe will do now. According to one scenario, he won’t make any radical changes. On the contrary, after battling smears and manipulations to gain control of IDB, he could very well be looking for the shortest way to earn legitimacy and entree to the club. Now he’ll have it easier. He holds the keys to IDB’s coffers and can offer everyone a quiet deal that goes something like this: I’ll keep paying your retainers and sending work your way; you’ll accept me, embrace me and make me your friend. You’ll open the door to Rahav’s home and sit with me in his kitchen. You’ll treat me with respect when I request a meeting with senior officials at Bank Hapoalim and Bank Leumi, and you’ll come to my office when I ask. In short, give me everything you once gave Dankner.
Smart people have said that business, beyond a basic level of wealth, isn’t really about money. After all, Ben-Moshe and Elsztain just proved to the court that they have enough personal wealth so that they, their children, and their great-grandchildren will never have any financial worries. The deeper question is therefore what exactly Moti Ben-Moshe is after.
Does he want to be accepted among Israel’s business and regulatory elite? Is he looking for respect and recognition? Is he already thinking ahead, to more acquisitions, more business, more control? And, in order to attain all this, will he adopt the practices that characterized the Dankner regime, such as vested interest deals, appointing cronies or family members to boards and management positions and applying leverage and financial pressure on the media and regulators?
If he chooses, Ben-Moshe has all the means to pull it off. The new pyramid he’s created is even taller than Dankner’s. It could be assumed with a fair degree of certainty that Dankner’s advisors and machers will be thrilled to work with him as long as he’s willing to pay the usual fee.
Some people who are familiar with IDB think that’s exactly what will happen: Ben-Moshe will suddenly discover that many of the managers and consultants are actually talented, charismatic and knowledgable. Others will try to frighten him, warning that without an experienced cadre of management he’ll find it hard to control the complex corporate monster, and that even if he tries to introduce changes the system might simply swallow him whole.
Alternatively, Ben-Moshe could take the opposite approach, creating a revolution in Israeli business and undermining the old capitalists’ club. He could replace the entire brigade of managers and consultants with new blood, untainted by the culture of boss worship, and instruct them to work for the benefit of the shareholders and the public.
He could forgo the old boys’ club, distancing himself from it while upending the centers of power on which it has stood for a decade. Ben-Moshe could create a lean machine, selecting managers and directors for their abilities, professionalism and market values rather than for their loyalty to the top man.
This scenario gives Ben-Moshe, and Elsztain, an opportunity: The capital market, financial system and the public is willing to accept a comprehensive mucking-out of the stables, complete with the removal of old skeletons and a new, low-fat diet. There are many things about which we are curious that Ben-Moshe could divulge. And if he wants, he can demonstrate how to manage a group of companies efficiently, modestly, transparently and honestly, disdaining the methods of the past and stunts like deals with vested interests.
Which direction will he take? Despite the attempts to smear his reputation and to uncover dirt, Ben-Moshe’s road to IDB hasn’t been hard. The moment he decided to match the offer made by Dankner and his partners, it was clear the creditors would prefer him – and not just to be rid of the person who failed and led the company into its crisis. Ben-Moshe and Elsztain now must make the truly difficult decision: Will they choose to blend into the capitalists’ club that’s just waiting to adopt them, or are they ready to pull themselves and Israel in a new direction, albeit a more difficult and challenging one.