Can a Man Steal From Himself?

The fact that Yisrael Perry was convicted of embezzlement, a form of theft, rather than of obtaining money fraudulently, effectively lays down the problematic legal principle that a man can indeed steal from himself.

Deputy Supreme Court President Eliezer Rivlin agreed last week to have the Supreme Court reconsider its own ruling in the case of Yisrael Perry, which, inter alia, upheld the lawyer's conviction for embezzlement in a scam perpetrated against Israelis who sought to claim pensions from Germany. Perry was convicted in 2007 along with the organization for implementing the Israel-West Germany Convention on Social Security, which he headed, and sentenced to 10 years in jail.

The reconsideration will revolve solely around Perry's conviction on the charge of embezzlement. Thus Rivlin's decision has no effect on his conviction on several other grave charges, including aggravated fraud. Even Perry's skilled and expensive legal counsel lacks the power to create something from nothing.

Israeli law instituted the practice of reconsideration to address cases in which the Supreme Court found itself having to make a difficult legal decision. This includes cases in which the justices themselves were split over the legal principle at issue, and the difference must be resolved. Rivlin has applied this practice to a case that deserves it.

There is no doubt, even after the current ruling, that Perry is a charlatan who concealed his ownership of the insurance companies with which he insured himself. In so doing, he grossly violated both his own obligation and the companies' obligation to inform his clients that the negotiations he was conducting with the insurance companies were in effect being conducted with himself, meaning that he himself was setting the terms of the loans - the interest rates and repayment schedules - that the clients were receiving.

Nevertheless, a legitimate question remains about his conviction for embezzlement, given the fact that the insurance policies were meant to cover Perry's own risks, not those of his customers. They paid their premiums to Perry and a company he set up, and these premiums were not then transferred to the insurance companies. But the quid pro quo he promised his clients - a monthly allowance - was in fact paid.

Thus the question of whether a man can steal from himself arises in the Perry case in full force. The fact that he was convicted of embezzlement, a form of theft, rather than of obtaining money fraudulently, effectively lays down the problematic legal principle that a man can indeed steal from himself. This is so because he, not his customers, was the beneficiary of the policies whose premiums were never transferred; these policies were meant to cover his own risks, not theirs.

On this difficult question, the justices were split in their ruling. The problematic outcome this created is clear in light of the principle once articulated by then-justice Aharon Barak, who wrote, "We must preserve appropriate boundaries for the crime of theft, which in the classic sense is committed by taking an owner's property without his consent." The expansion of these boundaries derives from the language of the Penal Code, which permits someone to be convicted of theft if he is a custodian, or "agent," who was entrusted by mutual consent with responsibility for the asset. But this provision raises difficult questions about how it should be interpreted. As Prof. Yoram Shahar correctly noted in an article he once published on the subject, the interpretation of what comprises theft in cases other than the classic one must conform to the spirit and culture of the age and the society in question.

Rivlin's decision does not change either the legal principle under which Perry was convicted of theft or the outcome of the conviction. All it means is that an expanded Supreme Court panel will reconsider some of the arguments relevant to his conviction for embezzlement, with a focus on clarifying the legitimacy of conviction in a case where a man "stole" from himself rather than another.

The need to reconsider cases that involve weighty issues of legal principle stems from the fact that the Supreme Court normally hears cases with panels comprised of only three justices. But when the court as a whole contains 15 justices, as it does today, it clearly ought to be possible to have cases heard by an expanded panel the first time around if those cases involve important issues of legal principle whose significance goes beyond the case at hand. Having panels of seven justices hear such cases to begin with would obviate the need for reconsiderations. Had a complex case like Perry's been heard by seven justices initially, the legal principles it lay down would have enjoyed greater validity, and there would be no need for a reconsideration.