Calling it the biggest bankruptcy in Israel’s history, the receiver appointed to oversee Eliezer Fishman’s assets issued a scathing report on the indebted tycoon and his family’s efforts to keep assets out of the hands of creditors.
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“Even at the start of the process it can be said categorically that we have before us the biggest bankruptcy ever in the history of Israel, that up to the time this report is being presented the proven debt amounts to a fantastic sums of 4 billion shekels [$1.05 billion],” attorney Joseph Benkel said in a report presented to Tel Aviv District Court Judge Eitan Orenstein.
Benkel, who has already won injunctions preventing the Fishman family from selling companies or assets, said the tycoon, his adult children and their spouses had planned as far back as 16 years for the possibility of bankruptcy and the collapse of the Fishman Group. They transferred as many assets as possible into the hands of family members.
Once one of Israel’s most powerful tycoons, along with fallen figures like Nochi Dankner and Lev Leviev, Fishman was forced into bankruptcy by the Israel Tax Authority over unpaid back taxes of 196 million shekels in December. Benkel was named special receiver by the court. Fishman’s bank creditors, who for a long time had avoided forcing the tycoon into bankruptcy, followed suit.
Benkel asked the court to allow him to begin an investigation in Israel and overseas in an effort to uncover hidden assets.
“It is important to direct a spotlight of the Fishman Group, which is how the debtor [Fishman] controlled his worldwide operations. He did this through a pyramid structure of holdings at the head of which stood Fishman, his wife Tova and their three children -- Anat, Eyal and Ronit; Anat’s husband Tal Menipaz; Ronit’s husband Ofir Rotem who worked with the debtor in the business as managers and close advisers for more than a generation,” Benkel said.
He was referring to Anat Fishman-Menipaz, Ayal Fishman and Ronit Fishman-Ofir.
There was no immediate response from Fishman to the allegations in the report.
The Fishman group counts hundreds of companies with assets worth billions of shekels, but most of the companies don’t adhere to ordinary rules of corporate governance and what he called a “tangle” of conflicts of interest, Benkel said in the report.
“Exposing all the assets and [creditors’] rights, as well as the extent of the debt and affiliation and procedures for prioritizing repayment is not a trivial task – it will take a long time and require the assistance of experts,” he said.
He cited the Jerusalem Economy Corporation, a publicly traded property development company that Fishman lost control of last year after it was crushed by debt, as one example of how the family transferred money out of companies.
Over the last decade, Benkel alleged, family members had paid themselves management fees of at least 85 million shekels from JEC and were paid dividends directly to themselves or to closely held Fishman companies amounting to 556 million shekels.
Benkel said the most Fishman Group companies were closely held entities whose shares were registered in the name of his wife or children. Money was removed in the form of salaries, management fees, directors’ compensation and dividends.
Other companies, in which Eliezer Fishman had no stake, presented themselves as part of the Fishman Group – using the group’s resources while transferring money out of the group. Moreover, group companies routinely pledged assets to one another against loans and provided credit without any agreements in writing or a formal decision-making process, Benkel asserted.
Benkel complained that he was not getting full cooperation from Fishman, his family or senior executives at the group companies.
“It isn’t their highest priority, to say the least, to help me fulfill my task assigned me by the court.” As a result, he said, it would take time to estimate the value of Fishman assets that can be used to repay debt. He also expressed doubt that the tycoon had been forthright about the extent of his assets.