The Kafkaesque Scam That Lost a Tel Aviv Family Its Dream Home

This case involves a sophisticated ruse involving the revival of a dormant company by imposters masquerading as its owners who took control of its assets and sold off the land registered in its name.

The Iskhakov family was dumbstruck when Tel Aviv District Court Judge Drora Pilpel handed down her ruling two weeks ago on the fate of their apartment. The case involved the boyhood home of the internationally renowned violinist Shlomo Mintz, which was fraudulently sold to the Iskhakovs; Judge Pilpel concluded that the deed to the apartment would revert to the violinist.

But what about the Iskhakovs? Who's responsible for the sting that left them out NIS 400,000 on which they're still repaying loans? The court didn't say and the family was left to fend for itself.

In 2004 an imposter claiming to be Mintz sold the apartment to one Mordechai Bohadana for $87,000. Just two months later, Bohadana flipped the property to the Iskhakovs for $100,000. The imposter vanished, Bohadana made a quick killing on the sale, and the Iskhakovs were left empty-handed. The real Mintz eventually discovered the swindle and took legal action.

"The court's purpose is to apply the law as well as a just result between the sides," wrote Pilpel in her ruling. "In this case both sides are innocent. The owner isn't required to hire a security firm to watch his apartment in his absence and also watch over the tabu [land registry office] to ensure registration doesn't occur in violation of its legal status. The buyers, for their part, enlisted a realtor who speaks their language, hired a lawyer who made all the proper inquiries, and couldn't have gotten wise to the sting."

So who's responsible? Do buyers need to hire a detective agency before purchasing a home? According to attorney Gideon Koren, who represented Mintz, the buyers were innocent but held to a higher level of responsibility than his client.

"Since only a cautionary note for the buyer is listed in the land registry, warning lights should go off in lightning deals with a number of owners within a short time," according to Koren.

"It is therefore highly recommended to identify the original owner to ensure the transaction actually took place and wasn't a scam," continues Koren. "Bohadana had nothing but a cautionary note listed."

"Therefore the buyers have some involvement in the transaction," according to Koren. "They might have done several things along the way to check the deal's validity. For instance, they could have located the original owner, Shlomo Mintz, and checked into the imposter's identity. They could even have sued to try gaining compensation.

"This wasn't so in Mintz's case," insists Koren. "He had no part in it whatsoever, couldn't have done anything, and suddenly found out the property wasn't in his name. This is a situation in which anyone could find himself without property because someone forged documents. It's a tough situation, so the court saw fit to favor the original owner."

And yet the whole affair is still of course unsettling. After all, the buyers relied on the state's official database, which seems sufficient - but isn't. Attorney Boaz Edelstein explains that Article 10 of the Israel Land Law protects a buyer relying on the land registry listing if he fulfilled three conditions: paid for the property, acted in good faith, and had the rights listed under his name.

"Despite the article in the law protecting buyers, over the years case law reduced expectancies for protection and ruled, inter alia, that the buyer is protected only if having relied on the tabu records and not on an external document like a bill of sale," says Edelstein.

"It has likewise been ruled, among other things, that protection is contingent on the rights being fully listed in the lands registry under the name of the buyer, as opposed to just having a cautionary note in his favor," Edelstein adds.

"The Mintz ruling represents the continuing sequence of stiffening conditions under Article 10," according to Edelstein. "It is entirely possible that the Iskhakovs will file a lawsuit against Bohadana, who sold them the apartment and actually received money from them without having handed it over."

In other words, the courts have allowed the state to limit its responsibility for erroneous tabu listings despite many instances of fraud in Israel, from individual cases all the way to more complex intrigues in which imposters impersonate company officials, mess with the company's affairs, and sell or dilute its assets.

Kafkaesque travesty

A lawsuit filed by Edelstein on behalf of clients who were fraudulently sold a plot of land in Kfar Shmaryahu for NIS 2.5 million is now pending in court. This case involves a sophisticated ruse involving the revival of a dormant company by imposters masquerading as its owners who took control of its assets and sold off the land registered in its name. The scam wasn't discovered by the company's true heirs until many years later.

The district court hearing the case voided the transactions and returned the land to its original owners. The damages suit recently filed by Edelstein for his clients insists on the culpability of all involved parties: the rightful heirs to the property, even though they played no part in the sting; the Registrar of Companies that approved the transfer of the company's ownership; and the lawyer who attended to the deal.

"The result was a terrible injustice to the buyers who put their trust in professionals, paid in full for the asset, paid all required taxes, and even registered as its legal owners," Edelstein said of the court's findings. "Through an almost unfathomable Kafkaesque travesty they were left deprived of the money and the asset, with the land literally pulled out from under their feet."

Edelstein claims the swindler was "lured" by the heirs' neglect of the company and land, which appeared to be inactive since the 1950s. Equating steps to avoid a scam with putting a lock on the door, he concludes that it's up to company and property owners to do what's necessary to prevent theft.

Neither has the state itself proven immune from being hoodwinked. The most famous and convoluted case in Israel's history was the Greek Patriarchate affair, a $20 million scam that took the courts 12 years to unravel until finally coming to a close three and a half months ago.

The state wanted to extend lease agreements between the Jewish National Fund and Jerusalem's Greek Patriarchate that were signed in the early 1950s and set to expire within 40 years. The patriarchate owns vast tracts of land in Jerusalem and Beit Shemesh.

The perpetrators were Benno Zussman, a businessman who had worked in the Foreign Ministry in the 1970s, and his partner Yaakov Rabinovitch. The two conspirators created the illusion that the Greek Patriarch was interested in a deal on condition that the JNF pay $20 million.

But when it came time to sign the papers, Zussman and Rabinovitch claimed the patriarch was too frail to receive the full Israeli delegation and produced forged documents containing his signature. In exchange for the documents they received two envelopes with checks for delivery to the patriarch. Instead of handing the money over to the patriarch, however, Zussman deposited $6 million in a Swiss bank account.

In his ruling, Judge Raphael Carmel described the episode as seemingly inconceivable. When the ruse was uncovered, Zussman fled to Romania while Rabinovitch was convicted and sentenced to six years in prison. Zussman was eventually extradited back to Israel to stand trial. He was later convicted of fraud and aggravated forgery.

Eyal Warshavsky / BauBau