How Bankrupt Israeli Tycoon Eliezer Fishman Got Away With It for So Long

Israel's leading banks enabled Fishman to live at the public's expense for years, as Bank Leumi finally revealed this week in a sordid tale that reflects badly on the media.

Eliezer Fishman in 2009.
David Bachar

MK Shelly Yacimovich (Zionist Union) was interviewed on Army Radio last week and told a shocking tale. She recounted an incident that took place just before the social protests broke out in 2011 and involved the CEO of the IDB group, Haim Gavrieli (the group was then controlled by Nochi Dankner, at the time one of the most powerful people in Israel). Gavrieli approached her and threatened that if she didn’t stop criticizing the group, the Maariv daily – which the publicly traded IDB bought with the public’s money – would publish an unpleasant story on her.

But no Israeli newspaper followed up on the story.

In other words, a major political figure presented information that she had been threatened by one of the most powerful businessmen in Israel, through the use of what was then the second-largest newspaper in Israel, and the press said nothing about it.

Now we see how the Israeli press operated in recent times, in particular until the birth of the social-protest movement, and how it hooked up with the club of leading business figures and for years deceived millions of readers, citizens and taxpayers.

Today, following the news that Bank Leumi has asked the court to appoint a receiver for Eliezer Fishman’s holding in Jerusalem Economy Ltd. (JEC), we can let them explain for themselves how the system worked.

Fishman and his family owe Bank Leumi about 2 billion shekels ($517.1 million), Bank Hapoalim another 2 billion, and other Israeli banks an extra 500 million – and he can’t pay. Yet the most amazing line in the bank’s request to appoint a receiver does not even concern JEC itself – which is only part, albeit a core one, in the pyramid and maze of the dozens of companies he controls.

No, the amazing statement concerns Fishman’s modus operandi over many years, and reveals what can now be called the “Fishman method” of how he and his family arrived at Israel’s largest personal bankruptcy ever: Debts of some 4 billion to 5 billion shekels, with assets of well less than half that amount.

The bank’s lawyers told the court that Fishman had not met his payments to the bank (and others, it seems) for a long time – despite many chances to do so – and despite claims that his collateral was enough to cover his debts. In simple language, all the banks knew that Fishman was broke and not paying off what he owed for years, but never told the public. But all of the banks repeatedly let him off the hook and gave him chance after chance to continue running his businesses. We will return to the main reason for this later.

In theory, they did so because Fishman kept presenting them with figures showing how his businesses would pay off in the long run. Very simple. Fishman may not have been paying them what he owed, but he at least promised to do so in the future. As a result, this situation was allowed to continue for “a long time,” according to Bank Leumi.

Meanwhile, Fishman and his family lived like kings – and everyone treated him like one, too. Because not a word made it into the news.

So now we must take our hats off to Bank Leumi and its CEO, Rakefet Russak-Aminoach: After years of silence and collaboration with one of the biggest secrets in Israeli business, Leumi finally exposed the truth – even if it came so late in the day. Other banks such as Hapoalim, to whom Fishman owes just as much, didn’t do so.

Leumi also informed the court it was worried Fishman was managing his businesses not for the good of the companies but for his own benefit, and it now wanted to appoint a receiver to prevent him from doing further damage. Also, that he might have put his own interests ahead of those of his creditors and businesses.

Looting, in other words. Is that too harsh? Not at all. It is the accepted word for such a case of managerial behavior in the face of threatened bankruptcy.

Negligence or lack of professionalism?

So now the question arises: If every rookie banker knows it’s dangerous to leave the owner at the helm of a company they’re likely to lose control of, how did the country’s largest banks allow Fishman to continue running the firms for a “long time”?

Is the answer negligence or lack of professionalism? Bank Leumi told the court it only heard of Fishman’s 4- to 5-billion-shekel debt in media reports. But didn’t the bank itself know this before it read it in a newspaper (it seems it is referring to the daily you are reading now, which did not collaborate in the conspiracy of silence)? Is it not the bank’s job to monitor its clients’ debts?

We’ll let the bank in on a secret: This newspaper knew nothing more than the banks themselves did. It didn’t have access to the financial reports of Fishman’s privately held companies (indeed, the information revealed by the press came from the banks themselves).

It is possible Fishman made sure the structure of the companies, debts and relations between them would be so complicated that no banker could possibly understand what was really happening. He is known for using holding companies, pyramidal holdings, and the endless relationships between them, along with debts and guarantees.

But there seems to be another reason for Fishman’s ability to keep piling on the debt: As the bank put it in its court filing, it gave Fishman many chances to sell off assets and pay back the debt, but he never did. Fishman is well known for refusing to sell assets; even when there are those interested in buying, he finds a way to blow up the sale. And why doesn’t he like to sell off holdings? Because the money and the risk belong to the banks – actually, the public – while the respect, prestige, power, influence and salaries are all his.

Do we really believe that the banks didn’t know who they were dealing with and what his true financial position was? Of course not. They didn’t need to read the newspapers to know the truth and understand it. They knew Fishman and his methods from way back. After all, most of his debts were written down as unrecoverable – or at the very least doubtful – long ago.

So we have returned to the big question concerning the “Fishman method,” similar to the query about “Dankner method”: Why did the banks, institutional investors, markets and entire business sector – who all were aware of Fishman’s situation for years – continue to roll over his debts, postpone repayment and keep doing business with him?

There are at least two answers to this question. The first is that bank managers are always afraid to clean out the stables of their big borrowers. Such exposure is always accompanied by questions of who approved the credit, who was responsible for rolling over the debt, etc. – as well as what was actually done to prevent him from looting the company? These are the questions that have arisen over the past few days concerning Fishman – and Leumi actually deserves a medal for being the first to stand up and do something about it. This is not true of Bank Hapoalim, which may be in even worse shape regarding Fishman and his debts.

The second reason for the special treatment Fishman received from everyone is also rather more important: he has major media holdings. He is the owner of the Globes business daily and has a 34% share in Yedioth Ahronoth. This makes him a key figure in the business world, and everyone knows it.

As the owner of Globes, Fishman, his family and employees do not need to threaten the bank managers, or explain that if they don’t roll over his debts, he will make sure they receive less-than-favorable press. They know that themselves. All that’s needed is their fears and suspicions.

Globes is a serious newspaper with dozens of excellent, hardworking and honest journalists. A few of them have uncovered corruption and other problems, and contributed greatly to Israeli democracy. But there are also a few editors who, over the past decade, have taken an editorial line that often serves the elite of the Israeli business world – the club where the Fishmans live and made their fortune.

After Leumi went to court, the rules of the game have changed. Now, the rest of the banks will have to decide what to do and whether they can recover anything for themselves from Fishman.

So, here’s the summary: Eliezer Fishman succeeded in taking 1 billion to 2 billion shekels of the public’s money through enormous loans from the banks that he cannot and will never pay back. He was able to do so because of the concentration in the banking system, his control of two newspapers and the structure of the Israeli economy. But now the public is waking up, the pyramids are falling and his methods of operation are being exposed. And it seems the time finally arrived when even Leumi knew it was no longer worth rolling over Fishman’s debts, and it decided to expose the public to the truth.