All That Glitters Why Dankner Has to Keep on Dancing

For all practical purposes, what IDB officials announce is almost irrelevant. The main thing is that it announces something.

Eytan Avriel
Eytan Avriel
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Eytan Avriel
Eytan Avriel

Everyone involved has an interest in making sure that the system the IDB Group owner used keeps on going, without the public’s knowledge.

In a quote that went down in history during the latest financial crisis, the chief executive of Citigroup at the time, Chuck ‏(Charles‏) Prince, said in July 2007: “As long as the music is playing, you’ve got to get up and dance.”

When Prince made that statement, the cracks in the financial system had started to become noticeable. Prince was dismissed from his position at Citigroup the following November, but the quote remained engraved in the collective memory because of the basic truth it embodied: Managers and managements often keep dancing even when everybody knows the party’s over.

Nochi Dankner, who is still the official owner of the IDB group, is in much the same situation as Prince was in the summer of 2007.

IDB Holding Corporation is insolvent, and the representatives of its bondholders have already started the process of taking control of the shares. Its subsidiary, IDB Development Corporation, is grappling in court with creditors over how to pay its debts. Today the creditors will submit proposals for how to rescue the group.

Eduardo Elsztain, the “knight in shining armor” from Argentina who was supposed to save the day, announced last Thursday that he was backing down and would not invest in the company.

But like Prince, Dankner is still hearing the music − and he is still dancing. Fact: several minutes after Elsztain’s announcement, IDB officials said that new plans, new investors and fresh funds would be presented this week.

For all practical purposes, what IDB officials announce is almost irrelevant. The main thing is that it announces something. So Nochi Dankner, the company’s managers and its battalions of advisers can meet for another round of talks, negotiations, court hearings and, of course, journalistic spin − anything to keep their jobs for another few months.

Waiting for a miracle

Well, why not? The music is still playing for the time being. Dankner and his advisers can withdraw funds every day and every hour ‏(for example, lawyers bill by the hour‏) from the public treasury − funds that, of course, belong to the public. And who knows? Maybe a miracle will occur: A new investor will come on the scene, a war will break out, the stock market and Credit Suisse shares will go up by hundreds of points. It seems that as of now, Dankner has no Plan B; as far as he’s concerned, the only way to manage his personal debts in his private companies, Ganden Holdings and Tomahawk Investments, is from the director’s chair at IDB.

But Dankner is not the only one who has to keep dancing. Along with him are dozens of other companies, institutions and people with whom he has made deals over the past decade. Some of them are even the strongest and most influential people in the Israeli economy − and they do not want to stop the music at all. Why not? Because like the financial crisis in the United States, once the music stops and the managers vacate their chairs for others, the investigations, probes and conclusions follow.

It can start with Dankner’s bankers, for example Bank Hapoalim, which extended credit to Tomahawk, and Bank Leumi, which extended credit to Ganden. In a hearing about the future of IDB Development, Judge Eitan Orenstin already said about those bankers: “Where were the the banks’ CEOs wants to see Dankner go down, and they definitely do not want anyone to probe their relationship with him, whether as part of an official investigation or as a result of the stable-cleaning that every new manager does.

The investigation can continue with some of the institutions − for example, Clal Insurance, which for years provided special treatment to IDB, Dankner and his close associates, often at the expense of the public’s pension funds. Executives at Clal Insurance will not want anyone to probe the decision-making processes that ended in giving tens of millions of dollars to the former government minister and current chairman of Clal Insurance, Dan Naveh, and the joint fund of IDB and Credit Suisse. Other financial institutions will not want investigations into the decisions that led to the group’s many bond issues, and why some of the controlling shareholders of those institutions saw fit to invest personally in an IDB bond issue when it was obvious that they were going to lose money.

Cooling off period

We can talk about the advisers: the accountants, the lawyers, and the media consultants. In the business world, just like in politics or any other system, everybody knows that the moment the “king” leaves the stage, a cooling off period starts that doesn’t last very long, after which people start to reveal the real story.

That’s when it will all come out. For example, the public doesn’t know yet exactly what service the politician Aryeh Deri provided in exchange for the NIS 2 million that he received from IDB. It doesn’t know why the former chairman of the Israel Securities Authority, Zohar Goshen, received millions of dollars in agency fees for a transaction regarding which the extent of his involvement is not clear.

We can sum things up with the media − the newspaper owners, attorneys, commentators and journalists. Just a few weeks after the public pressure and the large losses forced Dankner to take his newspaper Maariv into receivership, the stories began to surface about the newspaper’s management, its editing guidelines and the use Dankner made of the entire newspaper. We can assume that from the moment he steps down from his position as head of IDB and loses control over the advertising budgets of companies such as Cellcom, Super-Sol and Clal Insurance, stories about his relationship with the other newspapers and journalists.

Of course, this is only a partial list. There are dozens of other businessmen, CEOs, military people, kabbalists, mayors and others who would also prefer that Dankner stay where he is. To this day, an entire ecosystem − a “system” that benefits everyone involved, all the players and components that are part of it − has operated around the groups of employees that belong to tycoons in general, and around Dankner and IDB in particular.

To keep this system protected, to make sure that all the payments will keep flowing to all the players, and mainly so that the understandings and arrangements will not come to light and remain known to only a select few, Dankner and anyone who is part of the system must keep dancing. But for how long?

Over the past year, many people could have pulled the plug on the amplifier and stopped the music. The bankers at Bank Hapoalim and Bank Leumi could have demanded Dankner’s debts in Tomahawk and Ganden. The financial institutions could have taken control of IDB months ago. But they did not because they found it more convenient to go to the ball and keep dancing.



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