Nochi Dankner, who was for a decade one of the most powerful business tycoons in Israel, was found guilty on Monday of stock manipulation and other securities-related offenses.
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The maximum punishment for the offenses is five years’ imprisonment.
In a 280-page decision, Judge Khaled Kabub of the Tel Aviv District Court found Dankner guilty of all the charges that had been brought against him, which centered on his manipulating the share price of his publicly traded IDB Holding Corporation ahead of a secondary offering of its shares in February 2012. Dankner consistently denied any wrongdoing.
Dankner was also charged with failure to publish financial statements on a timely basis and for publishing misleading information in the prospectus issued ahead of the IDB offering, which raised 321 million shekels ($83 million at current exchange rates).
Itay Strum, an investment banker and associate of Dankner’s, who had been charged with executing Dankner’s directives, was found guilty as well. The charges against Dankner, originally filed in 2014, relate to events behind the scenes of the share sale, which subsequently won the sarcastic soubriquet the “friends’ offering” because Dankner encouraged associates to buy IDB stock. Prosecutors said Dankner did that in order to artifcially raise the value of IDB shares traded on the Tel Aviv Stock Exchange, thereby enabling the company to raise more capital.
“The considerable circumstantial evidence brought by the prosecution brought me, beyond a shadow of doubt, to a single logical conclusion: This was not an investment undertaken to take a position in the shares, but a plan by Strum based on a genuine desire to help Dankner and IDB,” Kabub wrote. “Nevertheless, the way it was undertaken was not legitimate, to say the least, and was necessarily designed to influence the prices and trading volume of [IDB] shares.”
Dankner controlled IDB, whose holdings include Israel’s biggest insurance company, cellular operator and supermarket chain, for a decade, making him one of the most powerful of the era’s business tycoons. But IDB was overwhelmed by debt and the seizing up of world financial markets in 2008. By 2012, when Kabub concluded he acted to inflate IDB’s share price, Dankner was desperately seeking capital to keep control of the group.
In the event, he failed: In December 2013, a court handed control of IDB over to Eduardo Elsztain, an Argentinian real estate magnate, and Israeli Moti Ben-Moshe in exchange for their help in recapitalizing the group.
Among the evidence prosecutors presented in court to show that Dankner and Strum colluded was the recording of a phone call Dankner made to Ilan Batsri, a manager of the corporate division at First International Bank of Israel, concerning a loan to Strum. Other evidence showed that Dankner and Strum talked and texted a great deal during the days leading up to the share offering.
Moreover, prosecutors showed that Dankner routed investors to Strum, and finally, that the businessman also lent the investment banker 8 million shekels.
In his version of the events, Dankner said the phone call to Batsri was principally a recommendation relating to Strum’s credibility. Dankner asserted that his ties with First International Bank were not close.
Of the ostensibly intensive contacts with Strum in the days leading up to the IDB offering, Dankner denied that they should be categorized as intensive, arguing in his defense brief that they had been coincidental and random. If anything, the conduct of the two had been the “polar opposite” of the way people would behave if they had actually been conspiring, as prosecutors alleged.
Among the investors he had referred to Strum were Yossi Williger, Ilan Ben-Dov, Zvi Barinboim, Shimon Weintraub and Gilad Tissouna, which he said amount to a small fraction of the dozens of investors he had been in touch with, Dankner argued.
On the 8 million shekels lent to Strum, Dankner called it a genuine loan with no strings attached that he offered out of friendship. But the court did not accept these explanations.
In December 2013, a decade after he had bought the controlling interest in the IDB group, Nochi Dankner lost it: Tel Aviv District Court Judge Eitan Orenstein approved, instead, a bailout plan devised by two previously unknown businessmen in local circles: Moti Ben-Moshe and Eduardo Elsztain.