Israeli Lawyer to the Tycoons Defends His Clients’ Riches

Pini Rubin, the 67-year-old co-chief of Gornitzky and Co., tells TheMarker about the loopholes that are closing, even if the magnates still have an easier time with the tax man.

Pini Rubin, the co-chief of law firm Gornitzky and Co., in his Tel Aviv office, October 2016.
Eyal Toueg

Pini Rubin, you’re an attorney for Israeli tycoons who maneuver the economy in their favor.

I don’t think my clients have maneuvered anyone. They’re businesspeople who operate according to business codes, and they’re successful.

Successful, or have they gotten wealthy with the help of connections, power and lawyers like you?

Most of those who succeed do so because they’re lucky, which is a very significant factor, though it’s combined with talent. If it weren’t for their talent they wouldn’t be so lucky.

But when you look out this window from the 12th floor onto Rothschild Boulevard, with or without remembering the protests from a few years ago, doesn’t it occur to you that something has gone wrong?

I don’t pretend to be someone who fixes the whole world.

We’re asking whether perhaps the world isn’t built right, and that this is what makes your clients very wealthy and successful, while other people wind up very poor.

I’m not a communist or a socialist; I don’t know whether the world is built right or not. It’s the world as I’ve known it since I was born.

But does it seem logical for, say, your client Yitzhak Tshuva to have billions in the bank while others have nothing at all?

The answer is very much a yes, for a capitalist society.

And he wields so much influence over the prime minister’s decisions; for example, on natural-gas policy.

I don’t think Yitzhak or his people have influenced the prime minister. The prime minister thought he was taking the right steps based on his own economic knowledge, not because of any steps or influence on Tshuva’s part.

You also represent Sammy and Idan Ofer, Beny Steinmetz, the Strauss family and Shari Arison. Why do they seek your counsel?

Because I’m knowledgeable about many subjects.

What do you talk about?

My conversations with them are very broad, from strategy to business structure.

And you also help them navigate global taxation.

I admit that I have a very good understanding of taxation and global tax policies. Guilty as charged.

Your job is to reduce the amount of taxes they pay.

In a legitimate and transparent way.

Transparent to whom? We don’t know anything about it.

Transparent to the income tax authorities.

Lately governments and international organizations have applied a great deal of pressure to shut loopholes so that those who dodge taxes using all sorts of sophisticated means will have to pay after all.

The pressure will grow. We’re in a new era in this area. For 30 years the nearly sacrosanct norm was that each country would keep an eye on its own tax base, even where its taxpayers included residents of a different country. Each country protected itself and regarding taxes didn’t provide any effective aid beyond handling crime.

Don’t forget their donations

So from now on it will get harder to avoid paying taxes?

Yes, the trend is exactly the opposite of what was. The gates have been lifted. Tax planning that in the past was based on sidestepping in one country or another will come close to nonexistence.

Is that good?

It’s to the taxpayers’ detriment, but it’s logical. It’s also not bad for us, the tax experts, at least not yet, to put it mildly.

Then along comes the Ofer family and you arrange a 100,000 shekel ($26,380) tax payment instead of the billion the tax authorities wanted. How does that happen?

They don’t pay taxes for what they shouldn’t, though they make tremendous contributions to the cause of Zionism.

So instead of donating, they should pay their taxes instead.

Neither they nor I am willing to pay taxes unnecessarily.

Your commission for the deal did you charge based on a percentage of the billion shekels that they saved?

Interesting how that question keeps popping up. My friends have also inquired, each with his own fantasy. I’ll give you the same answer I gave them. A Polish nobleman doesn’t talk about money. But I’m not complaining.

A Polish nobleman, but a wealthy one.

I don’t know how you define wealthy. I feel wealthy with what I have. I can also say I work morning till night 365 days a year, even when I’m on vacation, and my vacations are few. Do I enjoy it? Every moment of it.

What do you do with the money?

I invest it, as every Israeli does.

Do you think the country is being run properly?

No.

How do you mean?

Politically, security-wise and economically. I think Benjamin Netanyahu would say the same thing. He also knows that the country needs some fixing. I realize there are constraints along the way, and that the management isn’t good because it’s hard to implement decisions.

How do you explain all the downfalls of Israeli tycoons – a development during relatively good economic years – while the real estate market is thriving and interest rates are low?

Unfortunately, due to my age, I have a wider perspective. The cycle of businesspeople prospering and then disappearing from the business scene existed even back then, 40 years ago and 30 years ago, so there’s nothing astonishing about it. There’s a cycle; it’s fascinating to watch.

What don’t people know about you?

That I’m very sensitive, that I cry at the movies. I weep with excitement about my grandchildren. That’s the main event in our lives now. I have five grandchildren. It’s an experience that I never expected would grab me so strongly; I enjoy every moment of it.

What else? I apologize for mistakes when I’m wrong. I have no problem asking for forgiveness. I think this is to my credit and it doesn’t diminish me in any way. I’m naive, as strange as it sounds, and I love being naive because I like to see the world through rose-colored glasses.

Is that why you’re wearing a pink shirt?

Is it pink? I don’t know, I’m color-blind. Tzipi chooses my clothes. When I’m not well dressed she tells me “you can’t go out like that.” I tell her I don’t care because everyone will know it’s only because of her.

1.8 billion never to be repaid

Let’s for example look at the conduct of Bank Hapoalim’s directors in the affair regarding businessman Eliezer Fishman’s debt. He owes a bank 1.8 billion shekels, most of which will never be repaid. And that’s even more serious when we consider that Fishman hasn’t paid his debts for years. Who will answer for this?

From the standpoint of conduct, as opposed to results, the issue looks reasonable.

In other words, the result may be poor, but that doesn’t say anything about the bank’s conduct?

Yes, considering what was acceptable 10 to 20 years ago. I imagine that even in retrospect, they would receive a pretty good grade.

But since then the bank has given Fishman kid-glove treatment and hasn’t made him pay his debts.

I’ve already said in court that the moderate treatment was wise. Since then, hundreds of millions have been collected and guarantees have been reinforced. The hypothesis that the bank would have benefited if it took aggressive legal action a few years ago is apparently incorrect. I’m convinced that the bank examined itself over and over and took the necessary and possible steps at every turn.

Were you involved legally in this case?

No.

Fishman didn’t pay billions of shekels in debts for 20 years. Another man may owe the bank a few hundred shekels and gets his property repossessed.

How can you keep asking me the same question over and over when I tell you hundreds of millions of shekels were collected and guarantees were reinforced? If you’re trying to annoy me, you’ve succeeded.

Fishman is only an incident that points to a big problem of the Bank of Israel, which let such a thing to happen.

I imagine that all the monitoring agencies were aware of the accounting involved with the debt and relied on this handling as the best way to handle the issue, even if the net result was a loss. That’s part of the game; you also lose some along the way.

When all the deals and all the banks lose out, that’s not a systemic failure?

First of all, I don’t know because I haven’t checked. But do I think it looks like a systemic failure? The answer is no, it’s the nature of economics. It rises and falls, and the same goes for guarantees.

You once again paint an idyllic picture as seen in the textbooks on capitalism and management, but this doesn’t take into account Fishman’s personal links to Bank Hapoalim’s former director, Zion Kenan. How can you ignore the club in which everyone takes care of his friend lets the country’s largest bank let a well-connected person and owner of a financial newspaper not pay his debts for 20 years?

The word club that you use is a concept of TheMarker that doesn’t exist in reality. It’s a legend. And the insinuations that a special relationship existed between Mr. Fishman and Bank Hapoalim, as far as I know, is baseless. I’d like to emphasize that word, baseless.

There’s no such club?

There’s a golf club and a tennis club, and there are dance clubs, but there’s no such thing as the type of club you keep writing and hallucinating about. I know that after this interview I’ll suffer another bout of anger. My wife doesn’t like it when I give press interviews. She says “what do you need that for?” and my answer is that when I have something to say that I believe in, I say it. I’m not ashamed that it may be unpopular.