Israeli Ex-tycoon Nochi Dankner Sentenced to Two Years for Stock Manipulation

At its heyday, IDB Holding Corp was one of the biggest holding companies in Israel.

Nochi Dankner in Tel Aviv district court, December 5, 2016.
Ofer Vaknin

Nochi Dankner, formerly one of Israel's most powerful businessmen, was sentenced on Monday morning to two years in prison and fined 800,000 shekels (almost $200,000) for stock manipulation.

Itai Strum, who abetted Dankner in manipulating the price of shares in IDB Holding Corp, the company at the top of a vast business pyramid, was sentenced to 12 months by Judge Khaled Kaboub of the Tel Aviv District Court. Both Dankner and Strum also received a 12-month suspended sentence.

Calling the evidence presented "extraordinary by any criteria," Judge Kaboub noted the long list of character witnesses who came to Danker's defense from the uppermost crust of Israeli society and politics, and who had received Dankner's financial support.

IDB Holding Corp was the top of a pyramid, under which were dozens of companies in several tiers, including, at the time, Israel 's biggest supermarkets chain, Shufersal; one of its three mobile phone companies, Cellcom; a major insurance company, Clal; a gigantic construction company, Property and Building Corp and much more.

However, debt built up within the group, which had massively issued bonds to the public. Within a matter of a few days, Dankner and Strum had profoundly "erred against the values of a properly working stock exchange", as Kaboub wrote, through a massive manipulation to push through an offering of IDB Holding Corp shares worth 321 million shekels in February 2013. The company badly needed the proceeds in order to meet its obligations to bondholders, and Dankner and Strum tapped associates, friends and so on in powerful positions to pick up the shares at inappropriately high prices.

The judge observed that it wasn't that Dankner and Strum had stumbled once and mended their errant ways: They effected the crime through a period of three days, starting with a meeting at Dankner's house – "in a war-room he set up to make sure the offering would succeed," Kaboub wrote. "He also raised money from family members to send a message to the market." [I.e., that the offering was a good one.] "He controlled IDB from on high and exploited his talent and contacts," the judge added wrote.

In practice, trading on the Tel Aviv Stock Exchange was heavily affected by the artifice, Kaboub continued: "It is very difficult to accurately estimate the damage caused to investors who followed blindly after the defendants, but there is no question that the defendants damaged the efficiency of the stock market, especially as this was no tiny esoteric company."

It was his desire to retain control of the IDB group that led Dankner into crime, the judge concluded.

The judge said he had a lot more difficulty understanding why Itai Strum had risked his money – knowing the truth about IDB's situation, Strum seems to have been led into uncharacteristic malfeasance by his desire for Dankner's friendship.

However, the sentence fell short of the maximum, which the prosecution had indeed sought - three to five years.

Dankner for his part asked the court for mercy, as did Strum, who even wept during the penalty hearing.

"The verdict was a hard blow for me and for my family, from whom I draw my mental strength," Dankner told the court in his plea to settle for community service. "I would ask [the court] to place the good deeds I have  done all my life on the scales too."