Kelner's Original Sin

When the year 2007 began, top police officials hinted that the investigation into alleged corruption at the Tax Authority was the harbinger of a new era of enforcement against white-collar crime. Avigdor Kelner's arrest for serious offenses allegedly including abuse of inside information proves that the police decided, finally, to aspire to reach as high as possible.

The timing of his arrest is pure symbolism. He was questioned and sent to house arrest on Wednesday, a few hours before the cocktail party to which all the fat cats in the land had been invited, in honor of transferring the controlling interest in Polar Investments (TASE: PLR), the company he had led for ten years.

Actually, Kelner led Polar mainly into red ink and flops, en route helping himself to gigantic pay-checks. Finally the market lost its faith in the company, in Kelner and his partners Itschak Shrem and Yair Fudim. They were forced to sell the controlling interest to American developer Ziel Feldman.

Until a few years ago, Kelner - the CEO of Polar, chairman of the Reshet TV broadcast company, and director and living spirit at dozens of companies and ventures - had been one of the most influential, well-connected people in the Israeli business sphere.

But if you remembers his first big move in the Israeli financial market, you probably aren't taken too aback by his fall. Faithful Haaretz readers may remember a series of articles ten years ago, about the gigantic deal that ended his career as a salaried employee and connected him with Aharon Dovrat and Shrem, making him a controlling shareholder.

Kelner and his partners took a young, value-free company called Kaldash, glued a completely unwarranted company value of $35 million onto it and pushed it onto Poalim Investments, which they had bought from Bank Hapoalim. They received the blessing of the bank chairman for their dubious move, shrugged off the public outcry, allocated themselves a gigantic block of stock and sold some of it to the public for cash.

That stinking Kaldash deal hung over Poalim Investments, which changed its name to Polar Investments. It hung so low that Polar almost collapsed.

At some stage, the group's founder - Shrem - realized the magnitude of his mistake, in giving Kelner the management of the most important company in his group. But he didn't send Kelner home, hoping that the man who had escorted him into the mud would be the one to rescue him.

Shrem and Fudim won't get to see Polar recover from their regime, at leats not with their name on the company's mast-head, and meanwhile Kelner has fallen into a new hole, a very deep one, too. He may clear his name of criminal conduct: so far he's been arrested, and the road to conviction is long. He is innocent unless proven otherwise. But in the context of the public test, the ethical test, the business test - he was convicted long ago.