When Israel's Biggest Bank Reeks of Crony Capitalism

Eliezer Fishman, who owns the business newspaper Globes, accumulated a debt of 1.8 billion shekels debt to Bank Hapoalim. But the bank still wants him at the helm.

Eliezer Fishman in 2009.
David Bachar

The special treatment accorded for years to businessman Eliezer Fishman leaves Bank Hapoalim, the country’s largest bank, with a resounding failing grade in the financial Buzaglo test (the obligation to enforce the law against a VIP in the same way that it is applied to the “average Joe.”) No Israeli household would have received such permissive treatment from the bank.

Fishman accumulated a debt of 1.8 billion shekels, almost half-a-billion dollars, with Bank Hapoalim. The debt extended over a large number of businesses that Fishman owned and managed and swelled over a long period of time – some five to 10 years. It was not the result of a sudden event.

Despite that, it was not Bank Hapoalim but the Tax Authority that submitted the request to foreclose on Fishman’s assets; Bank Hapoalim and other banks subsequently joined the motion.

What is surprising in the request by Hapoalim is that the bank asked that Fishman be allowed to continue running his businesses for the time being. That, despite the fact that the debt accumulated under his management and despite Fishman’s cumulative debt to the entire banking system of about 4 billion shekels – not exactly evidence of brilliant management ability.

And that’s only one reason that the request is not reasonable. Fishman’s record as a risk-loving businessman should also have been taken into account. He was famous, for example, for a large and unsuccessful gamble on the Turkish lira.

On the other hand, the bank’s senior officials and its representatives in court certainly know that in legal proceedings between Fishman and Bank Leumi, the bank’s lawyers maintained that the businessman had misled them by promising to sell assets in order to serve his debt. They also said that, in light of the conflict of interest between him and the bank, it was not reasonable for Fishman to continue to run the companies and to sit on their boards of directors.

Another reason is more general: Research in the field of finance indicates that when a director is on the brink of almost certain bankruptcy, he is likely to act in ways that benefit him – but damage the assets and the creditors.

The identity of the receiver whom Bank Hapoalim wanted to appoint for Fishman also arouses questions (Eytan Avriel, TheMarker, August 20). Attorney Pini Rubin has not served as a special director or a trustee in a bankruptcy case of similar size, but he is known as the personal lawyer of the bank’s controlling shareholder, Shari Arison. It is quite likely that such a receiver will not have a burning desire to point a finger at those who are to blame for the present situation – when they are liable to be the directors appointed by his wealthy client, or Arison herself.

The conduct of the bank arouses heavy suspicion of “crony capitalism,” even more so when the person receiving preferential treatment owns the business newspaper Globes. If Bank Hapoalim wants to regain the public’s trust, it must honestly investigate how Fishman was allowed to accrue such a large debt, and refrain from handling him with kid gloves – just as it would do in the case of a private household.