Don’t Let Real Estate Tycoons Control the Public's Money

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Alfred Akirov, in 2012.
Alfred Akirov, in 2012.Credit: Tomer Appelbaum

In the 2000s, a handful of businesspeople who were dubbed “tycoons” took control of a large portion of Israel’s economy. Nochi Danker, Eliezer Fishman, Yitzhak Tshuva, Shaul Elovitch and others all used the same method: They borrowed money from banks and from depositors, acquired controlling interests in other companies, borrowed more money – rinse and repeat.

They sought to acquire control of companies that manage the public’s money, which they could leverage in a host of ways, as well as media outlets, as levers of pressure and influence. They used the public’s money in order to obtain control of the public’s assets, and at the same time became generous donors of money that was almost never their own, but rather that of millions of small depositors.

A decade ago, something went wrong for them. The global financial crisis of 2008, the Israeli social protests of 2011 and articles published in Haaretz opened the public’s eyes and stopped the endless rolling of the debts of the tycoons, who fell one after another, leaving behind “haircuts” for the public.

The Government Committee to Encourage Competitiveness in the Economy, known as the economic concentration committee, passed laws aimed at reducing the harm caused by the tycoons’ methods – for example, by prohibiting corporate pyramids and separating financial and nonfinancial holdings.

But not all the tycoons gave up on their dream. Alfred Akirov, the controlling owner of Alrov Group, a real estate and hotel group, wants to return to the old days. After acquiring a 15-percent stake in Clal Insurance, which manages about 250 billion shekels ($80.9 million) in savings and pensions for hundreds of thousands of households, he wants to reach 30 percent, which would give him absolute control over the company and its management.

Akirov, who celebrated his 80th birthday last summer, does not conceal the true purpose of the acquisition – to give his son Georgy a proper job. He must not be allowed to complete the takeover. First of all, his personal and business integrity is questionable: His name has been attached to the payment of compensation to Shula Zaken, the former office manager of his “friend” Ehud Olmert, and to an improper attempt to influence the selection of the Clal Insurance CEO, out of personal rather than professional considerations. Second, neither he nor his son has managerial experience in the area of insurance and investments. Moreover, as the owner of a property company with debt in excess of 9 billion shekels, he will face a great temptation to use the money of Clal Insurance policyholders, in one fashion or another (as Nochi Dankner did when he controlled Clal).

No less important is the flawed message: If the supervisor of the Capital Market, Insurance and Savings Authority, Moshe Bareket, gives Akirov permission to acquire a controlling interest in the insurance company, it will send all business moguls the message that the days of the tycoons have returned, and they can once again take control of the public’s companies with the aid of the public’s money.

The above article is Haaretz's lead editorial, as published in the Hebrew and English newspapers in Israel.

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