Arnon Out of Favor With Safra Family After Zeevi-Bezeq Fiasco

The brothers Joseph and Moise Safra, who own controlling interest in First International Bank of Israel (FIBI), have cooled relations with their attorney in Israel, Yigal Arnon, due to anger over the bank's loans to businessman Gad Zeevi.

Arnon has represented the Safra family in Israel for many years, but the Safras have turned to other attorneys in recent months to handle some of their affairs.

Arnon continues to represent Cellcom, the cellular company in which the Safra family is a partner.

Arnon served as chairman of the board of FIBI for about a decade until about two years ago. He also represented Zeevi when the businessman acquired a 20-percent stake in Bezeq. At the same time, Arnon chaired the credit committee of FIBI's directors.

According to testimony provided to police by FIBI's current chairman Shlomo Piotrkowsky, who served for 11 years as the bank's CEO, Arnon assured him that Zeevi had sufficient financial resources to buy controlling ownership of the bank.

Piotrkowsky questioned Arnon about Zeevi's finances after the CEO of the bank's Swiss subsidiary raised the suspicion that Russian tycoon Mikhael Chernoy was the one providing Zeevi's financial backing. But Arnon insisted that the money was Zeevi's.

The ill-fated Bezeq acquisition brought heavy losses to FIBI and the entire banking system following the dive in Bezeq's share price. The banks were forced to write off hundreds of millions of shekels to doubtful debt. The Bank of Israel investigated the dual role Arnon played in the Zeevi-Bezeq deal, but never published its findings.

Arnon refused to discuss his relations with the Safras. But sources close to the Safra family confirmed that relations between the two have chilled considerably. "There is no doubt that something has happened during the past year... the relations are not as they once were."

Relations between the Safras and Piotrkowsky have also soured following the Zeevi debacle and the bank's losses during the first three quarters of the year - the first time FIBI that has operated in the red.