Court Investigation Into Clubmarket's Downfall Is Meant to Send Clear Message'

The team is checking the behavior of both the company's managers and owners in the months leading up to Clubmarket's filing for court protection in July after running up debts of NIS 1.3 billion.

After several weeks of mud-slinging at the owners of bankrupt retail chain Clubmarket, Tel Aviv District Court yesterday permitted publication that it had appointed an investigative team to examine the circumstances behind the chain's collapse. The team is checking the behavior of both the company's managers and owners in the months leading up to Clubmarket's filing for court protection in July after running up debts of NIS 1.3 billion. Judge Varda Alshech appointed attorney Avner Cohen to lead the investigation, and asked the chain's trustees, Shlomo Nass and Gabi Trabelsi, to approve her choice.

Only last week, Cohen submitted a report into the collapse of another company (the Hamashbir Lazarchan department store chain), also commissioned by a court following pressure from shareholders. In that case, Cohen concluded that Hamashbir's parent company, the Co-Op Blue Square Consumer Cooperative Society, should be held responsible and pay NIS 56 million toward Hamashbir's receivership fund.

Alshech nominated CPA Giora Hartog, former head of the Israel Securities Authority investigation department, to assist Cohen in the probe.

The Official State Receiver Shlomo Shahar had approached the court in early August to begin an investigation into Clubmarket's recent history. The court ordered the investigation to begin but insisted on a gag order, which was removed yesterday despite objections by Nass and Trabelsi.

In her decision for the investigation a month ago, Alshech had written that it was necessary, both as a matter of legal policy and in the interests of justice, "to send a clear-cut message to the managers and owners of other companies that reaching collapse and filing for court protection could very well lead to an exacting investigation into their actions and behavior - and how much more so when the business and the collapse is of this magnitude," the judge wrote in her decision yesterday.

Alshech, who has not spared harsh words for Clubmarket's owners during the past few months, said that the message she was sending was that court protection from creditors is not to be used as "a city of refuge" by managers who have acted illegally. Those who appeal to the court for such protection must, Alshech wrote, demonstrate high levels of good faith, full disclosure and an absence of wrongdoing.

The judge said that a comprehensive investigation was needed in this case, given the enormous debts involved and the damage Clubmarket's collapse caused to so many parties, from employees to suppliers. In addition, Alshech wrote, shareholders and others connected to the company are precluded from objecting to such an investigation. She said that given the fact that they themselves had applied for court protection, knowing of the requirement for good faith and disclosure, they could not object to a thorough investigation into the circumstances of the collapse.

Meanwhile, Clubmarket's owners - the Mozes-Borovich-Rosen group - have entered negotiations with the chain's trustees to hand over NIS 11 million to creditors, Haaretz learned yesterday.

The group's attorney, Zeev Scharf, wrote to the administrators, Nass and Trabelsi, that out of "consideration and good will," the owners were "willing to try to examine the possibility of helping small creditors (even though damage to them had not been the fault of my clients)." In exchange for that NIS 11 million, says Scharf, his clients were demanding that they be declared not liable to other claims.

The letter went on to list associated claims and denials in response to much of the criticism hurled at them since the supermarket chain collapsed under its debts, most of which was to suppliers. Scharf again said that his clients had not withdrawn money from Clubmarket, and that Clubmarket had been in far worse condition when they bought it than when it filed for court protection in July.

Sources close to the owners said that any moves regarding the proposed injection of money would require approval of the court, and therefore the offer would be brought before the judge.