Harel Questioned Under Caution Over Rogosin Collapse

The Israel Securities Authority on Sunday questioned Ezra Harel, the former controlling shareholder in the collapsed company Rogosin, under caution for several hours in the authority's Tel Aviv headquarters.

Harel is alleged to have caused the company serious financial damage, brining it to insolvency. An authority spokesman said it does not comment on investigations in progress.

Harel's former partner, one-time Likud party treasurer Menachem Atzmon, was also interrogated in the affair. A week ago, the Securities Authority chairman Moshe Terry said no senior executive is immune to investigation.

At the beginning of July 2002, the day Rogosin was slated to due to make a first NIS 18.5 million bond payment, Harel sold the controlling stake he held to businessman Yochi Schneider for $100,000, thus evading a battle with the bond holders.

Schneider believed he would succeed in reaching a creditors' agreement, but failed and resigned his positions in the company. Rogosin owes bond holders more than NIS 80 million.

While Harel was selling control of the company and Schneider was trying to negotiate with bond holders, the holders, including institutional investors and mutual funds, were moving to have the company liquidated.

In October 2002, the court appointed a receiver who began to investigate the circumstances of the company's collapse. Harel was recently questioned twice in his own offices and a third interrogation session was planned.

The receiver's preliminary report included serious comments on Harel and his activities in the company. Among other things, he wrote: "A heavy cloud hangs over the way Rogosin was managed and the considerations that guided its managers in using company money and the accompanying discretion."

Bank Leumi fund manager Leumi Pia filed a lawsuit against Harel and other members of the board. Pia alleges that Rogosin managers actions and failings led to the company's financial collapse.

Under Harel's management Rogosin suffered for years from odd investments, controversial party-related transactions, and high management fees that Harel himself pocketed.

Over four years, Rogosin lost NIS 100 million before reached the point of being unable to pay its bond holders.