Rogosin's Ex-owner, Father Held on Fraud Suspicions

The Tel Aviv Magistrate's Court yesterday remanded Ezra Harel, the former owner of Rogosin, for three days, and did the same to Harel's father, 76-year-old Aryeh Mualem, who served as chairman of the failed company's board of directors. The two are suspected of fraud and breach of trust.

In his ruling, issued at 1:30 A.M. yesterday, Magistrate Yehezkel Harel (no relation to the suspects) said that there existed "a reasonable suspicion linking the suspects to the crimes attributed to them." The two were then taken to the Abu Kabir lock-up, where Securities Authority investigators continued interrogating them yesterday morning.

Another suspect in the affair, Menachem Atzmon, was released on NIS 3 million bail. Atzmon, a former Likud Party treasurer, was Harel's business partner at the time the alleged crimes occurred.

At the hearing, attorneys for Harel and Mualem contested the remand, arguing that the two have been cooperating fully with their investigators, even supplying them with all the relevant documents, and that there was no reason to treat them differently from Atzmon.

But the judge rejected these arguments, concluding that there were reasonable grounds to fear that the two would try to coordinate testimony with other witnesses or even try to suborn the witnesses if released on bail. There were also grounds for fearing that they might jump bail, he wrote.

The substance of the Securities Authority's suspicions against the two is not yet known, since a gag order was placed on the documents it submitted to the court yesterday. But sources familiar with the case say the authority is probably investigating whether Rogosin's financial collapse was attributable to criminal activity by Harel and Mualem.

The authority is also trying to determine what happened to the NIS 35 million in cash that the company had at the start of 2002, which later mysteriously disappeared. This money could have partially defrayed the company's outstanding obligations to its bondholders.

Another possible subject of the investigation is how a deal in which Harel and Rogosin bought Germany's Rostock port was approved. To finance the deal, Harel and Atzmon obtained a 17 million-mark loan from Rogosin; Rogosin then received an option to buy 25 percent of the port in exchange for forgiving the loan. Rogosin eventually exercised this option, which left Harel and Atzmon owning 75 percent. Thus Rogosin wound up as the minority shareholder despite having put up all the money, while Harel and Atzmon acquired a controlling stake using Rogosin's funds. Today, the Rostock shares are considered Rogosin's principal asset, but they were mortgaged to Bank Hapoalim as security for a $15 million loan in 2001.

Yet another possible subject for investigation is the deal whereby Harel sold Rogosin a loss-making tourism company called Harten. A few months after the sale, Israel Discount Bank demanded the company's liquidation because of its NIS 154 million debt to the bank. By selling the company, Harel reportedly rescued himself from this debt, for which he had given Discount personal guarantees.

Finally, there were several cases in 2001 in which Rogosin lent money to various other companies owned by Harel. These loans totaled NIS 41 million.