Taking Stock / 24-Keret Gold Story

Don't hold your breath.

If you've been waiting for the political echelon to howl in outrage and boot out Israel Aircraft Industries (IAI) leader Moshe Keret after the state comptroller's scathing report about him, you're in for a disappointment. The disgrace disclosed in that report is more likely to elicit no reaction at all, at least in the public arena.

IAI is one of the greasiest barrels of pork around. It is essentially a tiny nation with a single ruler. Politicians, ministers, businessmen and hundreds of cronies, suppliers and mediators and lawyers and accountants all get a taste of the pork. It is no coincidence that Keret has been sitting in the CEO's office at IAI for 22 years, as though it were his private business and not a government-owned one, with nobody so much as peeping.

Seven years ago, the IAI spokesman contacted us to complain that we were not reporting enough about the company's stunning "achievements." We told him we'd be delighted to allocate double and even triple space to IAI if we could receive documentation through which we could calculate whether the business was a success or a failure. What papers? Well, full and audited financial statements, a balance sheet, a profit-and-loss report, cash-flow report, and most important, the notes to the financial statement, for instance.

No need to know

At that opportunity, we asked to receive full disclosure of the billions of shekels that the state has been paying IAI retirees since the 1980s. How many workers actually retired? How much did they receive? What was the average retirement package? How old were they when they retired?

The spokesman was tickled pink: "We don't mean to give you any figures," he said. "You don't need them, and nobody is requiring us to do so."

The State Comptroller's Report on the deal in which, acting via its subsidiary Elta, IAI bought 30 percent of Elisra for $100 million (at a company value of $330 million) is a rare opportunity to glance into the decision-making process at the state-owned defense giant. And the picture we see is ugly: a CEO who does whatever he damn well pleases, hundreds of millions of shekels tossed away blithely without any proper decision-making procedure, directors who might as well be geraniums, and appalling negotiating skills.

Koor Industries managers Jonathan Kolber and Danny Biran managed to squeeze top dollar out of Keret for minority interest in the lousy company, even though Koor was in terrible trouble and had its back to the wall at the time. Didn't Keret know that Koor was on its knees and desperately in need of money? That the profit forecasts of the Elisra management were a joke, that the risk inherent in the deal was not small, and that a mechanism to correct the price if the forecasts were off was crucial?

Director. Cactus. Spot the differences

Apparently, Keret did know. But the money was other people's; you owe no explanations to anybody; the directors are as proactive as houseplants; politicians are in your pocket; and the union is your brother in arms. Then you can always sell the story that the acquisition is a "strategic" one and do as you damn well please.

The comptroller's analysis of those "strategic" calculations makes fascinating reading. To this very day, three years after the contract was inked, Elisra and Elta never managed to achieve their much-touted cooperation, and never even agreed on ways to leverage their much-touted "synergies" that were supposed to justify the sky-high price.

The comptroller's report exposes IAI as a body run in a ludicrously inept manner. But don't forget why this report was born.

Elisra had been controlled by Koor, which is a publicly traded concern. Recently, Elbit Systems bought controlling interest in Elisra from Koor, according to a company value of $100 million, or a third of what IAI paid. The business press widely reported about the collapse of Elisra's value.

The really interesting question is how IAI manages the rest of its multi-billion shekel business, the parts that are not exposed to the glare of sunlight by virtue of being involved in a publicly traded company.

Which leads us to a no-less nagging question. Is Israel's business press akin to the drunk who keeps looking for the coin he lost under the streetlight, because he can't see in the dark place where he actually lost it?

Is our focus on publicly traded companies simply because we can see there?

What is going on in the dark at the broad public sector, in places operating with zero proper disclosure? Is Israel's military procurement more efficient than the goings-on at IAI?

We think these are rhetorical questions. We think that in the dark, the conduct of organizations is as low as told in the State Comptroller's Report about Moshe Keret, the IAI and Elisra.