Taking Stock / Father, Son and the Holey Story

The headline: Chairman of the Knesset Finance Committee Abraham Hirchson announces that he is seeking counsel from the Knesset legal advisor Anna Schneider on whether he can return to chair debates on the banking system - after his son, Ofer Hirchson, has reached an arrangement over his banking debts with Bank Hapoalim, and has sold his control of Hirchson-Barak, which was mired in debts.

The background: Abraham Hirchson came under sharp criticism in recent months over possible conflicts of interest in discussing banking matters in the Knesset committee.

In the past year, the Finance Committee has become the critical stage of fate for the Israeli banking system - initially as a result of a new wave of legislation designed to curb the banks' power and to protect the public. And the major battle is only just approaching - approving the recommendations of the Bachar committee, which concluded that the mutual funds and provident funds should be separated from the banks.

Over and above his role as committee chairman, Hirchson wears two other hats: He is chairman of the National Workers Federation (Histadrut Haovdim Haleumit), which controls a pension fund and the largest private brokerage firm in Israel; and secondly, he is father to businessman Ofer Hirchson, who got entangled with bank loans of millions of shekels.

Three months ago, the Movement for Quality Government in Israel appealed to the Knesset's Ethics Committee, demanding that Hirchson Sr. be removed from his position, principally because of the reforms planned for the banking sector that were expected to come before the committee for its approval.

Following the movement's application, and after failing to stop TheMarker's publication of an investigative report on Hirchson, the parliamentarian announced in July that he was excusing himself from all committee dealings with banking matters.

Then came Sunday: When approached by Haaretz, Hirchson announced that he planned to ask the Knesset legal advisor if he could return to his seat, chairing debates on banking affairs.

And now for the true story: The Hirchson-Barak company did indeed report Sunday to the stock exchange that it had reached a debt arrangement with Bank Hapoalim in which Hapoalim has converted some NIS 20 million in outstanding debts to loans, joining the company's existing NIS 24 million in loans.

Ofer Hirchson and his partner, Zvi Barak, also told the stock exchange, as said, that they had sold their control of Hirchson-Barak to businessman Avraham Firian.

But let's take a closer look at the details: Hirchson and Barak sold the company for NIS 2.5 million cash - a tenth of the price they paid for it three years ago.

How did the duo finance that purchase back in 2001? Maybe through bank loans? There's no way we can tell - because that's their private business.

And that's not all. Firian did not buy Hirchson-Barak with all its failed activities and loans that the two ladled it with. He bought a publicly traded straw company, and the deal is contingent on Hirchson and Barak's private company buying all the company's assets and liabilities in the next few days.

Now we can sum up the saga: Hirchson and Barak will remain with enormous banking debts that will be difficult to see how they can repay them; and the banks apparently will have to continue bailing them out and rescheduling their debts.

So what's changed?

Clearly, the whole shebang has now left the stock exchange and the prying eyes of the general public, making it all that much easier for Hirchson Sr. to return to chair those debates on banking matters in the Knesset. Hirchson has already declared that there are Chinese walls between him and his son.

Why is Hirchson so keen to chair those meetings, when the whole world knows that his son is still saddled with vast debts to the banks following his failed gamble?

John Doerr, legendary founder of Kleiner Perkins, once explained the term "conflict of interest" in which so many businessmen and public personalities found themselves thus: "No conflict? No interest!"