Taking Stock / The Evolving Story of Eli Aroch

A few moments after hitting the newsroom, the editors of Israel's business press knew the story was pure gold.

A few moments after hitting the newsroom, the editors of Israel's business press knew the story was pure gold. In no time the reports on options speculator Eli Aroch's NIS 95 million arbitration award from Clal Finance Batucha were the hottest stories on TheMarker Web site. Readers also had something to say, too, and the number of talk-backs on the Hebrew site climbed sky high.

What was it about the story that attracted such interest? First of all, it's a story about a little man who beat a giant corporation. Not just any corporate giant, but an insurance company, which always comes out on top of the little man.

Secondly, he beat the giant in its own home turf, namely the courtroom. Giant corporations, especially insurance companies, keep the costliest lawyers in the land on retainer, lawyers with the greatest experience in grinding down the little customer. Yet along comes Eli Aroch and manages to not only survive the system, but walk away with a stunning award in his favor.

Third, Aroch claimed to have formulated a brilliant strategy to make money from options traded on the stock market. Nobody engaged in securities could resist a story about buying, selling and winding up with tens of millions in hand.

Fourth of all, NIS 95 million is a nice round sum. It's big enough to cause a serious dent in even a giant corporation, and it's plenty big enough to ignite the imagination.

But it soon became apparent that the remarkable story of Eli Aroch was not going to end in the David vs. Goliath genre. The first to realize as much were fellow traders in the market of options on the TA-25 index - Aroch's turf.

There are no free meals in the options market. There are no magic formulas. To earn amounts of money like that in such a short period of time requires the speculator to provide an enormous scope of guarantees. Aroch did not have that.

Change of plot

Suddenly the story about David and Goliath was turning into a story about the failure of Clal Finance's superstar lawyers and management. Why had they agreed to an arbitrator who had no background in high finances? Hadn't they seen which way the wind was blowing, namely against them? How could they become entangled in a ruling like that, knowing that arbitration rulings are almost impossible to overturn?

But before the legal story could gain momentum ... whoops! Turns out that the story is actually about Eli Aroch himself.

According to the motion to the court that Clal Finance Batucha submitted in hope of getting the award canceled, Aroch is no helpless little man in the street; he's a highly aggressive type who balked at nothing to get his. Threats, coercion, phone calls, revolving-door legal representation - Eli Aroch is no dewy-eyed David; he's something else entirely.

This is the stage at which the press and its readers started to wonder how Aroch really did persuade the arbitrator to award him that much, and at that point the story changed from "the case of Eli Aroch scandal" into "the case of Yaacov Maltz."

Did Maltz, a former Supreme Court justice, actually understand the case? To what degree is he cognizant of the financial markets? But Maltz wouldn't talk. At this point the case of Eli Aroch turned into a PR war.

For Clal Finance Batucha and its parent company, IDB Holding Corporation, and that group's controlling shareholder, Nochi Dankner, this was more than a financial blow. This was humiliating. Not only did they face paying a client NIS 95 million compensation, damages, etc., but there was concern that the ruling resulted from unwise management of the case by Clal Finance Batucha. The result has been a bombardment of the press by the IDB group's PR agents and lawyers, not to mention phone calls, all designed to paint in black not only Aroch's name, but the logic underlying arbitration ruling itself.

At the start of last week, the IDB public-relations people started revving their engines with hints at a "bombshell," with Aroch's (or Maltz's) name on it. Then midweek the bomb landed, as Clal Finance filed its motion to cancel the award. The investment firm exposed transcripts of phone calls in which Maltzapparently admitted to being threatened by Eli Aroch during proceedings.

Web sites celebrated the twist in the plot. The papers devoted whole pages and giant headlines to the story of this judge who had handed down a ruling despite being threatened by one of the parties.

True confessions

But is that confession of coercion the real story? This remains far from clear. It seems that the really interesting part of the story is how and where Maltz ostensibly admitted to being threatened: During a conversation with a private eye, who misrepresented herself as being a student working with kids in trouble. She had been sent by Clal Finance Batucha to ingratiate herself with Maltz.

Clal Finance sent her only after the ruling had been handed down, even though the company had suspected well beforehand that Aroch was threatening the judge.

Okay. Now it is not a story about David and Goliath, or a genius options trader, or the arbitrator who awarded an unheard of sum. It's a story about a giant concern prepared to do anything within the law to reverse its loss.

Eli Aroch is a marginal figure in the capital market and few can really understand the financial and legal minutiae of his case. But secretly taping a former justice is something everybody can understand.

Taping conversations is quite the norm in the business world and in the world of law, too. When the person who is taping is one of the parties to the conversation, it's perfectly legal. But taping an ex-justice serving as an arbitrator is unprecedented, and many in the legal arena feel the company has crossed red lines.

Will Israir's passengers remember in a year or two about the safety hazards revealed at the company? Probably not. But journalists, editors, publicists and big business will not be forgetting how an investigative report on Israir folded before Nochi Dankner, the airline's controlling shareholder, after Keshet chairman Mozi Wertheim intervened.

Will capital market players remember in a year or two how Eli Aroch did, or did not, rake in huge profits in the options market or why he was awarded the gigantic sum? Probably not. But judges, arbitrators, lawyers and businessmen won't be forgetting how Clal Finance Batucha, legally, managed to sweet talk and tape a judge who had ruled against it.

Did that Channel 2 "Fact" program about IsrAir need to be aired in a timely fashion? Perhaps. Was Eli Aroch entitled to that gigantic award? That question remains open, too.

What will be remembered of both affairs is the ability of the companies controlled by the strongest businessman in the land to face off against the papers and the legal system, and to employ any (legal) means at hand to gain their ends.