Taking Stock / Zoller's Piggy Bank

Now that February is over, the spin-of-the-month-award can be conferred: and the winner is Michael Zoller, the chairman of Leumit HMO.

I believe it was Thursday 10 days ago that Zoller's confidants leaked to the business press that "Zoller is leading Berger Holdings brokerage firm in opposition to the Ellern deal."

For those less versed in the capital market, let us explain that in the Ellern deal, various branches of the Dankner family are selling their private holdings to the publicly traded Ellern Investments, thus transferring personal obligations to the limited corporation.

Berger Holdings is the investment house that six months ago overtook DS Securities and became one of the biggest portfolio managers in the country.

Berger Holdings controls 4.9 percent of Ellern, and may therefore influence the Dankners' chances of getting the deal approved. During the reign of Amit Berger, the founder and former manager of Berger Holdings, the firm was to vote in favor of the deal. However, Berger is no longer in charge; now Zoller is.

Zoller's news naturally sent out shock waves. The business sections in the papers keep asking whether Zoller will oppose the Dankners, whether he has enough stock to thwart the deal, whether he will strike his own deal with them, and so on.

This gem of a spin made everyone forget the trivial question of how come the chairman of an HMO has gained control of the largest private investment house in Israel?

Well, listen to the following surreal story: Zoller is a businessman who gained most of his publicity and power over the years by catering to Likud officials. He started out with Yitzhak Moda'i, and is now the right-hand man of Finance Committee Chair Avraham Hirschson.

Hirschson, who led Leumit HMO to a financial crisis, left the cushy chairman position to Zoller. Lots of money and power - after all, the HMO has 700,000 clients.

But Zoller wanted more: he wanted to wheel and deal at the heart of Israel's business sector. Around two months ago the pension funds of the workers' union of Leumit (Histadrut Leumit) acquired control of Berger Holdings, in a NIS 23 million deal.

What does an HMO have to do with large brokerage firm? What's an HMO got to do with a company that handles NIS 7 billion worth of stock exchange portfolios? Zoller was never asked to explain.

The entity that actually acquired Berger Holdings was Hod Yuvalim Holdings, which is a partnership between Hod Hamidbar Hotel and Yuvalim Pension Funds.

Hod Hamidbar Hotel? This story is getting more surreal by the minute. It turns out that this hotel was once owned by Leumit HMO and was sold to Leumit Histadrut when the HMO encountered cash flow problems.

The hotel was sold without tender, in violation of the recovery plan signed with the Finance Ministry. After the hotel was renovated, the heads of the Leumit pension funds invited 120 Likud members to spend the weekend there. Zoller explained at the time that the guests were people who had helped renovate the hotel, as well as Leumit Histadrut officials, including some Likud members.

Hod Yuvalim has no CEO or chairman. Rather, it is run by three representatives of the controling partners: Zoller, Zion Cohen - CEO of one of the pension funds, and Yehuda Zicherman, the hotel's director.

Other people's money

Let us recap: Zicherman, Cohen and Zoller used other people's money to take over a brokerage firm that manages NIS 7 billion that belongs to other people still.

But there's more. In fact, this is just the beginning. Now that Zoller has not only the HMO in hid hands, but also a nice little piggy bank - a private investment house - he can start doing business. We heard about the first deal last week - Berger Holdings received an option to acquire control of Apex Investments for $7.7 million.

What's Apex doing here? Interestingly enough, Apex and Zoller go back a long way - Apex was chosen by Zoller to handle some of the available funds of the Leumit Histadrut's pension funds.

Thus, for example, if you have savings with the Leumit Histadrut pension funds, you should not be surprised to find out your portfolio includes a substantial holding in Tecnomatix. The owners of Apex like Tecnomatix: they bought stocks for the portfolios of their clients and for those of Leumit Histadrut pension fund. They are also the ones who, together with Muzi Wertheim and other partners, will be getting the $7.7 million once Berger Holdings exercises the option on Apex.

Is this whole affair legal? Not quite. Haaretz has found that the acquisition of Berger Holdings was in violation of the treasury regulations regarding pension funds. Any fund that holds more than 10 percent in a corporation stands to lose its license and tax breaks.

Zoller's response: "Hod Yuvalim is a partnership between Yuvalim's management firm and Hod Hamidbar Hotel. In other discussions held between Yuvalim and the treasury, the treasury made no comments and presented no questions about this deal." In other words: We were not told it was against the regulations, so we went ahead and bought it.

Following publication in Haaretz, Berger Holdings announced on Thursday that Hod Yuvalim has reached an understanding with the treasury's capital markets director that within a year the holdings of the company would be restructured to comply with the treasury's instructions. Why should Zoller be given a year after he violated existing regulations?

This question is particularly interesting, because when the offices of the managers of the old Histadrut labor federation had to be broken into so that new managers appointed by the government could take their place, kicking the old ones out overnight - the Insurance Commissioner Eyal Ben Chelouche acted without hesitation.

Except the pension fund in this case is controlled by the party in power. And the pension fund in this case is controlled by the man closest to the chairman of the Finance Committee. We can only wait and see whether there are two categories of pension funds: those whose managers can be thrown out in a blink of an eye, and those who are on the right side of the political map.