The Bottom Line / Losing Fairly and Honestly

Dedi Borovich, Tami Mozes and Yossi Rosen never believed this could happen to them: to go from being a huge success story, the darlings of society and the media, to being the targets of a lengthy and humiliating campaign of vilification, with them in the mud and everyone spitting on them; from the heights to the depths.

They thought the entire affair would end quickly with a creditors' arrangement, in which the banks would reschedule their debts and the suppliers would forfeit some of the money they are owed, and they would resume managing Clubmarket with a promising future. They never dreamed of the mighty hurricane that is threatening to sweep them, and their businesses, away.

They were not wise enough to predict the enormous anger of those who hold Extra-Tav vouchers, who suddenly understood that they, too, were among the chain's creditors. They scorned the banks, which were left with heavy debts; their hearts were hardened to the fate of the small suppliers who lost their entire world; and above all, they failed to correctly assess the strength of large companies that do not like to lose - especially if they have been conned.

Osem CEO Dan Propper set the tone. He launched a blatant, frontal attack on Dedi Borovich and Yossi Rosen: "The business community must not only denounce, but must also eject this filth from its midst - people who play irresponsibly at the expense of working people ... Dedi Borovich and Yossi Rosen gambled deep, not with their money, but with the money of suppliers and workers - and that is a criminal act ... the act of ordinary market hustlers who deceive others ... We should lift the protective veil and make them personally responsible for Clubmarket's losses." No journalist has ever dared to utter such harsh statements.

Tnuva CEO Arik Reichman also attacked: "The Borovich brothers will have no right to exist as businessmen if they do not act fairly ... I have no doubt that they will be injured by this affair, whatever happens."

Yaki Yerushalmi, chairman of American Israeli Paper Mills, upped the ante and suggested imposing "a boycott of businessmen, who will cease to buy products and services from Sonol, Tambour and El Al ... until the Borovich family realizes some of its holdings in order to stand behind its managerial failures at Clubmarket ... It is inconceivable that the general public and commercial companies should pay the price of this failure, while the owners are free of commercial and moral obligations."

What Propper, Yerushalmi and many others share is the demand that the Boroviches put their hands deep into their own pockets and extract cash that could save the chain and repay its debts to suppliers. But isn't Clubmarket a limited liability corporation?

Despite all the consternation, we must preserve the existing legal structure of a limited liability company. Otherwise, it will be impossible to have large corporations here, and no one will take risks, because investors will always fear that, in case of failure, their own house and cars will be forfeit - despite the fact that the documents say "limited liability."

The real problem is Dedi Borovich's big mouth. From testimony that has been gathered (which still needs to be proved in court), it seems the company's owners told worried suppliers and journalists that the firm's situation was solid, and that all the rumors about difficulties were baseless lies generated by commercial rivals.

It is okay to lose money, and it is not a crime if your business fails. But you have to lose fairly and honestly. It is unacceptable to lie to suppliers and to present a false picture to the media. If this occurred, the Boroviches will not be able to hide behind claims of limited liability, because they themselves stripped away that shield. In that case, they could be personally sued for Clubmarket's debts, and the court-appointed trustees would also obviously investigate their behavior.

The Boroviches should have behaved competely differently. The minute it became clear that the ground was trembling under their feet, they had no right to mislead anyone. That is illegal - and immoral. They should have gone to the banks, told the truth, and jointly devised a recovery plan in which they would also have contributed their share for a while - and thereby, they would have enabled the chain to survive.

Later, at the appropriate time, they should have sought a buyer and exited the retail business (at a loss, of course) - because it turns out that it is impossible to simultaneously run jumbo jets and sell cottage cheese at Jumbo outlets.