Bright Lights, Hot Seat

Television anchorman Ya'akov Eilon's testimony in the trail of Guy Vaisman is stirring up a tempest around an issue long discussed in the media arena.

Let it be clear: The things alleged about Eilon were said about him when he was a prosecution witness against the manager of his investment portfolio and prima facie caused him serious losses.

At no point was Eilon charged with anything. Eilon, in court, vigorously denied all allegations, which were rejected by the judge.

Nevertheless, perhaps because of other past cases, the matter is arousing debate.

Sometimes accusations were found to have a basis, and this may yet emerge with Eilon. Sometimes journalists or public figures who had early access to information faced criminal charges, or their conduct raised ethical issues.

"This is reminiscent of an earlier affair involving senior media people who had become friendly with [late businessman] Miki Albin and made quite a lot of money thanks to their connections with him," recalls one veteran journalist. "You don't need to be an expert to understand that a journalist who works for an important media organization can't just shoot the breeze with a millionaire, and that was the case then.

"But in Eilon's case I don't see any problem. If he is telling the truth, he put his money into an investment fund, and the story ended there. Even if he did use information, is it possible to call it inside information? He did not reveal any scoop, he found something out an hour or five minutes before the viewers, and this is an item that spreads with tremendous speed. He is not a commander of armies who put soldiers' lives at risk."

What does constitute "inside information?" Paragraph 53-A of the Securities Law defines: "Information about a change in the situation of a company, about an expected development or change or other information about a company that is not known to the public, which if it were known to the public would lead to a considerable change in the value of the company's stock."

For there to be a criminal offense, the insider must make use of the information.

And what is an insider? Someone who holds a position in a public company; a major shareholder, a person who provides services to the company or someone who has access to the information. Family members of officeholders are also included in the definition.

Attorney Yael Grossman, who specializes in white collar crime and securities, stresses that "a journalist who receives information from the company also becomes an insider, because he has been given access to inside information. If a journalist gets hold of unpublished information from a public company and subsequently buys shares, he is committing a crime. The punishment prescribed by law is five years in prison."

Realistic expectations

Grossman says the reason the law restricts the use of inside information to those who are connected to the company is that these people have information from independent sources, and it is not realistic to forbid them to use it. "There are countries where the use of inside information is not a crime.

This is a problematic crime, because it is difficult to enforce the law on it. When a company has interesting information, it trickles out, and it is hard to put a finger how the information reaches the market. Practically speaking, in many cases a share begins to go up even before the report to the stock exchange. This is a process that often occurs, and it's difficult to locate the source of the leak." Grossman says the way an event comes together in the life of a company "is a process and not something pinpointed."

She offers an example: Suppose a company decides to acquire another firm. "This is a development and doesn't happen at a single point in time," says Grossman. This, too, makes enforcement difficult using the tools of criminal law, she says. Journalists who cover the capital market are forbidden to invest in most kinds of securities because of the ease with which they can lower or raise the price of a share.

But some journalists have been charged with using inside information. Former Globes journalist Shmuel Rosenblum received information about Elbit while working at the newspaper and told a friend, who used it to make a profit of about NIS 30,000. In 2001, the Supreme Court said Rosenblum should serve a suspended prison term of four months and fined him NIS 40,000 (instead of the NIS 3,000 the District Court imposed).

For those in the media or the public eye, even when there is no suspicion of criminality, the matter of ethics arises.

During the noon hours of July 12, 2006, hours after Israel Defense Forces soldiers Ehud Goldwasser and Eldad Regev were abducted and hours before the Second Lebanon War broke out, the then chief of staff, Dan Halutz, ordered his share portfolio, worth NIS 120,000, to be sold. Naturally, during the first days of the war, prices dropped sharply.

The Israel Security Authority stressed, at the time, there was no violation of the Securities Law in what Halutz had done. Halutz knew nothing about the deepest secrets of what was going on in any public company, and therefore the information he had did not meet the definition of inside information.

But a public storm raged. MK Silvan Shalom (Likud) proposed a law that was immediately dubbed "the Halutz law." It said those holding public office like the president of the country, Knesset members, cabinet ministers and the governor of the Bank of Israel would be obligated to transfer their share holdings to a blind trust within 60 days of taking office. However, in July 2007 the coalition knocked the proposal down. Shalom said that before the vote MKs contacted him and asked him to remove legislators from the list of those to whom the law would apply. When he refused, he said, they decided to scrap the law - a disgrace, he says, because "MKs preferred personal consideration to the public good."

Paragraph 16-B of the Israel Press Council's ethics code relates to the issue, stating that a journalist or a media organization will not make illegitimate use of information that has come into its hands during the course of its work.

A prior version of the code was more detailed and specific.

Media researcher Professor Yehiel Limor explains: "Without relating to the specifics of the case, a journalist who uses information that has come to him for purposes of his work to advance interests that do not concern his work, prima facie, violates the code of ethics. In one of the earlier versions of the code it was explicitly stated that a journalist who is an economic reporter cannot manage investment portfolios. That's because he knows what is going to happen and he has, in effect, inside information."

But journalists are human beings. Is someone who knows something that hasn't been published and tells someone else ethically in the wrong? The question, says Limor, is for what purpose? "If no use is made apart from passing along the information, there is nothing wrong with it. "The question is for what purpose this information was transmitted and to whom?"

Another veteran journalist says [using] discreet information in an area in which a journalist specializes is a crude exploitation of your status as a journalist. "It crosses the line."

Where does the line run? Is an item soon to be published all right?

"There isn't disclosure of inside information here, because it's a matter of a person who might hear a report that in a short while everyone will have heard. A journalist who makes personal use of information that has come to him is a scoundrel, and in journalism there are scoundrels just like there are everywhere else," says a senior journalist, "and this is with no connection to Ya'akov Eilon's story.

There are scoundrels in every professional group. If information that could influence economic behavior is passed along, that's illegitimate, but in this case a criminal was caught who made a sting of hundreds of millions of dollars and his lawyer is trying to grab headlines for himself and distract attention from what his client did."