The CEO's New Jeep

The banks would have found it worthwhile to prevent the collapse of Clubmarket. They would have agreed to reschedule debts and increase the Boroviches' line of credit, if only the latter had dug into their own pockets.

If Dedi Borovich, Tammy Mozes and Yossi Rosen had known what was in store for them, they would have behaved very differently. They did not understand that not only would they lose Clubmarket, but that all their other businesses would suffer from the affair. The moment their good names were sullied, they became free game and everyone began pelting them with stones. A person's reputation is everything.

At first, it was the bankers who felt swindled. They declared to the media that they had learned their lesson, and if the Boroviches were to approach them for credit for their other businesses, they would be given the cold shoulder - something that happened far sooner than expected. Granite Hacarmel, one of the Boroviches' companies, announced yesterday that it was withdrawing from the tender to purchase Nitzba Assets. Granite's executives realized that the banks would not give them credit to make the deal.

The Boroviches have lost Clubmarket. The chain is no longer theirs. Their investment in it has been wiped out. Now the chain belongs to the creditors - but that is only part of the damage. This week a motion for a NIS 10 million class-action suit was filed on behalf of the holders of the gift vouchers Clubmarket issued. Suppliers are also organizing to file personal suits against the Boroviches.

The court-appointed trustee is considering forming a special team to examine claims of irregularities in the chain's finances. There are calls for checking whether Clubmarket's owners received overblown management fees and whether they withdrew some of the loans they had given the chain when it was foundering - even back in May 2004, the company's accountants attached a "going concern" warning to Clubmarket's financial reports.

As if that were not enough, Rony Elroy of Isal Investments is now rethinking his planned purchase of New Pharm from the Boroviches. New Pharm is a Clubmarket sister company, and Elroy is attempting to take advantage of the situation to lower the price.

Then there were the sharp words hurled by Osem CEO Dan Propper against Borovich and Rosen, that the "business community not only denounce, but must also eject this filth from its midst - this is an act by ordinary market hustlers," and there is also no ignoring the unprecedented suggestion by American Israeli Paper Mills CEO Yaki Yerushalmi to instigate a boycott by businessmen, who would cease to buy goods and services from Sonol, Tambour and El Al.

In light of all this, it is clear that the manner in which the Boroviches handled the crisis was one enormous mistake. They should not have deceived the suppliers, or said that the company was strong and that all the rumors originated with jealous competitors. They should have told the banks the truth and built a recovery plan with them that would have prevented their appeal to the courts.

The banks would have found it worthwhile to prevent the collapse. They would have agreed to reschedule debts and increase the Boroviches' line of credit, if only the latter had dug into their own pockets. This would have been a far lower price than they are paying now. If the banks were standing by them, they could also have recruited the big suppliers and agreed upon a recovery plan.

After all, the suppliers also understand that cooperation is better than losing the whole debt. These steps would have made it possible for Clubmarket to continue operating as a going concern with a value much higher than its present worth, and later on it would have been possible to find a buyer - but now that scenario is only a fantasy, as proven by one small incident that reveals much about Clubmarket's management culture. Just a few months ago, when the chain was already hemorrhaging and the junior employees' wages were cut - CEO Yaakov Ginsburg bought a fancy jeep for about NIS 400,000. True, it is not the monthly lease payments that brought down the chain, but it is a clear symptom of poor, squandrous management that alienates the bosses from the workers and lowers the latter's motivation. Anyone who tries to tread on the workers on his way up is bound to fall down.