When the embezzlement scandal at Harel Investment House Ltd. emerged six weeks back, it transpired within a few days that the damage was extensive and that it threatened the investment house's stability. Harel's sister company Harel Insurance Investments Ltd. (TASE: HARL) immediately provided it with a NIS 125 million capital injection It has now emerged from the former's first quarter report that the loss amounted to NIS 8.3 million.
The embezzlement at Harel amounted to NIS 123 million, and so far Harel has retrieved NIS 12 million of the stolen funds. After factoring in reinsurance (less the excess), the foreclosing on the NIS 1 million in severance pay of former CFO Guy Vaisman who has been charged with embezzlement, and a NIS 5 million tax effect, the company recorded, as mentioned above, a loss of NIS 8.3 million in its accounts.
Harel Insurance CEO Moti Rosen said, "I think that we have demonstrated how a large entity can cope with embezzlement. I hate to think how we would have handled an embezzlement like this if we were small. It could have finished us off. There can be no doubting that we are now paying much closer attention in all the company's divisions. You're only allowed to get it wrong once."
Six weeks on, Harel's reports show that things are back to normal and that profits have soared, as have those of its peers. Harel ended the first quarter of 2007 with a net profit of NIS 381.2 million, while its shareholder's equity stood at NIS 2.85 billion. Excluding a one-time profit of NIS 46 million on the sale of the group's holdings in Israel Credit Cards-Cal Ltd., the company's pretax profit rose 25.7%, in comparison with the first quarter of 2006, to NIS 233.6 million.
Published by Globes [online], Israel business news - www.globes.co.il - on May 31, 2007
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