Few people know it, but Omri Padan, known as the owner of MacDonald’s Israel, the largest MacDonald’s franchisee in the world, has a Ph.D. in economics. Among other things, Padan owns a five-and-a-half room apartment Kashimi Street in Ramat Aviv Gimmel. A lawsuit recently filed against him by a senior diplomat at the Korean Embassy in Israel, who resides in the apartment, claims that Padan is a financial trickster in the rental business who defrauded both him and the embassy.
Hwang Kyu Han is the First Secretary at the Republic of Korea Embassy in Israel. Before and his wife arrived in Israel, an embassy employee, Lee Tae Hee, signed a lease on their behalf for the apartment in Ramat Aviv Gimmel. The employee obtained the apartment through the real estate agent, Ami Greenberg. The lease was signed for three years, and the rent was set at $2,500 a month, which “coincidentally” was the amount of the reimbursement allocated by the Korean Embassy to a diplomat for renting an apartment.
Lee showed the diplomat a photocopy of a check in the amount of $30,000 that the embassy paid in advance for one year’s rent. He said that Greenberg had received from the embassy an agent’s fee of $2,500. According to the diplomat, he believed that the Embassy employee had done his best and was sure that the terms of the lease were reasonable and normal.
To the diplomat's amazement, “he subsequently discovered that he had been mislead and deceived by Lee and Padan, in that on the date of payment of the rent for the first year, Padan paid Lee a kickback of $18,000.” To explain the payment, Padan and Lee signed a document under which the refund was for the “consent” of the Embassy (which was not a party to the agreement) to undertake the maintenance cost of the apartment.
The diplomat claims that, as a result, he made a survey with real estate brokers in the Ramat Aviv Gimmel area and discovered that the average rent for a similar apartment without parking should be only $1,300 per month. For the $2,500 that he paid, he could have rented a luxury penthouse with a balcony and open view to the sea.
“They inflated the rent”
According to the diplomat, the findings of the review proved that Lee and Padan exploited the fact that he is reimbursed for the rent by the Embassy and “they inflated the rent in order to meet the maximum amount paid by the Embassy and that the ‘difference’ in rent was split between Lee and Padan.” In April 2007, it is alleged, Lee actually visited Israel and deposited NIS 42,000 in Padan’s bank account.
As a result of the findings, the South Korean Ministry of Foreign Affairs conducted a comprehensive investigation, at the conclusion of which Lee was indicted on criminal charges in Korea. Due to his determination in investigating the affair, Hwang Kyu Han says that he was forced to terminate his employment at the embassy, even though he had been promoted to the position of “advisor”. However, since last September, he and his wife are ineligible for reimbursement for the rent, and they are paying the full $2,500. He says that Padan offered to refund him $500 a month from the rent paid in advance and to deduct the same amount from the rent for the third year. According Hwang, Padan admitted in his statement that he paid Lee $18,000.
Through Adv. David Kirshenbaum, Hwang and his wife filed a lawsuit against Padan and the agent Greenberg for NIS 83,000, the difference between the actual rent paid and the “true, correct, and proper” rent for the apartment.
Padan, for his part, see matters completely differently. In his statement of defense filed by Adv. Eli Zohar and Adv. Rakefet Peled of the M. Zeligman law firm, he claims that the claimants' allegations should be directed to the Korean Embassy and government, not against him. As for the matter in question, he says that, as far as he is concerned, a fundamental clause for renting the apartment is that the tenant undertakes the maintenance and repairs of the apartment, including responsibility for natural wear and tear, and that the tenant will not make any demand of him with regard to maintenance during the rental period.
Peled says that while the rent would be $2,500 per month, $300 of this amount is for local land tax (arnona), water, the building committee fee (vaad), so the actual rent was $2,200. Since Padan demand that the embassy maintain the apartment, he agreed to pay it $500 a month, for an aggregate of $18,000 for the three years.
A refurbished and elegant apartment
Padan claims that the diplomat “forgot” to state in his claim that Padan personally notified them about the $18,000 refund sent to the embassy, and that they thanked him for disclosing these arrangements to them. The fact that they are making claims about the amount of rent and the refund only after they ceased to serve as representatives of the embassy proves, according to Padan, that the claims are unfounded. These facts, says Padan, indicate that the issue is not a dispute between him and Hwang, but “an internal Korean affair between the claimants and the Korean Embassy and its representative, Lee Tae Hee.
Padan says that he expects to receive for a renting a “refurbished and elegant” apartment about $1,800 a month, “which is the normal rent for luxury apartments of this kind in the area”. In other words, in practice he receives $1,700 after deducting local land tax, the building committee fee, and the refund for maintenance of the apartment. He claims that in the first year, the embassy paid $30,000, but he reimbursed Lee $18,000, so that he was left with $700 a month (after deducting local land taxes).
Only at a meeting with Hwang in March 2007 did Padan learn that the claimant was unaware of the agreement in which the embassy received a refund of $18,000 in order to undertake maintenance of the rented property. Padan showed him a copy of the agreement with Lee and the diplomat said the he understood that Padan was a “good guy”, and that he had been deceived by Lee.
A few days after the meeting, Lee arrived in Israel and asked Padan to shorten the rental period by six months. Padan agreed on the condition that a sub-tenant was found, and Lee repaid him $9,000 for maintenance of the rented property during the shortened period (a multiple of the remaining $18,000 rent at $500 a month). Since Padan understood that the $18,000 that he had given Lee had never reached the embassy, he demanded and received an additional $9,000, which he transferred to the embassy.
Last month, Padan filed a countersuit in the amount of NIS 250,000 against Hwang and his wife, in which he sued for compensation for slander against him in the context of the first lawsuit, and demanded their removal from the rented property because they continued to reside in it even though they had no rental lease with him.
Hwang says in his statement of defense that Padan and the real estate agent Greenberg had filed the countersuit and that they made in it claims that contradict the written documents. “In order to create damages where none exist, they invented baseless legal excuses and imaginary damages.” They say that the lawsuit is baseless and false, and they therefore want to find Padan liable for exemplary costs. The pre-trial on the case has been postponed to May 15, and the case has been transferred for review of a possible settlement.
Published by Globes [online], Israel business news - www.globes-online.com - on March 30, 2008
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