The Supreme Court today overturned a lower court ruling and convicted all the accused in the Discount Investment Corporation (TASE: DISI) affair: the company and former executives CEO Dov Tadmor, legal counsel Shlomo Cohen, and CFO Yosef Book. The conviction came more than five years after they were acquitted.
The panel of Supreme Court Judges, Ayala Procaccia, Selim Joubran, and David Cheshin, convicted Discount Investment and its former executives on 18 counts of filing reports with the intent to mislead a reasonable investor. The ruling upheld the conviction by Tel Aviv Magistrates Court Judge David Rosen, which was overturned by a panel of Tel Aviv District Court judges under Dvora Berliner.
The indictment charges the defendants with aggravated fraud by concealing the financial reports of private companies affiliated with Discount Investment, which the company should have included in its consolidated financial report. By not notifying the Tel Aviv Stock Exchange (TASE) about the reports, the company concealed them from investors.
Discount Investment is a holding company subsidiary of IDB Holding Corp. Ltd. (TASE:IDBH), controlled by chairman and CEO Nochi Dankner.
In the early 1990s, Discount Investment and its executives submitted to the TASE and Registrar of Companies 18 financial reports, from the annual report for 1990 through the report for the first quarter of 1995, without appending the financial reports of three private subsidiaries (in which the company owned more than 25%): Iscar Ltd., Tefron Ltd. (Bulletin Board: TFRFF; TASE:TFR), and Lehavim Ltd. Discount Investment was required to include these companies' financials by law.
Not only were these financial reports not included, Discount Investment and its executives falsely presented the company's status, by sending the financials of the three companies only to the Israel Securities Authority.
The indictment filed with the Tel Aviv Magistrates Court in 1999 charged the defendants of misleading investors by colluding in concealing the financial reports. The prosecutor claimed that the defendants provided investors with only partial financial statements, which were liable to mislead a reasonable investor. In 2002, Judge Rosen convicted the defendants, ruling that they colluded in the concealment.
However, in November 2004, in a ruling the sent shock waves through the capital market, the Tel Aviv District Court overturned the Magistrates Court ruling in the appeal filed by Tadmor and his co-defendants, and cleared them of all charges. Judges Berliner, Zeev Hammer, and Judith Shitzer, ruled that all the statute of limitations applied to all the violations in the financial reports submitted before August 1993, and they accepted the defendants' claims concerning the eight financial reports submitted afterwards.
Judge Berliner ruled that the defendants did not avoid appending the financial reports in order to conceal them or to mislead the reasonable investor. The state appealed against the ruling to the Supreme Court, which today overturned Berliner's ruling.
Published by Globes [online], Israel business news - www.globes-online.com - on February 21, 2010
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