The Israel Securities Authority today sent to the Prosecutor for Taxes and Economics the investigative material against former Delek Real Estate Ltd. (TASE: DLKR CEO Ilik Rozanski. He is suspected of submitting a misleading prospectus and financial reports, fraud, and other violations of the criminal code.
The Securities Authority says that the focus of the investigation at Delek Real Estate is on, among other things, the purchase and management of income-producing real estate in several countries through subsidiaries Delek Belron International Ltd. (TASE:DLKI.B1) and Delek Global Real Estate Ltd. Delek Belron owns British motorway services company Roadchef, and also has real estate activity in Israel.
The Securities Authority found that Rozanski, who served as Delek Real Estate's CEO until July 2009, acted to change the accounting classification of Roadchef in Delek Real Estate's books in order to avoid making a NIS 125 million reduction in value in its annual financial report. For this purpose, the Securities Authority claims that Rozanski signed management documents with a third party, which made the accounting reclassification possible.
The investigation was opened in December 2009, a few months before Rozanski left the company. The investigation found that, as part of this agreement, no real transfer of management or risk was actually made by Delek Real Estate to the third party as required by accounting standards. The investigation also found that in order to prevent the write-down, Delek Real Estate and Rozanski misled the Securities Authority and the company's auditor and created false presentations about the management agreement.
The Securities Authority also claims that, in November 2008, amid the global economic crisis and Delek Real Estate's many liabilities and cash flow problems, the company put Roadchef up for sale. The investigation found that, in order to prevent a write-down of Roadchef's value in the financial report, Rozanski falsely told the auditor that one of the bids that Delek Real Estate received for the UK company reflected the expected sale price, albeit only as a preliminary, non-binding offer. Rozanski was involved in this offer, and it was quickly dropped from the agenda.
The Securities Authority claims that the price tag that Rozanski set for Roadchef resulted in a valuation in Delek Real Estate's books that was ₤50 million higher than Roadchef's real value. In a presentation, Rozanski also falsely presented the company's expected cash flow, a critical factor for Delek Real Estate's ability to meet its commitments.
The Securities Authority investigation found that Rozanski acted to raise the value at which it booked the value of British car parks held through a subsidiary of Delek Global Real Estate, National Car Park Ltd., at several hundred million shekels more than their real value, in a deliberate attempt to prevent a large reduction in value in Delek Real Estate's financial report for 2008, greatly affecting the financial report.
The Securities Authority says that, as was the case with Roadchef, Rozanski created a false presentation about a serious offer for National Car Park. The investigation found that there was never any offer for the company, and that Rozanski wrote the offer and the price.
The Securities Authority says that Rozanski gave false statements about the replacement of National Car Park's assessor, and that the real reason for the replacement was to conceal from the auditor and new assessor the low valuation given by the previous assessor.
Rozanski said in response, "The Securities Authority has carried out its duty in the best possible manner and with my full cooperation in discovering the truth and the facts. Regrettably, the findings of the investigation and the facts raised by the Securities Authority's allegations and announcement are unacceptable to me and are incorrect. I am sure that after the prosecutor examines the case, the conclusions will lead to the truth and the closing of the case."
Yitzhak Tshuva owns 50.7% of Delek Real Estate. The company's share price fell 2.8% today to NIS 1.72, giving a market cap of NIS 535 million.
Published by Globes [online], Israel business news - www.globes-online.com - on August 29, 2010
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