Scorpio Real Estate: Langotsky hasn't won

"We both missed the opportunity of a lifetime, but the one with a small bank account is trying to recoup from the one with a large bank account."

Geologist Joseph (Yossi) Langotsky and Beny Steinmetz's Scorpio Real Estate Ltd. (TASE: SCRP.B1) are at odds over the significance of the arbitration ruling by Judge Emeritus Boaz Okun on Langotsky's claim against Scorpio concerning rights in the Tamar offshore gas discovery. While it has been stated on Langotsky's behalf that the arbitration procedure has been decided in his favor, sources close to Scorpio say Okun rejected most of Langotsky's claims against Steinmetz.

5% of the drilling rights

Steinmetz and Langotsky jointly owned 5% of the rights in the partnership exploring the Tamar and Dalit fields, which Langotsky initiated, but Steinmetz left the partnership, and as a result, after he failed to find another investor, Langotsky lost his rights too.

After Steinmetz withdrew, Langotsky claimed that his withdrawal from the partnership at a late stage was contrary to the agreements between them, and he turned to the courts. Langotsky also claimed that Steinmetz torpedoed the entry of an alternative partner in his place, and thus aggravated the damage caused to him.

The dispute was brought before emeritus District Court judge Boaz Okun, who gave a 145-page ruling today. Langotsky and his associates argued today that Okun had accepted Langotsky's claim, and that he had found that Scorpio breached its agreements with Langotsky and bore responsibility for the fact that the latter lost his rights in the Tamar discovery. It was also claimed on Langotsky's behalf that the implication of the arbitrator's ruling was that Langotsky would receive NIS 400 million from Scorpio, or 1% of the value of the gas reserve.

On the other hand, sources close to Scorpio say that Okun dismissed most of the claims that Langotsky raised against Scorpio, including the main claim, that Scorpio breached its obligation to finance the joint activity of the parties in Tamar. According to the sources, the only claim put forward by Langotsky that Okun recognized was that Scorpio did not give him sufficient time to find an alternative partner to Steinmetz. They also claim that the damage to Langotsky recognized by the arbitrator was "likely damage" to the prospect of finding alternative finance. They say that the amounts Langotsky mentions are far from correct.

Following the reports on the arbitrator's ruling, Scorpio issued a statement saying that the arbitration procedure had not yet finished, and that the headlines on the matter were therefore completely misleading and did not reflect reality.

"It's a pity that Langotsky chose to publicize half-truths about a long and reasoned interim ruling from the arbitrator. Media spin will not change the substance of the decision, which speaks for itself," the group said, adding "In this interim ruling, not a single shekel has been pronounced as owed by Scorpio, and the reports on this matter are misleading. We will not participate in the media game that Langotsky is trying to create."

Langotsky demanded from Steinmetz compensation for the loss of profits that he would have received from the drillings, of which he said he was the initiator and motivator. In the legal proceedings between him and Steinmetz, Langotsky related how he obtained the exploration licenses from the state, after he approached the state with a revolutionary idea on how to find oil or gas. Later, he claimed, he persuaded British Gas to join the venture, and British Gas brought in Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L) and other players, while Langotsky received 5%.

Since it was necessary to invest money to receive the 5%, Langotsky approached Steinmetz, and agreed with him that he would invest the money in exchange for 4% out of the 5%, and that the division of profits between them would be 80%-20%, in Steinmetz's favor.

According to Langotsky, Steinmetz started to pay, but decided at the last minute to withdraw from the venture, since in October that year (2008) Lehman Brothers collapsed, and he himself got into financial difficulties.

Steinmetz counter-argued that he made a purely business decision that, in hindsight, turned out to have been a mistake. According to him, not only did he withdraw from the partnership lawfully and in accordance with the terms of the agreement, but the fact that he forewent his rights in the drilling without receiving anything in exchange contradicted the idea that he torpedoed the entry of an alternative financier, since he thereby lost all the money he had invested already.

Steinmetz argued that he and Langotsky were in the same boat: both lost the opportunity of their lives, but "the one who lost and has a small bank account seeks to recoup part of the loss from the one who has a larger bank account."

Published by Globes [online], Israel business news - - on December 29, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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