Last month, the State Prosecutor closed the file against former Poalim Capital Markets - Investment Bank Ltd. CEO Nir Brunstein, almost four years after the investigation against him was initiated. The Israel Securities Authority arrested Brunstein in February 2009 on suspicion of passing insider information to TASE securities trader Ofer Eisenberg.
Despite the long investigation, which included which employees at investment houses' dealing rooms were questioned, prosecutors decided against indicting Brunstein. It is important to remember this case today, when the Securities Authority is investigating IDB Holding Corp. Ltd. (TASE:IDBH) chairman Nochi Dankner - not every offense suspected by the Securities Authority ends in a trial and conviction.
Nonetheless, the fact that the Securities Authority is carrying out an investigation at all is a serious blow to Dankner's image. He strove, with a large degree of success, to keep his reputation as a fair businessman, even as the troubles which jeopardize his control of IDB worsened over the past year.
In the present crisis, Dankner appeared as the man who took responsibility for his failures, which pushed IDB into its troubled shape. He initiated financial measures to rehabilitate the company; the equity issue that is the subject of the Securities Authority investigation was one of main measures taken. The objective was to rescue IDB without a debt settlement and its related heavy losses to investors.
The investigation and suspicions target Dankner personally, but disclosure of the investigation sent IDB's share price tumbling. There ought to be no connection between the two things, since the investigation is targeting Dankner, not IDB. But the possible legal problems of IDB's controlling shareholder at this time are bad news for the company, which is in the midst of two acts that will affect its financial shape and ability to service its debt.
The first is increasing the stake of Eduardo Elsztain in Ganden Holdings Ltd., through which Dankner controls IDB. The second is the negotiations with US private equity fund KKR & Co. LP (NYSE: KKR) for a loan of hundreds of millions of shekels to IDB. If the investigation of Dankner torpedoes either of these deals, IDB will have to come up with an especially creative solution to pay its debts next year.
Published by Globes [online], Israel business news - www.globes-online.com - on November 27, 2012
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