The Supreme Court has upheld the verdict in the case of bond price manipulation at Psagot Investment House Ltd., but has reduced the sentences passed on former Psagot managers David Edry and Shai Ben-David. The court thus partially accepted the appeals by the pair. Edry's prison sentence is reduced from 54 months to 42 months, while the sentence on Ben-David is reduced from 40 months to 22 months. The rest of the sentences remains in force, including fines of NIS 4.5 million for Edry and NIS 1.75 million for Ben-David. The original sentences imposed by the Tel Aviv District Court were unprecedented in Israel for securities fraud.
Twelve years after the events in question took place, the Supreme Court's decision brings to an end an affair that shook the Israeli capital market. The judges did offer Edry and Ben-David a compromise whereby they would withdraw their appeals against the verdicts in exchange for a reduction in their sentences, but the two insisted on claiming their innocence.
The investigation into the affair began in 2010. The Israel Securities Authority investigated the suspicion that serious securities fraud by senior managers and more junior managers at Psagot, Israel's largest investment house, had taken place in September 2007. Psagot's CEO at the time, Roy Vermus, and Psagot Securities manager Shay Yaron were among those questioned.
In the end, the case against Yaron was closed, and Vermus escaped criminal indictment thanks to a settlement reached with the prosecution. Two less senior figures, Edry and Ben-David, were tried and convicted in December 2016 of having worked jointly to influence the price of government bonds in advance of a swap auction by the Ministry of Finance in September 2007 and of associated offences. At the time of the events, Edry was VP Brokerage at Psagot and managed the firm's nostro account. Ben-David was manager of the brokerage trading room.
Edry and Ben-David were also convicted on a charge of having carried out large deals with the aim of boosting the price of bonds issue by Delek Real Estate, after agreeing with Delek Real Estate CEO Hillel Rozanski that he would buy the bonds at more than the market price.
Edry was also convicted on a count of committing fraud and breach of trust against Psagot itself. He bought bonds on his own account, and then carried out very large deals in those bonds through Psagot. After their prices rose, he first sold the bonds he held in his personal account, at a substantial profit, and only then, after the prices fell again, sold the bonds in the Psagot nostro account.
In their appeal to the Supreme Court filed in July 2017, Edry and Ben-David sought to overturn both the sentences and the verdicts. The two men claimed that they were innocent of wrongdoing, and that there was no case against them or against Vermus and Yaron, but that the decision to indict only them amounted to selective enforcement, and that justice therefore demanded that they should be cleared.
Published by Globes, Israel business news - en.globes.co.il - on July 16, 2019
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