Sources inform “Globes” that several of Israel’s largest banks recently hired external consultants to examine the legal aspects of The First International Bank of Israel’s behavior. First International headed the consortium that granted Gad Zeevi credit to buy his Bezeq shares.
First International still heads the consortium formed in October 1999, composed of Bank Hapoalim, Bank Leumi, Israel Discount Bank, United Mizrahi Bank, Mercantile Discount Bank, Union Bank of Israel, and First International.
Sources inform “Globes” that at least two of the major banks have hired external lawyers, who are working in cooperation with the banks’ own legal departments in examining the affair.
The banks’ investigations are being conducted independently, and are not being coordinated. The investigations were spurred by reports of police evidence that the First International managers, including then CEO and current chairman Shlomo Piotrkowsky, were aware that Zeevi’s financing for the deal came from Israeli-Russian businessman Mikhail (Misha) Chernoy.
The other banks in the consortium say they were totally unaware of these rumors. Piotrkowsky confirmed this in his police interrogation, when he said that he did not inform anyone else, after checking the information, and finding that it was incorrect.
The banks have not yet completed their legal investigation, or decided on further steps in the affair. Senior banking sources told “Globes” that if they found prima facie evidence of improper behavior by First International, they would consider taking action, either separately or in concert.
”Globes” reported several weeks ago that the other banks might file a lawsuit against First International. The source said, however, that it was too early to comment on this possibility, which would be considered only after the external legal consultants made their recommendations, if at all.
In 1999, the banking consortium granted Zeevi a $630 million loan to acquire 20% of Bezeq. The collateral consisted of the Bezeq shares, as well as a $150 million deposit in FIBI Switzerland, which gave the consortium a guarantee for that amount.
A few months later, in 2000, the consortium loaned Zeevi another $90 million, with the same security, whose value increased when the Bezeq share rose on the Tel Aviv Stock Exchange.
A year ago, Zeevi failed to make the periodic interest payment on the loan, and the banks foreclosed the guarantee from FIBI Switzerland. Even after the foreclosure, the security was still $100 less than the outstanding loan balance, due to the steep decline in the market price of the Bezeq share.
This gap forced the banks to make an aggregate allowance of over NIS 500 million for their loan. The banks recently began the process of foreclosing the Bezeq shares, and Adv. Alex Hertman was appointed receiver for the companies holding the shares for Zeevi.
Meanwhile a draft indictment for fraud against Zeevi and Chernoy was prepared; the indictment is still contingent on a court hearing.
There have been a number of recent reports of evidence given to the police that parties at First International were aware of the suspicions regarding Zeevi and Chernoy. This has subjected First International to anger on the part of the other banks, which claim they would not have granted Zeevi the additional $90 million loan, had they known of these rumors.
Published by Globes [online] - www.globes.co.il - on December 24, 2002