BoI seen demanding clarifications from Arison

Shari Arison  photo: Yossi Zeliger

Being questioned under caution in the Shikun & Binui bribery affair could put Shari Arison's bank control permit in jeopardy.

If it should turn out that they had any part in the bribery affair that has embroiled Shikun & Binui Holdings Ltd. (TASE: SKBN) and their investigation goes deeper, Shari Arison, controlling shareholder in Bank Hapoalim (TASE: POLI) and her right hand Efrat Peled, who serves both as CEO of Arison Investments and as a director of the bank, are liable to feel the consequences of the affair in that connection as well.

Arison, who until recently controlled Shikun & Binui, was questioned yesterday at the offices of the Israel Police Lahav 433 division in connection with the alleged bribery of a foreign public servant and other offences by the company that carries out construction projects in Israel and around the world.

Arison Investments said in a statement, "Shari Arison and Efrat Peled were summoned in advance to the offices of Lahav 433. They cooperated fully and are certain that their conduct was blameless and that that will also be the conclusion of the enforcement agencies. Arison Investments has zero tolerance for any improper conduct."

It may be, however, that the investigation will have further consequences. This is because anyone who applies for a permit to control a bank has to undergo a fit and proper person check. Among the criteria in this check is whether the person has a criminal conviction, or has been indicted, or been the subject of a criminal investigation, or had material negative findings against them in legal proceedings or in an audit, or been the subject of many complaints that were found to be justified, and so on.

The criteria for someone who seeks to hold the means of control of a bank also stipulate that the Bank of Israel should consider "personal and business honesty and uprightness" as one of the four main matters to be considered in this context.

This means that the very fact of an investigation concerning honesty, certainly one under caution, requires an in-depth review by the regulator - in this case, the Bank of Israel - the more so since the offence in question is bribery.

"Questioning under caution in an affair concerning bribery of a public servant would impede the grant of a control permit," a source involved in the fit and proper person process says. Arison and Peled, however, who have only been questioned once and concerning whom it is not known whether they had any part in the matter that is the subject of the investigation, received the permits from the regulator long ago.

"In this respect there is a huge difference between someone applying for a permit and someone who already holds one. It requires something much more substantial to remove someone who holds a permit," and "the mere fact of being questioned under caution does not by itself represent a trigger for removal," the source adds. What could prove bad news for someone holding a permit is an indictment on serious charges, which would be "a completely different story."

In this respect, the fact that neither Arison nor Peled has a management role in the bank will help them if the investigation picture worsens from their point of view, which is by no means certain to happen. This is because the fact that it is difficult to operate day-to-day while under police investigation is less relevant in their case than it would be for someone in management.

The Bank of Israel is believed to be monitoring developments and it will presumably ask for clarifications. The Bank of Israel declined to comment today. It may be recalled that, in very different circumstances, a chairman of Bank Hapoalim, Danny Dankner, was removed at the behest of the Bank of Israel.

Arison currently holds a little over 20% of Bank Hapoalim, which has a market cap of NIS 33.7 billion. She has been seeking a buyer for her stake in the bank for some time. Arison recently sold control of Shikun & Binui to Naty Saidoff. At any rate, the investigation of Arison and Peled is still at a very early stage and has no certain significance. Even the order forbidding them to leave the country is routine in such cases, certainly at the initial stage.

Published by Globes [online], Israel business news - www.globes-online.com - on August 13, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

Shari Arison  photo: Yossi Zeliger
Shari Arison photo: Yossi Zeliger
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