Computer giant IBM has filed a NIS 185 million counter lawsuit against Israel Chemicals (TASE: ICL: NYSE: ICL). Israel Chemicals filed a NIS 1.1 billion ($300 million) lawsuit against IMB early last December.
ICL decided in 2016 to terminate the harmonization project led by IBM and reported a $282 million one-time write-off for it in the third quarter of that year.
In its claim, ICL accused IBM of failing in each stage of the project. ICL says that as a result, the system that IBM gave to ICL for testing in April 2016 was unstable, unintegrated, and non-functional.
"IBM proposed putting into use a clearly unready system that would endanger the company and put it at risk of a real crash. This created a crisis of confidence between the parties. Israel Chemicals lost confidence in IBM's ability to apply the system at all within the stipulated period of time within a sustainable budget," Israel Chemicals wrote in its statement of claim.
IBM has now filed a statement of defense and a counter-claim alleging that Israel Chemicals' statement of claim "clearly shows that the project was discontinued for reasons not involving IBM, the quality of the project, or the quality of IBM's work. The documents indicate that the project was called off because of Israel Chemicals' situation and the change that took place in the economy. Israel Chemicals' board of directors hurried to terminate the project, although there was no objective urgency to do so. The various alternatives could have been examined, and IBM could have been consulted about them."
IBM says that Israel Chemicals' primary aim was to save money. "The decision to terminate the project was taken hastily due to irrelevant considerations, in bad faith, and in an unacceptable way. Israel Chemicals could have at least asked IBM before canceling the project, consulted with it, and examined possible alternatives for continuing the project together with IBM."
Israel Chemicals decided on the harmonization project in 2012, shortly after Stefan Borgas became the company's CEO. Borgas left the company in 2016 and was replaced by Asher Grinbaum, who served as acting CEO until May 2018. One of Grinbaum's first decisions was to halt the harmonization project, while at the same time ending the company's potash mining project in Ethiopia, for which Israel Chemicals posted a $484 million one-time write-off in the third quarter of 2016.
IBM further alleges that following the termination of the harmonization project, "Israel Chemicals did not pay many invoices sent to it. IBM and Israel Chemicals held meetings on the subject and tried to reach agreement on the amounts to be paid, but Israel Chemicals evaded paying the remaining invoices."
The two parties entered an arbitration proceeding managed by Judge (ret.) Amiram Benyamini, but IBM alleges that Israel Chemicals suddenly halted the procedure and quickly filed a lawsuit.
Israel Chemicals said in response, "We completely deny the allegations and put our trust in the court."
Published by Globes, Israel business news - en.globes.co.il - on March 5, 2019
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