This morning, Israel Police and the Israel Securities Authority (ISA) investigators detained four former senior managers at Frutarom for questioning. The four are suspected of having paid bribes to public servants in Ukraine and Russia. They are being questioned at the Israel Police Lahav 433 fraud unit.
Food flavorings and specialist ingredients company Frutarom was acquired in 2018 by US company IFF. Following the acquisition, IFF carried out an internal audit that raised suspicions against the senior managers.
The four are also suspected of false accounting. The ISA is involved in the investigation because Frutarom was a public company at the time that the offenses allegedly took place, before it was acquired by IFF. IFF (International Flavors and Fragrances Inc.) is itself now listed on the Tel Aviv Stock Exchange as well as on the New York Stock Exchange.
In August 2019, IFF reported in its second quarter financials that it had discovered in the course of the merger with Frutarom, which was completed in October 2019, that improper payments had been made to Frutarom customers in Russia and Ukraine. It said that initial findings from an investigation by external firms of auditors and lawyers indicated that key personnel in Frutarom's senior management were aware of these payments. IFF stated that there was no indication that these payments were in any way connected to the US.
The former Frutarom managers have hired the services of Adv. Aaron Michaeli of Goldfarb Seligman & Co.
IFF bought Frutarom for $6.5 billion in May 2018. Frutarom's CEO at the time, and the person who brought it to the successful sale, Ori Yehudai, received a bonus of $20 million as part of the deal, and sold shares to the tune of some NIS 250 million. Yehudai, who led a strategy of growth through acquisitions at Frutarom, received the huge bonus despite the fact that a meeting of Frutarom minority shareholders convened to discuss the matter did not approve the offer.
Published by Globes, Israel business news - en.globes.co.il - on June 3, 2020
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