The musician, the doctor, and the oil company

Paz affair
Paz affair

It's 1991. Two young Poles arrive in Israel with suitcases full of dollars and take over strategic fuel company Paz. This is the story of their astonishing rise and dismal fall.

In February 1991, during the waning days of the first Gulf War, a private executive jet landed at Ben Gurion Airport. Inside sat two young Poles. The shorter, stockier of the pair, sporting a two-week-old beard, wore a red T-shirt and pink pants. The other wore jeans and a denim shirt. They exited the terminal wheeling luggage carts laden with heavy suitcases that were vacuum-sealed 11 times over, and containing $46 million in cash.

The greenbacks inside the suitcases were to complete the purchase of a 50% stake in Eltin Finance & Investment , a Dutch holding company owned by the late Australian-Jewish tycoon Jack Liberman, which held 100% of the shares in fuel company Paz Oil (along with control of real estate company Sahar Development & Investments).

Eltin had acquired control of Paz three years earlier from the State of Israel. Liberman's representative in Israel in those days was Zadik Bino, who would be a tycoon himself just a few years later. At the time Liberman purchased the Paz shares from the state, Bino was CEO of Bank Leumi and the chairman of the committee that granted the Australian the credit to make the deal. Four months after retiring from the bank, Bino became Liberman's right-hand man.

The agreement between Liberman, who was in need of cash at the time because of cash flow difficulties in his real estate business, and Pitchfork, the company owned by the Polish duo, stipulated that the two would pay $85 million for 50% of Eltin Finance. $39 million had been transferred in advance, in two payments via bank transfer to a trust, and the remainder was brought by the Poles in cash. The documents accompanying the transfer of the first $39 million state that this was a down payment for "dairies and packaging lines." But it was neither this strange detail, nor the fact that funds were transferred not from Pitchfork but from another company altogether, nor was it the unusual mode of transfer in suitcases that led Liberman to withdraw from the deal. In an arbitration ruling issued in 2005 that dealt with the behind-the-scenes of the affair, arbitrator Ishai Levitt wrote that the Liberman group "…closed its eyes in the light of its need for cash... The fact that the Liberman group ignored the warning signs indicates that it knew or at least suspected it was entering into a deal with a dubious group."

In recent weeks I have talked to some of the main characters who were involved in this affair, most of whom preferred to do so without being quoted. One person who did agree to be interviewed on the record is Andrzej Gasiorowski . We met at his home in Caesarea, on a quiet street inhabited by some of Israel’s wealthiest people. In addition, legal documents from Israel and Poland, including some previously undisclosed to the public, press clippings, and documentary films , also helped me put the various pieces of the puzzle together.

The Paz affair, and the connection to the two Poles, has been covered in the Israeli press over the years. But it seems as though only now, with the perspective afforded by the passage of time, can one really appreciate that this story is the stuff that Hollywood blockbusters are made of. How did Bagsik, a self-taught musician raised in an orphanage, and Gasiorowski, a frustrated doctor who dreamed of a better life, go within a short time from being a pair of ne'er-do-wells to two of Poland’s richest people? How did a small import company established in June 1989, bringing goods from Germany to Poland in a van, become the country’s largest private concern almost overnight? How were they able to purchase a major Israeli concern before the sellers could understand whether the buyers were reputable businessmen or conmen? How did big money affect the relationships between those involved in the affair? And could the fate of the two protagonists of the plot have been any different?

"Shock therapy" creates an opportunity

Our story begins in December 1988, just before the collapse of the Soviet bloc, when Poland was the first Eastern European country to adopt a free economy. On December 23, a series of laws were passed in parliament to privatize government companies and encourage the establishment of commercial businesses. On June 4, 1989, elections were held that marked the end of the communist era in Poland. At the same time, Minister of Finance Leszek Balcerowicz promoted a series of additional laws designed to rehabilitate Poland's economy from years of communism. He initiated a series of dramatic measures that would take effect in January 1990. These included removing price controls, an exchange rate linking the dollar to the zloty, eliminating most industrial subsidies, and facilitating the import of international products into the Polish market. This series of aggressive measures would later be termed "Shock Therapy" by Polish economists. During this interim period, which lasted about two years, chaos reigned in the Polish economy, and was reflected in hyper-inflation: in 1989 it stood at 245% (the jump was recorded in the second half of the year), and peaked in 1990, with an annual inflation rate of 568%. In 1991, inflation stood at 78%.

In early 1989, Boguslaw Bagsik , then 26, heard about the new laws and decided to become an importer. Bagsik had always been considered a brilliant, avant-garde character, prone to melancholy. Ever since his childhood at the orphanage, he yearned for love and respect, and felt being rich would give him both. In his early twenties, he worked as a music teacher and piano tuner at Poland’s Musical Instruments Cooperative. In October 1988, he was convicted for appropriation of funds from his employer amounting to about 92,000 old zlotys (less than $10) and sentenced to two years on probation. After the conviction, in an attempt to turn over a new leaf, and with government incentives for entrepreneurship, he set up a company called Art-B (short for Artistic Business) and began importing foodstuffs from West Germany to Poland.

Bagsik took out loans, bought a van, hitched a trailer to it, and started working. A few months later he suggested to Gasiorowski that he should join him as a partner. The two friends had first met at a summer camp for Baptist evangelical youth that operated discretely in a communist country with Catholic roots. They kept in contact over the years as they had a common hobby: music. Occasionally, they played together at jazz nights where both preferred the piano. Gasiorowski also played the violin.

At that time, Gasiorowski was a 30-year-old gynecologist, married with two children, working at a hospital in his hometown Wa?brzych [Valbrich] for $30 a month. When Bagsik made his offer, Gasiorowski hesitated for a long while, but his charismatic friend managed to convince him, and gave him 40% of the company.

In January 1990, as "Shock Therapy" came into effect, monthly interest rates stood at 36% (these later declined somewhat, but remained very high). Bagsik and Gasiorowski realized they would no longer be able to take out loans to buy goods without going bankrupt. They looked for a solution and realized it would never be found where the problem lay. The optimal way to solve it would be to try to upend the pyramid.

The Oscillator: Turning the pyramid upside-down

Alongside Poland's ambition of creating a liberal economy, was a slow and cumbersome banking system formed over decades of communist rule. This intermediate stage, characterized by a system of laws that encouraged free market competition within the outdated infrastructure, created cracks through which particularly clever types could slip. Bagsik - the mastermind behind the operation - discovered that when he deposited a check issued from another bank, his bank clerk would mail a letter informing the source bank that the check had been deposited, and that said amount should be deducted from that bank's customer account.

The post office in Poland in those days did not work well, to put it mildly, and the letter would take between two and four weeks to arrive. And what would happen in the interim? Well, as long as the amount was not deducted from the source bank, both banks would pay the interest on the same check. From the moment Bagsik discovered how things worked, it didn't take long to launch Phase One of the duo's wealth enhancement program: they rushed to open hundreds of bank accounts all over Poland, wrote checks to other Art-B-owned accounts that, in turn, issued checks to other accounts, and so on, accumulating huge amounts of interest on funds that were not at all in their possession (the checks were for 9-9.9 billion old zlotys, because deposit confirmation of a check above 10 billion zlotys was sent not by mail but via telegraph) .

They called this creative program the oscillator (an electronics term referring to a circuit that generates a cyclical electrical signal), and it was a first step in exploiting the ridiculous amalgamation of new American capitalism and Cold War-era Eastern European bureaucracy. The oscillator has since become legend in Poland, and is widely discussed in the media and academia. A 1991 Newsweek article quoted a senior Polish official as saying: "They speeded up the circulation of money and they system did not keep up with them." According to an economic opinion submitted to a Polish court in October 1991 as part of a lawsuit by several bank officials who allegedly allowed the oscillator to exist in exchange for fringe benefits from the duo, Art-B's net profit from the oscillator was about $10 million. However, according to an Art-B executive, in another lawsuit a few years later, the oscillator generated a profit of about $100 million for the group.

"What amazed me about what they did was that, for the first time, I saw someone overturn the system," says a man who worked for the two in their Polish office 30 years ago. "Nobody messes with the banks and we're used to them being more powerful than us, and here came two young people, and turned the pyramid upside-down, and said 'We are the bank,' and the ones that began paying crazy interest rates were not the customers, but the banks. We're not surprised when the bank gets rich at the customer's expense, but this was the other way around. "

Eventually, the pair were accused of acting against the Polish banking system on a huge scale, as described below, but they claimed to have done nothing that was not legal at the time. After all, they were not to blame for the interest rate given by the banks in Poland, and they were certainly not to blame for one bank taking weeks upon weeks to inform another bank that it should deduct the amount.

All in all, they saw a financial opportunity - arbitrage - through a loophole in the law, and they have no doubt that had things been the other way around, no one would have complained that the bank had used this method to its advantage. By the way, the character witness for the twosome in this regard was the former President of Poland, Lech Walesa, who said in interviews that, although the duo did unpatriotic and immoral acts, at least as far as the oscillator was concerned, they did not break the law.

Selling at a loss for big profits

Next, the Polish duo used the proceeds from the oscillator to acquire a few businesses in Poland. They first came into public view when they purchased from Ursus, the government heavy machinery company that had run into difficulties, all of its tractor products for the year (36,000 in number). "They simply took 160 billion old zlotys [about $17 million - S.A.] out of a bag, and bought the entire annual inventory. We were all shocked," the Polish deputy minister of industry told German magazine Der Spiegel in 1991.

The aid to Ursus led to wide media coverage. Journalists fell in love with them, termed them, "Sons of Balcerowicz", after the Minister of Finance who turned Poland capitalist and in fact enabled them to get rich. The high profile helped them with customers, suppliers, and employees, who became a key pillar in growing the company, which imported products from a variety of countries in Europe, Asia, and Central America. A partial list of products: clothing, milk powder, coffee, tea, juices, meat, raw lumber, furniture, paint, cleaning products, cosmetics, and - topping the list - electronics imported in huge quantities from the Far East.

The relationship with Korean companies - in particular Samsung and Lucky Goldstar (now LG) was a leap forward. But what interested the duo was not the profit margins between the price of televisions and VCRs in their country of origin and the price in Poland, but something else entirely: the terms for financing the deal, in other words, the interest rate differentials between Poland and international markets. And the financing terms were fantastic, because Art-B was able to obtain lines of credit from several international banks which allowed it to pay for goods purchased from Korea 12 months from the date the transaction had been completed.

Art-B purchased electronic products from Korea in dollars and paid for them a year later (plus 7% annual interest). On the other hand, the products themselves were sold immediately in Poland at no profit, and usually even at a loss ("We sold as quickly as possible, we didn’t care about anything, not service, nothing. We weren’t in the business of trade, we were in the business of finance," Gasiorowski states). The goods arrived within a few weeks, were sold in a day or two, and the money received in zlotys was deposited in local bank accounts which, because of inflation, had interest rates of over 80% on annual deposits, and sometimes much higher. After the deposits matured, the duo converted them to dollars (the dollar exchange rate remained constant, in line with government legislation), covered what was owed on the purchase of the goods from a year earlier, and purchased new goods, and so on. Using this model, it was almost impossible not to make huge sums of money.

The empire expands

If the first phase of the program took advantage of unreliable communication between banks to generate double interest gains, , and if the second phase took advantage of the interest rate differentials between Poland and the international markets, then the third phase was intended to expand the empire.

Because Art-B had become such a high-profile company, a good number of Poles wanted to join the party. Bagsik and Gasiorowski found it pointless to have full-time employees. It was not profitable enough. Instead, they decided to make them entrepreneurs working for Art-B. In other words, they distributed franchises.

"We gave them our name, which had a good reputation, and the resources they needed, connections in different countries, lines of credit, etc., and they had to operate their business in all kinds of cities in Poland," Gasiorowski says, talking to "Globes." "We took a 95% share of the subsidiary, and they took 5%. They earned about five or ten times what they earned when they worked in senior government positions under communist rule. That’s how a situation came about in which one company gave birth to another. They brought in connections and more people who worked for us. They made money, and we made money, and we became more and more well-known. Everywhere you went, you’d see an Art-B sign, and then more people wanted to join us. We had 591 companies, which also set up subsidiaries. We had 100,000 people working for us."

According to an economic opinion submitted to a Polish court in October 1991 on behalf of the General Prosecutor, the total turnover of the Art-B Group and its subsidiaries during the two years in which it operated was 221.1 trillion old zlotys (about $22.5 billion).

Even if we view these numbers with healthy skepticism - both the number of companies claimed by Gasiorowski (who is prone to exaggeration, according to people who know him), and the opinion intended to support the prosecution's interest in portraying the extent of the damage Art-B caused to Poland’s banking system - there is no disputing that the duo succeeded in establishing a huge business empire in a short space of time. According to various sources, Art-B had at least 200 subsidiaries in Poland and overseas, with tens of thousands of employees. Still, even if, in large part, Art-B operated on the fact that the law lagged behind a changing economic reality, it soon became clear that some part probably did cross a line, and it would not be long before the duo found themselves hounded by the same law.

The world's first oligarchs

As heads of a large operation, the two young men raised in deprivation now reveled in a life of pleasure. They owned 13 aircraft, including a Canadian-built executive jet, and six Soviet helicopters accepted in deals in lieu of cash, plus dozens of private cars for themselves and their families - they themselves preferred to drive Lincolns and Pontiacs. Pontiac was also the brand of vehicle provided to their senior executives. After all, managing one's personal brand is necessary for growing an empire.

They bought houses for themselves and their families for cash, including an old castle outside Warsaw, where highly-placed personages from local politics and the international business world were treated to fine caviar and vintage wines. Musicians at heart, they surrounded themselves with outrageously expensive musical instruments, and a 250-item art collection that included masterpieces by Picasso, Renoir, and the 19th-century German painter Oswald Achenbach.

In a sense, they complemented each other. The brilliant, impulsive Bagsik had an introverted, immature aspect to his personality, longing for love, along with a harsh, cruel conception of life that railed against authority. Gasiorowski on the other hand was an extroverted, media-loving, tireless talker, who played a critical role in marketing the operation, including spreading rumors that became legends, and made the duo seem almost like cinematic characters. For example, the Polish media often stated that the two were Mossad agents who helped bring Jews from the USSR to Israel, or that they used Soviet helicopters to travel between distant cities in Poland, to deposit their double-interest checks, or that while they drove their luxury vehicles, if the trunk was opened, bills would come flying out.

But alongside the stories, which themselves seem to have been part of the marketing strategy, there is no dispute that the pair, who preceded the more well-known Russian oligarchs, pulled strings in the Eastern European country trying to rebuild itself. They not only made money and spent money on nouveau riche exhibitions of wealth, but also donated millions to the presidential campaign of Lech Walesa, the aforementioned first president of Poland after the fall of the USSR. Bagsik was elected to a political position in his district of residence, in parallel to running his world-wide business, and Gasiorowski decided to run for parliament. They had big plans. But then, the Israelis entered their lives.

The Poles land in Tel Aviv

Quite a few Israelis were circulating in Poland at that time. Relevant to our story is Meir Bar, a Jerusalemite of Polish descent, who met the two at a social event, and decided these were the kind of people he wanted to work with. The three established a company in Israel called Polyco , which served as a local representative of Art-B, with offices in Beit Europa in Tel Aviv. Bar was appointed director of the Israeli office, received a retainer and looked for deals. As legal advisor to the company he hired Jacob Liraz , a lawyer who was previously an advisor to Minister of Energy Moshe Shahal. In 1990, Shahal stepped down as minister, returned to the legal profession in parallel with serving as an MK, and advised Jack Liberman (who, during Shahal's tenure, had purchased a stake in Paz from the State of Israel). Liraz called the former boss and requested a meeting between Liberman and his Polish clients.

The first meeting between the Polish group - Bagsik, Gasiorowski, and Bar - with Jack Liberman and his team took place in January 1991 at the King David Hotel. According to later testimony by Arie Levy , CEO of Paz at the time, who was present at the meeting, the Poles made a very bad impression on him, and at one point he did not believe a word they said. ("This 30-year-old guy told me how he went through the Holocaust?", he testified in the same arbitration before Levitt). After the meeting, Levy shared his concerns but Liberman, who needed money urgently, preferred to continue to meet again with the Poles. Within eight days from the first meeting, there was an oral agreement for a share sale, and on February 13, 1991, the contract was signed.

Half a year would pass before accusations in Poland against the two would erupt, according to which one bank was defrauded of $420 million. But even then, in the winter of 1991, it was clear to Liberman and his confidant and Israel representative Zadik Bino, that they would be subject to criticism for selling a 50% share in a company, one strategically significant to the Israeli economy, to a pair of unknown Poles. They therefore requested letters of recommendation. Adv. Liraz provided the goods and presented two letters of recommendation, from the then-Israeli ambassador to Poland, and from the head of Poland’s central bank . Afterwards, Liberman claimed in a letter to the Knesset that these letters helped in checking the buyers’ credibility before the deal was closed, but he and his people apparently did not notice that the letters of recommendation bore a later date: February 28, 1991.

"It appears that the Liberman group requested the letters of recommendation in retrospect," arbitrator Levitt wrote in 2005. "Probably for fear it would remain without an excuse if asked how it sold a company, that until recently was a government company in a strategic position for the whole country’s security, to a foreign gang of thieves."

Incidentally, another reason that the matter of the letter of recommendation is puzzling is that, two months before it was received, according to a Yedioth Ahronoth investigation at the time, the Israeli embassy in Poland reported to Jerusalem stating of Art-B: "This is a mysterious company turning over millions of dollars. There are questions about this group, and suspicions that its people have ties to the American Mafia or possibly to the CIA."

Meanwhile, the Paz deal also led to great distrust in the corridors of power in Warsaw. "One of my duties was to identify threats from private and foreign capital to the financial system in Poland," read a 1993 affidavit submitted to the Polish parliament by a senior minister in Walesa’s office, Maciej Zalewski . "During the visit of the President of Poland to Israel in May 1991, I met with senior officials at the Israeli Ministry of Defense and Secret Services. One of our areas of interest was Art-B- investments in the Israeli fuel industry, ties to large Israeli banks, and alleged ties to the Mossad and the KGB regarding transport of Russian Jews to Israel, etc."

Escapees seek refuge

At the end of July 1991, the good times ended for Bagsik and Gasiorowski. They heard from a journalist close to Zalewski that they were about to be arrested, and flew quickly to Hanover. In that German industrial city, they watched on television as police and counter-terrorism forces broke into their offices. They also watched as seven senior bankers were arrested on suspicion of receiving from them - Bagsik and Gasiorowski - bribes in exchange for turning a blind eye to their financial activities. For days on end, the news detailed suspicions against the two: defrauding a local bank of $420 million by obtaining credit based on false representation, then emptying the accounts, and, as mentioned, bribing executives in the banking system.

Bagsik, who held an Israeli passport, and owned a house in Kfar Shmaryahu, as well as a handsome share of the Holy Land’s largest fuel company, suggested to his partner that they should fly their private plane to Israel. Ever since the Menachem Begin era, the country was known for not rushing to extradite its citizens. Gasiorowski agreed, and on August 4, the two landed with their families at Ben Gurion Airport. They were sure matters would be resolved within a few days. A year and a half after arriving in Israel, Gasiorowski received citizenship on the basis that his mother was Jewish.

But law enforcement in Warsaw, reinforced by the Polish media, continued to deliberate about the duo that had fled the law. The Polish prosecutor's office initially filed an indictment only against Bagsik but later attached Gasiorowski. The Warsaw Ministry of Justice requested that they should be extradited. The Israelis did not agree to do so. The two Poles sat and waited on developments. At the same time, Art-B was expropriated in favor of the bank from which $420 million was allegedly stolen, and a Polish liquidator was appointed to collect on their debts and locate assets to cover the debts. As Bagsik and Gasiorowski were in Israel, the Polish liquidator hired an Israeli lawyer, Eliyahu Miron , who filed a lawsuit against the two.

Under the table: $17 million

The commotion in Poland caused a stir within the Liberman team. Not only did the problem of their partner’s reputation bother them, but they feared that the Polish liquidator would demand the value of the shares, or would become a partner in Paz, instead of the two Poles. Although Bagsik and Gasiorowski held 50% of Paz, they did not participate actively in the company’s management, and had not even appointed a director on their behalf. It was clear to Liberman and Bino that if the duo’s shares were transferred to the liquidator, the Liberman family would lose its total control of the company.

Bagsik and Gasiorowski, too, feared foreclosure on their shares, and thought it better at this time to hold cash rather than shares of a giant company. They decided to arm themselves with veteran attorney Dan Avi-Isaac , to bolster their legal team. Under Avi-Isaac’s direction, they negotiated the sale of the shares to Gad Zeevi, who had previously held 25% of Paz, but eventually sold the stake back to the Liberman group for about $80 million. At the same time, they signed a settlement with the liquidator. It was agreed that their total debt to Art-B, which was now being liquidated, was about $100 million, and that they would immediately pay $80 million received from the Liberman Group for their shares.

But in 1996, two years after the settlement was signed, it turned out that the Liberman group had not only paid the Poles $80 million, but also an additional $17 million, under the table, that is, without the liquidator’s knowledge. This amount was paid in secret so that the liquidator would not impose a foreclosure. Most of the amount ($14.7 million) was transferred, by order of Zadik Bino, from a company called Off-Shore Galactic to a trust company in the tax haven of Jersey. From there the money was secretly transferred to the Swiss bank accounts of two Irish companies set up by Bagsik.

The amount received under the table caused a dispute between the group members as soon as it was received in 1994. Bagsik, whose family had broken up and who was now in love with an Israeli woman, wanted to take the lion’s share of the money. Gasiorowski did not like this. Meir Bar, who would later go bankrupt, also demanded his share.

Then something happened that physically separated the team members. Bagsik traveled to Switzerland to handle his secret bank accounts, although an Interpol arrest warrant was still pending against him. Avi-Isaac, his lawyer, advised him not to go, but Bagsik’s impulsive nature got the better of him. He was arrested at the airport, and sat in detention near Zurich until his extradition to Poland two years later.

In January 1996, two years after Bagsik’s arrest, Gasiorowski and Bar decided to look out for themselves. They turned to Eliyahu Miron and offered to tell him about assets that they - the members of the Polish group - had hidden from him over the years. In return, they demanded 50% of the value of each asset that they would reveal to him, less fees and expenses. Miron agreed, and signed an agreement with them in his office on January 2, 1996, creatively termed "The Informants Agreement". This was how he learned about the $17 million, as well as an additional $16 million that came to the group members from a number of secret partners in Europe. The informants also revealed to him seven bank accounts holding funds in Geneva, Zurich and London.

$27.7m in legal fees for an Israeli attorney

The discovery that $17 million had been transferred secretly from the Liberman group to the Poles led to the long arbitration with retired judge Levitt, during which time Eliyahu Miron died and was replaced by his son, Itzchak . In 2005, Levitt published a partial ruling that dealt with a number of issues, including an under-the-table payment transferred to the Poles. He ruled that the Liberman group concealed the payment from the liquidator. Zadik Bino, the controlling shareholder in Paz and First International Bank of Israel (FIBI) by the time of the arbitration ruling was issued, was severely criticized in the ruling, and filed a motion that it should be voided, claiming a conflict of interest, as in the past Levitt’s family had negotiated unsuccessfully with Paz over land it owned, and that the ruling was essentially revenge for the failure of that negotiation. The Haifa District Court accepted the claim, shocking the legal world.

Levitt's career was badly damaged, but three years later the Supreme Court reversed the decision and upheld the arbitration ruling. Therefore, even before a new arbitrator was appointed to deal with the question of whether 50% of Eltin's shares belong to the liquidator, the Liberman Group and the liquidator reached a compromise in 2014, whereby it was agreed that the Liberman Group would pay $67 million into the liquidation fund, and wind up the matter.

The legal saga of Art-B, the Liberman group and the Poles - along with its ancillary legal dramas - lasted two and a half decades, and provided a livelihood to many lawyers in Poland and Israel. The Polish liquidator filed about 700 lawsuits, and managed to get hold of about $300 million belonging to Art-B, including eight planes, 76 tractors, 106 cars, 79 real estate assets, cash, and 220 works of art, including pieces by Renoir and Picasso. Among the many Israeli lawyers involved in this case, there is no doubt that the law firm of Miron, Bension & Prywes - which represented the Polish liquidator - earned the highest amounts, and by a considerable margin.

According to legal documents from the 2014 bankruptcy case of Meir Bar, who had meanwhile quarreled with Gasiorowski, it appears that Miron's firm received legal fees of $20.8 million over the years. According to a complaint later filed by Gasiorowski about the matter, it was claimed that Miron's earnings had since swelled to $27.7 million (including VAT). "The amounts listed totaling $27.7 million not only materially exceed market prices for legal services in Israel," Gasiorowski stated in the complaint, "but are also unjustified in any way, given the nature and complexity of the dispute in which Miron provides legal assistance." Itzchak Miron declined to comment.

Bino builds a high tower

Apart from the huge sums of money that flowed into the pockets of the lawyers and others involved in the case, (the Polish translator of documents, for example, received $374,000), there was also a great deal of bad blood. Clearly, the Poles’ large fortune brought out the least impressive personality traits of all involved. Levitt's arbitration ruling cast aspersions on the credibility of Zadik Bino, as well as some of the other high-profile attorneys involved on both sides.

The affair ignited many conflicts: the close relationship between Eliyahu Miron and his friend Bino was shattered. Subsequently, Avi-Yitzhak clashed with Liraz in court, after the latter sued him for distributing the fees paid to them by the Poles. The matter ended in a compromise. And of course, Bagsik, who spent many years in prison, fell out with his partners. Later on, Gasiorowski quarreled with Bar, his partner in "The Informants Agreement" where he declared bankruptcy.

At the same time, the affair was huge leap forward for Bino, who acquired control of Paz after Liberman's death, and together with Liberman's heirs, become the owner of FIBI. This was how it happened: When Jack Liberman bought back the Polish shares, he was given the option to buy 14.5% of Paz at a $122 million valuation. A few months later, in October 1994, Liberman sold a third of Paz to an investment group led by Jonathan Kolber at a $325 million valuation. On that occasion, Bino exercised the option he had received a few months earlier, and paid Liberman $17.7 million for 14.5% of the shares, then sold 4.8% to Kolber for $15.6 million, reflecting the value of the deal at that time. He then received a $2 million dividend. In other words, in effect, Bino purchased 9.7% of Paz for only about $100,000 - a stake worth about $31.5 million at that time.

"A man's character is his fate" - Heraclitus

Bagsik - now 59 - and Gasiorowski, 63, are not the first ambitious young persons to succeed in beating the system and flying too close to the sun. After getting burned, that system was waiting for them on the ground, ready to wreak vengeance in full force.

Gasiorowski remained in Israel, but never learned Hebrew, and mainly engaged in legal battles with Paz and ancillary cases. His two children have grown up as Israelis. He did not leave the country, for fear of being arrested, until 2014, when Poland decided to close the investigation against him, (Gasiorowski: "I was declared innocent"). He remains on the margins of the local scene, continuing to live on the funds received in exchange for cooperation with the liquidator, on the remainder of cash from his past, or on income generated from business activity outside Israel. In recent years, he has headed an organization that assists Holocaust survivors.

Over the years, he has been connected to several dubious businesspeople, and in 1996 was even sentenced to six months of community service, after being accused of setting up, with others, a staffing service that brought Polish citizens to Israel to help an Israeli gang withdraw cash from ATMs using fake credit cards. Gasiorowski was not involved in the forgery scheme, but was convicted of having knowledge about it, and not taking all reasonable measures to prevent it.

"I’ve been here all these years, but I haven’t been here," Gasiorowski admits. "When you’re persecuted by your government, and you don’t trust people, and you’re in a foreign country - that’s the moment to do one thing: commit suicide. There’s no hope. And besides, time passes, you wait here 25 years and cannot leave, Ben Gurion Airport is the end of the world. You have no power to do anything. I barely left the house. Today, I realize that something in my brain changed during that time, and I was in post-trauma. What do my wife and children always tell me? I was here and not here. Only a few years ago, when I started helping Holocaust survivors, did I come back to life. It gives me a reason to get up in the morning."

But it seems that the tragic figure in this story is Bagsik. Gifted with talent, his unconventional personality intertwined with a unique life story, led him to fantastic wealth, and a fall into the abyss.

After being arrested in Switzerland and extradited to Poland, Bagsik sat in custody in his country until he was convicted of defrauding the Polish banking system, paying bribes and smuggling assets. In December 2000, he was sentenced to nine years in prison, less the period during which he was detained in Poland. He was released in 2004, and has since been involved in a range of businesses. At first, he represented Polish world champion boxer Tomasz "Tomek" Adamek, but after a disagreement, Bagsik turned to various financial enterprises, to try and rebuild, as most of his fortune was expropriated from him. For most of the past few years, he has lived in Switzerland and England. Along the way, he managed to reconcile, to all appearances at least, with Gasiorowski, and the two starred together a few years ago in a documentary series called Art-B: Made in Poland.

In 2015, Bagsik got into trouble once more, and was sentenced to five years in prison after being accused of being the mastermind behind an operation that defrauded investors. The sentence was delayed until appeals were filed on the matter; these were filed on his behalf, and also on behalf of the prosecution, which demanded a more severe punishment. A retrial was ordered, and in 2019, Bagsik was sentenced to six years in prison. He appealed against this sentence as well, but his chances seemed dim. A few months ago, Bagsik stopped coming to the hearings. Some in the Polish media were quick to claim that he had disappeared, hinting that that 1991 escape operation was happening once again. Undoubtedly, the story of this man's tumultuous life, from childhood on, is proof that at the core of every person lies something that can raise them up, but that can also be the seeds of their destruction.

Published by Globes, Israel business news - - on July 21, 2022.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.

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