Clalit Health Services’ health fund has become embroiled in a conflict of interest, centered on two brothers in senior positions who are responsible for the fund’s ultra-Orthodox sector. On September 19, 2021, Clalit announced to the advertising company for the “authentic” ultra-Orthodox sector, owned by Shlomo Konsky, that it had won the tender to provide advertising services to the sector. But Shlomo Konsky is none other than the brother of the person who has run Clalit’s ultra-Orthodox department for a decade – Avraham Konsky.
Clalit immediately understood the potential for conflict of interest, and already in the second line of the letter announcing the win, it was stated that Brother Avraham Konsky serves as the director of the Haredi department at the fund, and therefore the advertising office must not contact him in any way. All inquiries, written in the winning announcement, should be made exclusively to Tami Goren, Clalit’s Marketing Director. It was also clarified that the contract is “conditional”, and that the ability to implement the contract, which is already clearly going to be very difficult to implement, “will be tested in the months following the win”.
Clalit also signed Avraham Konsky ahead of time on a comprehensive conflict of interest arrangement, in an attempt to regulate the restrictions that apply to him in light of the expected engagement with his brother’s office. Since then, and even more so in recent months, Clalit has tried in every possible way to neutralize this conflict of interest, but without success.
Why in the first place did Clalit not cancel the winning bid of a factor so close to its sector manager? Lawyers involved in the details clarified that Clalit had no option to cancel the win, since the principle of conflict of interest is weaker than a basic law: freedom of occupation. Due to this, the committee decided to focus on preventing conflicts of interest and stopping any managerial interface between the two Konsky brothers.
But what was expected to happen did happen. A few months later, it became clear that neither the contract nor the conflict of interest agreement could be honored, since “compliance with the terms of the conflict of interest agreement harms the day-to-day conduct of Clalit’s marketing division and disproportionately burdens its work,” Clalit explains. Clalit’s Tenders Committee held a discussion on the subject, in which the operational and professional difficulties created by the various restrictions were presented. For example, the need to separate the marketing communication work in general districts in the ultra-Orthodox sector from the marketing director of the sector. Clalit finally decided that there was no choice but to end the engagement with Authentic.
Clalit notified the Ministry of Advertising of its unilateral decision. In response, the ministry filed a lawsuit in the Tel Aviv District Court, demanding that the contract be complied with, and alternatively ordering compensation of NIS 5 million. In the lawsuit, the advertising ministry claimed that the profit expected from the contract with Clalit is NIS 2.4 million for each year of work (the tender was for two to five years).
“The burden of proving that someone is combining is on Clalit and not on us. We cannot be seen as crooks for no injustice on our part, we are not a party to the conflict of interest,” Shlomo Konsky’s representatives argued at a hearing in the Tel Aviv District Court two months ago. On the other hand, Clalit’s representatives claimed: “From Clalit’s point of view, there is a very serious conflict of interest. In order to continue this activity, we need to be convinced that the conflict of interest will be removed.”
Finally, when it became clear that Shlomo Konsky did not intend to give up the handsome sum he deserved as Clalit’s campaigner, a compromise was reached. But it is also strange, no less than the story itself: Konsky, it was agreed, would not give up Clalit’s auction, but would give up authentic – and sell the shares in the firm to his partner. On April 10, the court gave effect to the agreements between the parties, and the procedure apparently ended.
However, on July 5, Clalit’s representatives wanted to make sure that things were done as agreed, and then they realized, according to them, that in the Registrar of Companies, Konsky was still registered as the owner of the advertising office, and that the company’s address was his. Clalit subsequently sent a letter to Konsky, which reached Calcalist, informing him that on August 5 the contract with Authentic would be revoked, Indirectly, and (the advertising agency) “.
Calcalist has learned that Konski, for his part, is now demanding that the fund send him a document confirming that the sale of his shares will remove the conflict of interest and that the contract can remain intact. But in general they refuse to draft such a letter – and it seems that the strange saga is on its way back to court. As the lawyer involved in the details put it, “in these circumstances it is not inconceivable that Konsky will file another lawsuit.”
Clalit responded: “Clalit is obligated to prevent any conflict of interest. Clalit canceled the agreement with Authentic on its own initiative, after it became clear that the conflict of interest arrangements adopted may prevent the company from receiving effective and quality service. The agreement between the parties, but after it did not fulfill its obligations to the court and to Clalit, we acted to cancel the agreement immediately. “
Authentic responded: “Authentic won the tender legally because of its skills and abilities. There was no flaw in Authentic’s conduct or ownership. On the contrary, in view of the potential conflict of interest, the parties reached an agreement in advance that removed the fear of a conflict of interest.
Notwithstanding the foregoing, and in view of Clalit’s new and additional demand to change the conflict of interest order, it is authentically agreed to take far-reaching actions before the rule of law to remove concern. These actions, which involve many costs and some of them even irreversible, will not be possible without coordination with Clalit and acceptance of its position, as even determined by the court. We are sorry for channeling things in the middle of the process, while creating an inaccurate presentation of the relationship between us and a client we cherish. “