After a series of reports of financial irregularities discovered at the non-bank credit company United Credit And criticism (in this paper) of the lack of oversight of the industry, the Securities and Exchange Commission’s investigation into what was happening in the company was only a matter of time.
A report by the Securities Authority indicates that as part of the investigation into the affair, the three controlling shareholders in Yonet were investigated: the fired CEO Tzachi Azar, Shai Panso andShlomo IsaacAlong with Yitzhak Eviatar, who is suspected of actually running the Yonet Credit branch in Nazareth, where the financial irregularities were discovered.
According to the suspicion, the four are involved in the theft of funds totaling tens of millions of shekels from the public company. In the request for their release under restrictive conditions, the Securities Authority states that all four are suspected of receiving anything fraudulently under aggravated circumstances; false registration in corporation documents; fraud and breach of trust in the corporation; theft by an authorized person; forgery and money laundering; (Ezer, Penso and Isaac).
The authority’s suspicions focus on three cases, along with an examination of the failures in Yonet’s corporate governance. This, among other things, revolves around the questions of how large sums of money may have disappeared from it without the company reporting it, or how transactions with controlling shareholders are not approved in an orderly manner with the relevant organs of the company and audit mechanisms, which were supposed to be its gatekeepers.
Parsha 1: 50 million transferred and returned
The first affair, which involves the highest sums of money, concerns a private allotment that took place in January 2021, of the shares of the public company to its controlling owner, a private company also known as Yonet Credit, and owned by Azar, Panso and Isaac. As part of the same transaction, the private company was required to inject capital into the public company in the amount of NIS 50 million, in exchange for an allotment of shares.
“Investigations carried out at the request of the company’s independent directors allegedly show that in parallel with the transfer transaction to the controlling shareholders, the company executed transactions, in which about NIS 50 million was transferred from the (public) company to the private company, under the guise of third-party loan transactions. They were not approved as required by law, and were not reported to the public. ” This was reported by Yonet following the investigation of the officials. The Securities Authority seems to suspect that this is a fictitious transaction in which the money was allegedly transferred to the public company in exchange for the allotment of shares, but in practice it returned to the private company under the guise of loans to third parties.
A review by Globes shows that this alleged amount, of NIS 50 million, also includes NIS 37 million that Yonet recently reported as a debt at risk – a credit that it provided to a group of borrowers at the beginning of 2021, which is not repaid under the loan terms. As revealed in Globes, this is credit given at Yonet’s Nazareth branch to a group of borrowers from the Zoabi family, which is a well-known family in the city and a partner in Yonet’s non-bank financing business at the Nazareth branch.
The Securities Authority will examine whether in a NIS 50 million deal, which is so significant for a relatively small company like Yonet (reported NIS 78 million in equity at the end of 2021), the company was required to approve the deal in an orderly manner and report it to the public. The deal and the conflicts of interest it produces, when at present the suspicion is that the reporting was not carried out by law.
The Authority is also examining suspicion over the question of where the money in the transaction came from – whether from the controlling shareholders or other parties, and whether it came in full to the public company, or its share disappeared along the way, when the shares were fully allotted to the private company.
Affair 2: Where did the checks go?
The second case, which focuses on the Securities Authority, concerns the missing checks. Following the discovery of the irregularities last month, the location of checks in the higher amount of NIS 10.6 million, which were handed over to Lyont against loans made by it as part of check discounting activity – which is the main business of the company – is unknown. A Globes survey revealed that about half of the amount, in the amount of NIS 5 million, was also lent to the Zoabi family.
The suspicion being investigated by the Securities Authority is that elements within the company are involved in the disappearance of the missing checks, and therefore the four suspects are attributed the suspicion of theft from the public company, which is the one that lent the funds.
Affair 3: Sales using inside information
The third case being investigated by the Securities Authority concerns the suspicion that the controlling shareholders of Yonet took advantage of inside information, and sold shares of the public company when they were already aware of irregularities around the missing checks, and the tens of millions of shekels issued by the company.
“According to the suspicion, during the relevant period, Ezer made transactions in the company’s shares through his private account, and together with Isaac and Panso also in the account of the private company in which they control, using inside information held at the time regarding the said suspicious conduct, which included material and serious incidents. , “Explained the Securities Authority in the appendix.
The Authority apparently refers to a series of 14 transactions made by Yonet Credit Private on April 19, about a month and a half before the affair exploded, in which the company sold shares for a total of about NIS 150,000. About two weeks later, a number of additional sales were made by the private company, in the amount of an additional NIS 40,000.
Even before that, Ezer himself sold a series of shares in Yonet Credit. Thus, on April 10, he executed three separate transactions for a total of NIS 49,000, and four days later two additional transactions in the amount of NIS 4,230.
How involved is Tzachi Eviatar?
Apart from the three controlling shareholders in Yonet, the fourth suspect in the case is Yitzhak (Tzachi) Eviatar, who does not hold or hold an official position at Yonet Credit, but according to company officials is a business partner of the Zoabi family, Yonet Credit’s partners in the Nazareth branch. Non-bank credit. According to the suspicion, Eviatar is involved in fraudulently spending money from the public company.
Globes has learned that loans granted to Eviatar are the reason why Isaac decided to suspend his commitment to deposit a guarantee in the amount of about NIS 1 million (and much larger amounts later) that will allow the company to cover its debts if the funds are not found.
At the end of May, it was discovered that Eviatar was not transferring the payment for the loans he had taken in an orderly manner to the public company. When Isaac realized that contrary to what was agreed with him, the funds were directed to third parties, he announced that he was withdrawing from the deposit of the guarantee, in a move that provoked anger against him on the part of the company, which, as stated, is one of its controlling shareholders.
Attorney Gil Dahuh, representing Eviatar, stated: “Indeed, Yitzhak Eviatar does not hold any managerial position in Bayonet, he did not receive a salary from them and was not employed by them. In a period of a few months he connected the branch with various customers. The claim that he is a partner in the branch in Nazareth has nothing to rely on at all and is unfounded. No piece of evidence was presented to him during the interrogation in this matter.
“The claim that he acted on behalf of the Zoabi family is also based on gossip from stakeholders and is not true. In Scripture.
Will the insurance pay? Who will bear the legal costs of Yonet’s executives
At the end of May, on the same day that Yonet Credit’s board of directors learned that financial irregularities had been discovered in the company, just before the publication of the first quarter reports, the company reported the extension of insurance coverage to its board members and officers. These included the chairman at the time, Moshe Kahlon, as well as the three controlling shareholders in the company who were questioned this week.
The new policy for Yonet executives will be valid until June 2023, and is within the warranty limits of up to $ 5 million for one case or the entire period. Now that the investigation against company executives has become public, the same insured executives can claim from the insurance company the coverage of legal expenses under the purchased policy. The legal defense expenses of Yonet’s executives are expected to reach hundreds of thousands of shekels, and even more.
Under the policies customary in the market, the insurance company has to pay the expenses to the insured, and only if the court determines that there was a criminal intent on the part of the insured, which actually led to the result, the insured will have to return the money. That is, even if the suspects are convicted, it is not certain that this will be proven and that the insurance company will get its money back.
If, however, the insurance company requests to claim the money back, in the case of the executives’ conviction, it is likely that it will sue it from Mounted Credit itself and not from the officers.
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With the publication of the list of interrogees in the Yonet Credit case, one name stood out in his absence – that of the company’s chairman until about a month ago, the former finance minister Moshe Kahlon. From the moment of the first publication about the financial irregularities at Yonet Credit, Kahlon claimed that these were due to events that occurred before he took office in June 2021, but since he was an active chairman, involved in the day-to-day running of the company (and even received a generous salary). The Securities Authority will have no choice but to summon him for further investigation, even if not under the definition of a suspect in the case.
He resigned from his post at Bayont due to irregularities. Window / Photo: Alex Kolomoisky-Yedioth Ahronoth
A source from the legal world, who is familiar with what is happening in the field, noted that “in the past year Kahlon has been exposed to the information required for his investigation. He is likely to be investigated for reporting offenses and possibly also for breach of trust in the corporation. ”
On the other hand, Adv. Dror Matityahu, a partner in the Fischer firm (FBC & Co), which represents directors and officers in corporations, in criminal proceedings, thinks otherwise. ” Gatekeepers. “The board of directors does not replace the company’s CEO in the direct and ongoing management of the company, and the chairman of the board of directors is also prohibited by law from assuming the CEO’s powers,” explains Adv. Matityahu.
“In cases where the board acted reasonably, in the circumstances, but the gatekeepers allegedly failed to perform their duties, the board’s ability to provide effective supervision is significantly impaired and accordingly its degree of responsibility is reduced. In the circumstances of the case. Only after the relevant period for the suspicions attributed to officers in the company.
“Also, during Mr. Kahlon’s tenure as Chairman of the Board, the Company was accompanied by a number of gatekeepers, such as an external accountant, an auditor, an auditor of the Company, underwriters approving the granting of credit and a compliance officer responsible, among others. On the formulation of implementation and implementation of procedures in the company.
Moreover, the company’s board of directors is mostly fed by the company’s management and controlling shareholders. In the case in question, the management and controlling shareholders are the suspects suspected of allegedly improper activity. .
“In these circumstances, the basis for the claim that the board of directors and its chairman allegedly acted negligently or delinquently was dropped. It is very doubtful whether Mr. Kahlon will be summoned for questioning at all, and as long as he is questioned only as a witness and not as a suspect. “
The Securities Authority stated in response to Globes’ request regarding the Kahlon investigation that “the Securities Authority does not address investigative and intelligence matters. All parties involved will be investigated as long as there is evidentiary infrastructure. “
* Presumption of innocence: The detainees are only suspects. This is a preliminary stage in the criminal proceedings, and they have the presumption of innocence.