A sharp conflict between Shalu Julio and Amri Lavi, the founders of NSO who left the company, and the controlling owner of the company, the American investment fund BRG, led the manufacturer of the spy software Pegasus to submit a special request to the District Court in Tel Aviv, in order for it to help it make a decision in favor of which board of directors She must be heard.
“The court is asked to decide between the claims of the shareholders, to determine the composition of the authorized board of directors, as well as whether there is any validity to the previous and future decisions of the board of directors,” reads the application submitted today (Thursday) through the office of attorney Ran Shaprincek from Ardinest.
The root of the conflict lies in an international legal battle between four parties: on the one hand – the old board members, which include Holio Valvi and their representatives, who are in a minority position around the table; On the other side – the BRG Foundation, an American company that inherited control of NSO two years ago after the partner conflict that dissolved the previous controlling owner, the Noblefina Foundation; From the third party – some of the partners in Nobelpina who are themselves managing a dispute with BRG over compensation they claim it owes them; And finally – the debtors who loaned $500 million to the group of companies around NSO, including Credit Suisse and the hedge funds Senator Investment and Birch Grove Capital. In between, stands the company’s management headed by the new CEO Yaron Shohat.
Yaron Shohat, CEO of NSO / Photo: Pini Siluk
“The management found itself between a rock and a hard place”
The BRG fund, represented in Israel by attorney Howard Berkovich, took over NSO as an asset shortly before it was blacklisted by the US Department of Commerce, and its business declined. The relationship between the two parties came to a halt, when BRG claimed that NSO did not pay back a debt on a loan, and therefore sued it and asked to take out of its hands the drone company Convexum, which NSO purchased in exchange for 4 million dollars. After a legal battle, BRG took over Convexum with the intention of turning it into an independent military drone warfare company.
During the legal dispute between the two, the bad blood between them was revealed: NSO flatly refused to hand over financial reports or comply with BRG rules regarding sales to certain countries. BRG representatives have even claimed many times that they do not see NSO as an asset that can be sold or profited from, due to the entry into the blacklist. This, although in the end, despite the difficulties, NSO ends this year with its head above water, with revenues of approximately 150 million dollars, and continues to employ hundreds of workers – despite the dismissal of 100 people last August. There is no doubt that the company is experiencing great difficulty due to its entry into the blacklist and the new restrictions of the Ministry of Defense on the export of offensive cyber products, which were imposed on it by the direction of the American government.
The letter of claim filed today indicates that during the last few months the tension between the two increased, when the controlling owner appointed additional board members who began to exert their influence on the Israeli Rogela manufacturer, to demand that they hand over documents to them and interfere in management decisions. In a situation where there are normal relations between the board of directors and the company, all these seem to be commonplace, but in the conflict between the controlling owner and the founders of the portfolio company, they became a stumbling block.
Last December, BRG appointed two British directors: Tamara Makarenko and Asher Allen-Bornstein. Makarenko is a long-time partner of BRG – on her LinkedIn profile she presents herself as a professional director, an expert in corporate governance and company rehabilitation.
At a meeting held that month, a confrontation was held between the two and Shalu Julio, who served until the last few days as a director of the company before leaving for the new start-up he founded. According to NSO, Makarenko asked to hire an independent investigator to investigate the reasons for the company’s management’s non-compliance with the fund, to transfer to it financial documents, business plans and transactions that the company had recently carried out, as well as to provide it with certificates that NSO did not sell to customers that the fund opposes.
Julio, on the other hand, opposed all the requests and was based on the ruling of the court in Luxembourg, which stated that BRG’s decisions were not valid for several weeks – this was due to the lawsuit of the partner in Nobelpina who is in conflict with it, Stefan Kovski.
The fund responded to this by appointing Makarenko as the chairman of NSO, and later even asked to appoint its lawyers as NSO’s attorneys. Subject to severe controversy, the company will have difficulty operating properly,” NSO’s request reads.
Two days ago, Julio sent a letter to the management of NSO, in which he claimed that in the appointment of the directors “there is a serious risk potential for the company and its business”, and demanded that the management “not take any irreversible step or a step that could burden the company with unnecessary expenses and damage its business”, and ordered not to transfer to “unauthorized parties According to him, information that there is a fear that its delivery will be in violation of regulatory requirements, while exposing the plaintiff to risk in this matter.
“It can be seen that the management found itself between a rock and a hard place: on the one hand, it allegedly appointed representatives of BRG as directors of the group and pretended to make a series of decisions with far-reaching effects; on the other hand, the minority shareholders (Holio Valvi – AG) made claims that The directors were appointed illegally, because their decisions are invalid, and they even warned that those who act according to these decisions will be exposed to lawsuits.”