In 2008, attorney Israel Perry was convicted of theft, fraud, subornation in
connection with an investigation and obstructing justice, receiving 12 years in
The sentence shocked many legal, insurance and pension experts,
and anyone who knows the gentleman.
A gross injustice occurred, and that
is why I am compelled to speak out. I don’t believe any article written over the
years relayed enough information to allow one to understand this case, and I
hope I can provide a clearer explanation.
In a nutshell, the prosecution
centered around the German pension program. In 1973, the German government
offered participation in its social security program to any Israeli citizen no
matter what his religion.
This pension had nothing to do with the
Unfortunately, whenever anyone has read anything about Perry
in the press over the years, headlines screamed out about theft from Holocaust
survivors. This is emphatically untrue.
Around the time the offer was
going to expire in 1983, Perry devised a business venture to assist those people
interested, and advertising in Israeli newspapers garnered 30,000 requests.
Eventually, 13,000 qualified due to age requirements.
government blocked participation, deeming the pension not to be a worthwhile
The biggest requirement was “catching up” with those German
citizens who started contributing to the program in the 1950s. The cash
injection each Israeli participant needed was the equivalent of approximately
30,000-40,000 euros in today’s prices.
Many people could not afford this,
and the government forbade any transfer of funds outside the country, making
As it turns out, this was the best pension plan
anyone could have signed up for, far exceeding in value all pensions available
in Israel today, with this additional money from Germany making participating
pensioners’ daily lives much more comfortable.
Perry, thinking outside
the box, set up companies abroad to lend applicants the money needed to join the
program. Finding credit accommodations was very difficult.
German bank agreed to lend money to Perry against personal guarantees. The bank
stipulated the requirement of life insurance on each loan, guaranteeing if a
client died before paying off the loan in full, the survivor pension would be
free and clear of debt. The lending company was the beneficiary and owner of the
This was noted in the contracts with detailed explanations of
fees, interest, service charges, a 20-year schedule of loan re-payments, and
insurance premium charges.
Over time, Perry made arrangements with
several Israeli insurance companies, but their service proved unsatisfactory.
The German bank was unhappy with the situation, preferring that Perry contract
with a non-Israeli insurer.
Perry decided to set up his own insurance
company, becoming a self-insurer. His insurance company, called Britannia, was
reinsured by a first-class company, Cologne Re of Germany. A legal opinion was
accepted not to inform the pensioners, as nothing had changed regarding their
commitments, except a reduction in premium charges.
Clients had no
exposure due to the relevant clause in their contracts. All the risk was on the
The Israeli prosecution charged Perry with two thefts of
insurance premiums from clients. This seems impossible, since you can’t steal
Perry didn’t divulge his ownership in the lending company,
as Israeli law did not allow foreign ownership of companies. He was worried the
German bank might withdraw the credit line if it was revealed he circumvented
Israeli rules. In 1988, this law was repealed, and he was not prosecuted for
this infraction, but it was alleged that he lied about the company ownership in
order to defraud his clients.
Some employees of Perry’s Israeli company
the Organization for the Implementation of Social Security Act Israel-Germany
(OSSA), seeing the venture to be lucrative, decided to open their own company,
appropriating 5,000 names from OSSA, and all the documentation from the OSSA
offices. OSSA sued them in civil court, winning the case. They appealed the
judgment to the Supreme Court and lost. The vendetta against Perry began with
much negative press, and demanding investigations for theft and fraud.
this is what they truly believed, why did they try to start their own business,
taking all the contracts that OSSA used for their clients, and using the same
business model? These business adversaries approached OSSA clients, convincing a
few to stop paying on their commitments.
The German government set up
parameters for repayment of the loans, allowing 66.6 percent of the value of the
pensions to be used as payment to the lending company, BGF. Another company, BGA
had standing bank orders from the participants that charged interest, service
charges and life insurance premiums monthly, leaving approximately 28 percent
for the pensioners’ use.
After all, there was a large loan to be repaid
by the pensioners. This pension was free of any contributions from their own
pockets. Some clients, convinced they were cheated, canceled standing bank
orders, while still receiving the pensions from Germany. OSSA sued in civil
court, winning every case, but one, which was reversed on appeal to the Supreme
All the contracts were examined by the Standard Contracts Court,
and an insurance actuary for the Finance Ministry. Both contracts and premium
charges were deemed fair, comparable to industry standards.
actually less than market norms regarding loan interest and life insurance
How could the criminal court reach completely opposite
conclusions than the civil courts? The investigation against Perry went on for
more than 10 years.
Coming from the US, I find it very disturbing that an
accused can be interrogated without defense counsel present, investigations go
on endlessly, and defendants are not judged by a jury of their peers.
Israel, most criminal cases are heard by one judge, not always with the
expertise needed to understand economic and financial issues, as in this
particular case. In 2001, Perry negotiated a settlement with the Israel Tax
Authority regarding a parallel investigation that went on for a few years. He
paid NIS 150 million in regards to businesses owned abroad.
of the settlement was agreement to stand trial on criminal charges, because the
government didn’t want it to appear that Perry had bought his
Perry’s attorneys believed there wasn’t anything criminal in
his actions, having won all civil suits, and convinced him to accept the
Many experts testified on behalf of Perry, including Prof. Amir
Barnea, a world-renowned economist, and Doron Shorer, a former insurance
regulator for the State of Israel. In contrast, the prosecution didn’t present
even one expert witness.
The most damaging testimony was given by
“state’s witness” Martin Hecke.
Perry met Hecke at the German bank, and
he helped with the architecture of the credit line. After leaving the bank,
Hecke was employed by Perry. Several years later, during a routine audit of
Perry’s companies, it was discovered that Hecke had stolen $7.5m. Hecke was in a
panic about the money he had embezzled, and more than willing to testify against
Perry, receiving a guarantee from prosecutors of not being charged
Hecke testified about a meeting with Perry in Switzerland, where
Perry gave the impression he would negotiate a “parting handshake” of
considerable value if Hecke returned the money, and didn’t testify against
Actually, Hecke tried several times, through business acquaintances
of Perry, to offer favorable testimony on Perry’s behalf if he would forgive the
$7.5m. embezzlement. These people testified in court, but to no avail. Part of
Perry’s sentence was five years for attempting to bribe a witness. It seems the
opposite was true.
In my opinion, Hecke was not a credible witness, and
had much to gain by lying. Unfortunately, the court deemed Hecke truthful and
not a thief.
During the court proceedings, Perry’s attorneys served Hecke
with a civil suit. This move was interpreted by the court as an effort to
intimidate Hecke not to testify against the defendant, and this was evident in
Eventually, Perry won a suit against Hecke in Israeli civil
court for embezzlement of NIS 35m.
Unfortunately, Perry had already been
convicted in district court, and Hecke got away with his lies. Perry won a civil
action against Hecke in Germany, and recently that case was upheld on Hecke’s
appeal. He was ordered to pay 5m. euros, but so far, he hasn’t paid anything in
During their investigation, Perry’s appeals team went over
many hours of taped conversations between Hecke and investigators in the
district court case. Unfortunately, there were audio problems with the tapes,
and conversations “off camera” were not audible, but with new technology, the
tapes were cleaned up, posing more questions than answers about Hecke’s
testimony. A portion of one tape appeared on Israeli television a while ago. To
this day, inquiries by Perry’s attorneys have not been satisfied.
appeals have been presented to the Supreme Court, only producing a two-year
reduction of the original sentence. I believe it’s every person’s right to do
whatever is necessary to prove his innocence.
Unfortunately, most people
simply don’t have the money needed, and the rules for appeal to the Supreme
Court are very complex.
Perry made irrelevant mistakes along the way. One
fact is certain, 9,000 people who received a loan have lived a better life
because of all he accomplished on their behalf. He was hounded by the
authorities for years. Many damaging stories about Perry appeared in the media,
most of them not factual. He paid an enormous income tax
Perry’s biggest crime was devising a brilliant plan, taking
enormous risks and making money. He certainly didn’t deserve a 10-year prison
I have known Israel Perry for many years, and I am extremely
proud to call him my friend. I’m asking every person whose life was improved by
the German pensions to stand up and be counted. Please make your voices heard.
In my opinion, justice has not been served, and a man’s reputation has been
ruined. There was no real crime, but there definitely was real punishment.