State Comptroller Micha Lindenstrauss on Monday called on the defense and finance Ministers to fire Israel Aircraft Industries General Manager Moshe Keret for the "negligent" way in which he purchased a 30 percent share of Elisra Electronic Systems Ltd.
"Whoever does whatever he wants, shuts his eyes and acts in an extremely negligent way in [failing to] safeguard the public purse, the purse of the citizens of the country, must pay a personal price," Lindenstrauss told the Knesset State Audit Committee. "The personal responsibility of someone who failed so utterly in this affair, IAI General Manager Moshe Keret, who is at the head of the pyramid, obliges the minister of defense and the minister of finance to reach personal conclusions."
Keret, who attended the meeting, rejected Lindenstrauss's criticism that IAI subsidiary Elta Systems Inc. had overpaid when it spent NIS 100 million for the Elisra shares.
"Between 2001 and 2005, Elta achieved astounding results," said Keret. "Elta's sales increased during that period by 68 percent, from $390 million to $650 million. The amount of orders grew by 380 percent, from $814 million to $2.303 billion a year. Prophets increased by 470 percent, from $5 million to $22 million.
"Can anyone say regarding these statistics that Elta or its board of directors is a failure and doesn't know what it is doing? The increase in sales by Elta and the IAI results in employment for tens of thousands of workers - was this achieved by negligence?"
Lindenstrauss countered that he had found "serious flaws" in the procedure for examining the value of Elisra; in the decision-making process regarding the substance of the purchase; and in the way the deal was approved by the Elta board of directors. "It is inconceivable that on June 6, 2002, the board of directors approved by telephone the principles of the deal to purchase 30 percent of the Elisra shares, and that afterwards the members of the board signed the approval without meeting to hold a detailed and systematic discussion on the matter." Lindenstrauss told the committee this was only one, and not the worst, of the flaws that the State Comptroller's Office found in Elta's handling of the purchase.
In response to Lindenstrauss's criticism of the way Elta estimated Elisra's value, Keret said Elta had two assessments, both of which were admittedly made on behalf of Elisra, but by well-known and respectable accountants. He added that Elta had analyzed these assessments properly. Since another company, Elbit, had previously negotiated purchasing shares in Elisra according to an assessed value of $350 million, Elta had no choice but to do the same, he continued. Keret added that the company's board of directors met seven times to discuss the sale and each member knew all the details of the transaction. The decision-making procedure was perfectly proper, he said.
Lindenstrauss said the report "was a very grave one. The details of the deal were repeatedly checked and rechecked by the best experts in the office during long, detailed and in-depth discussions that went on for many months. The report was written clearly and exhaustively and included an examination of all possible points of view of all those involved in this incomprehensible and offensive transaction."