The Tel Aviv District Court awarded a group of seven British property investors
NIS 7.5 million plus interest this week after finding that a man they entrusted
to manage a loan they gave for a haredi public housing project had use the funds
for purposes other than those originally intended. Judge Eliyahu Bachar ordered
the defendant, Zion Bar-El, to pay the plaintiffs NIS 7.5 million plus a further
NIS 400,000 in expenses and legal fees.
In 2005, investors Haim, Morris,
Israel, Shimon, and Yosef Kaufman, Michael Litzer and Mendel Kreditor, all
haredi entrepreneurs from the United Kingdom, agreed to invest $2.1 million in a
housing project in Yeroham, which was to be marketed to the haredi
They did so for ideological reasons – to help provide public
housing solutions for Israeli haredi Jews – and also to allow them to purchase
discounted apartments in the project, according to their lawyers, attorneys
Yuval Bracha and Meital Grinberg.
However, when the Yeroham project fell
through and the investors asked for their investment capital to be returned,
they discovered the money had apparently been used for other purposes and
without their consent.
The task of managing the investment funds was
entrusted to Bar-El, who held it in trust in the bank account of a company named
Forum Architects Ltd.
Another man, Israel Abramov, also named as a
defendant, acted as Forum Architects’ owner and CEO.
As a result, the
seven brought a lawsuit in the Tel Aviv District Court against Bar-El, Forum
Architects and Abramov as well as two others, claiming the defendants had not
used the funds for their intended purpose, and accusing Bar-El of violating his
duty as a trustee of the money.
Also named as plaintiffs in the lawsuit
were two other companies involved in the project, Eretz Hakodesh and Binyan
Shalem, both of which specialize in marketing haredi housing projects, and Rabbi
Menachem Blumenthal, who manages Binyan Shalem.
The three companies -
Binyan Shalem, Eretz Hakodesh and Forum Architects - were involved in developing
the Yeroham project, and had located suitable land owned by the Israel Lands
Authority (ILA) and had issued a public tender for the
According to the investors’ lawyer, Bracha, the project
developers offered the investors a risk-free agreement, according to which their
investment capital would be returned should the project fall
Before the investors transferred their loan capital, they signed
a tripartite agreement with Bar-El, which also included provisions that the loan
money would be deposited in a specific bank account in the name of Forum
Architects and that Bar-El would serve as the only authorized signatory to the
Shortly after the agreements were signed, the ILA canceled the
tender granted to the building contractor, Zaguri A.D. Building and Development
Ltd, after it failed to complete the payments required under the terms of the
tender. The investors offered Forum Architects the alternative of using the
funds for another public housing project in Lod or Harish, under exactly the
same terms as before.
In 2007, Bar-El transferred his shares in Forum
Architects and his role as director to another man, David ‘Didi’ Harpaz, and
asked the investors if they would agree to use the money to invest in projects
in China. They refused.
However, the court found that money from the
account held by Forum Architects had used the money to pay expenses unconnected
to any Israeli projects.
In court, lawyers for the seven investors
alleged that Bar-El had used the money for his own means and had written
fictitious check stubs to cover up the withdrawals from the bank
Throughout the lawsuit, Bar-El denied all the allegations
against him, and said the disagreement between the parties was simply a business
Bar-El argued that he had never made any personal promise
regarding the funds, which had been in the form of loans given over in
Bar-El said the loans were used for investment purposes that could
have born considerable fruit but unfortunately failed, and argued that the
lawsuit was a conspiracy directed against him personally.
Bar-El to pay the seven investors NIS 7,557,183 plus interest, Judge Bachar said
he had been responsible for the loan money held in the special Forum Architects
“When, as the responsible person, he withdrew money for reasons
that were not those for which the monies were given, he violated his duty as a
trustee,” said the judge.
In response, Bar-El’s attorney, Elisha Cohen,
said that the ruling referred only to Bar-El’s private business activities and
were not connected in any way with any activities undertaken by Bar- El’s law
office. Cohen further emphasized that the court had stated explicitly that the
ruling was unconnected to Bar-El’s activities as an attorney.
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