Fallen Israeli business mogul Dankner convicted of stock manipulation

Along with Dankner, all defendants in the case were convicted of manipulating the issuing of shares in order to inflate their prices.

By YONAH JEREMY BOB
Updated: JULY 5, 2016 03:51
Nochi Dankner (photo credit: REUTERS)
Nochi Dankner
(photo credit: REUTERS)
Former IDB Chairman Nochi Dankner, until a few years ago the country’s reigning business magnate, was convicted Monday by the Tel Aviv District Court of illegally manipulating the value of his company’s stock in February 2012.
Before his fall from grace, Dankner, 61, controlled an estimated NIS 400 billion of the public’s wealth through his Israel Discount Bank pyramid, which included controlling or substantial shares in the country’s biggest supermarket chain, Shufersal, and mobile operator Cellcom, as well as financial giants Clal Insurance, Bank Hapoalim and others.
Dankner, a graduate of Tel Aviv University’s law school turned banker and investor, reportedly had the ear of Prime Minister Benjamin Netanyahu and other leaders. As well, he had major interests in Las Vegas and in Swiss financial institutions.
None of that mattered Monday as an army of journalists took over the normally empty-looking court lobby to witness his downfall. Dankner tried to maintain the same forced smile he had on when entering the courtroom, even as he hustled out of the court after the verdict.
Sentencing arguments are set for September 20.
In June 2014, Dankner was indicted by the Tel Aviv Economic Crimes Division in the Tel Aviv District Court for securities fraud. Other charges included misrepresentations to shareholders and investors, failure to issue certain reports and illegal use of assets under money- laundering laws.
The scheme which Dankner and Itay Strum of ISP Group hatched in February 2012 was both complicated and deceptively simple. The bottom line was that after years of glory and a meteoric rise, Dankner and IDB had run into rough times. Facing financial ruin, he tried to rig the game to save himself and his company.
Many of his international investments had not paid off, and changes in the cellular market hammered Cellcom and IDB’s profits and share-price.
Dankner’s plan was to get Strum, stockbroker Adi Sheleg and other wealthy colleagues to buy and sell newly offered IDB stock at inflated prices as part of a public offering to raise capital.
The illegal scheme succeeded in raising NIS 321 million in capital that likely could not have been raised following the rules. When insiders like Strum intentionally buy stock at prices above their worth in order to fool others into buying that stock at an inflated price, that is considered to be the crime of stock manipulation.
But Dankner’s price manipulation failed to raise enough funds. IDB collapsed regardless. By the time Dankner lost control in 2014, he had become the subject of a criminal investigation.
Sheleg, who was intimately involved with executing the plan, turned state’s witness against his former co-conspirators Dankner and Strum.
Strum was also convicted of a range of stock-related crimes along with Dankner, though he was acquitted of the relatively minor offense of witness intimidation.
As it turns out, Judge Khaled Khabub said that Sheleg’s testimony against Dankner and Strum was only a small part of his reason for convicting the two.
The judge explained that the defense had succeeded at finding major consistency issues with Sheleg’s testimony.
Moreover Judge Khabub said the wealth of financial evidence was enough to convict the two. The communications between Dankner and Strum revealed their actions had no economic rationale other than swindling the public.
Khabub also said that Dankner’s attempts to blame all illegal actions on Sheleg going rogue laid bare their guilt, even more since Dankner did not fit the role of an ignorant hands-off leader without knowledge of the actions of his minions.
Meretz Party leader Zehava Galon responded to the verdict, saying “It is a good step toward the cleaning-up that is needed in the Israeli market.
The verdict is an important message to members of the ruling financial club who think that their money can buy them a place above the law.”
Zionist Union MK Micky Rosenthal said, “It is good that the court sent out a signal to stop this dangerous man.”
He said that Dankner had used connections in the government, Knesset and financial sector to exploit the public for years, not because of talent, but because of his connections and influence.
Securities Authority Chairman Shmuel Hauser added that the conviction was “a part of our uncompromising war on corruption in financial markets. We bring to trial people from all places, levels and ranks when we believe there is evidence to convict.”
The state prosecution also declared victory in its twoyear battle to snare Dankner.
While Strum’s lawyers said they would “consider their options,” code for considering an appeal, observers noted that neither Dankner nor his lawyers said a word as they rushed out of the courthouse.
Many speculated that the courts findings were so penetrating and damaging that he may forgo the appeal to the Supreme Court that many powerful officials take for granted