Jacky Ben Zaken, Eitan Eldar under house arrest
Israel Securities Authority investigators raid headquarters of Financial Leverages on suspicion Ben Zaken tried to paint tape in bid to get company listed on TA-100. Businessman Eitan Eldar, who sold controlling interest of Macpell to Ben Zaken, detained for questioning as well. This is ISA's largest investigation since Psagot affair
Calcalist has learned that several people, including Ben Zaken – one of the holders of control over Financial Leverages, and Eitan Eldar – one of the holders of control over Gibor Sport Group – were detained for investigation for several hours at the Authority's headquarters and then confined to house arrest.
In fact, both have been under house arrest since last Wednesday. This is an intricate affair in which several capital market big guns are allegedly involved and more businessmen are expected to be detained for questioning over the next several days.
Ben Zaken's spokesperson Moshe Debby responded, "Since the matter is under the ISA examination we are prevented from disclosing any details. Jacky Ben Zaken is convinced that once the investigation – with which he is fully cooperating – is completed, it will be made clear that he followed the book".
In an announcement to the Tel Aviv Stock Exchange released by Financial Leverages, the company confirmed that it was under investigation and said that ISA investigators confiscated documents from the company's headquarters.
According to estimates, the investigation is focusing on at least one substantial affair in the past associated with Financial Leverages but possibly to more events as well. The said affair is the listing of the company on the TA-100 on December 2010. Authority investigators suspect that maneuvers leading to the share's listing on the TA-100 involved alleged Securities Act offences.
Suspicions are that the share's price was driven up by a series of orders and fictive selling and purchasing of Financial Leverage stock, thus increasing the company's value and enabling its listing on the TA-100 index. Estimates are that the share's leap in value occurred on February 2010 when its value doubled within a month.
This leap in the share's value was attributed by the media to an expected transfer, by Ben Zaken and partner in Financial Leverages Avraham Nanikashvili, of 25% of their oil drilling operations (Med-Ashdod) which they won, to the company; however, the company's steep value increase to NIS 1.1 billion ($320 million) was not enough to buy the company a ticket into TA-100 at the time necessitating a public issue of 10%-15% of the company's shares at a rate that would land the company into the index.
Currently the share is traded at a company value of some NIS 900 million ($262 million).
And indeed, on November 15, 2010 Leverages managed to raise NIS 122 million ($35 million) which placed the company on TA-100 since financing round beefed up the public stake in the company and raised funding for the acquisition of the minority shares in Leverages' subsidiary Macpell. A portion of these shares were purchased from EItan Eladar and his partner Roi Gil.
Mcpell purchased and delisted
Financial Leverages acquired the control (73%) of Macpell on July 2007 from Eldar and Gil for NIS 140 million ($41 million). This was in fact the beginning of the acquaintance between Ben Zaken and Nanikashvili and between Eldar and Gil. Only three months previously Eldar and Gil acquired Macpell for $36 million together with an investor group which included Dash-Apex and former Amdocs senior execs Nehemia Lemelbaum and Mario Segal, and sold it at a $45 million value – 25% above its purchasing value.
In the three months between the Macpell acquisition and sale, the holders of the company's controlling interest sold off Macpell's real estate and textile holdings and the company acquired by Leverages new had NIS 175 million ($50 million) in its cashbox. Later on, Leverages acquired another 3% of Macpell and incorporated Nanikashvili's cousin David Ben Nani's real estate business into Macpell.
Leverages held 76% of Macpell and ahead of Leverages' financial round in November 2010, acquired an additional 14% stake from Macpell's minority shareholders for NIS 30 million and later, as part of an acquisition proposal, delisted Macpell.
Investigation out in the open
Zaken and Eldar maintained their relationship and recently, Eldar mediated a deal in which Leverages acquired ZBI – Zvika Barinboim's publicly listed holdings company.
As part of the deal, which was signed last June, Ben Zaken and Nanikashvili acquired control (about 76.6%) of the holdings company – a subsidiary of SG Holdings which is controlled by Barinboim, for approximately NIS 126.8 million. The value of the deal reflects a company value of about NIS 165.5 for ZBI – about 55.7% above its market value at the time.
Following the deal, Ben Zaken and Nanikashvili will take over ZBI's subsidiary BGI in the aim of using the NIS 180 million ($52 million) in BGI's cashbox to increase their stake in Leverages and to buy out their partner in Financial Leverages.
Gil's coition is unclear at this time and estimates are that he is currently overseas. Leverages is run by former Chief Investment Manager at The Pheonix Dani Vaknin.
This is the first ISA investigation to be revealed since Professor Shmuel Hauzer replaced retired Professor Zohar Goshen as ISA chairman. This may well be an indication of the new chair's hard line against securities offenses.
At this stage, the ISA is investigating suspicions.
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