US ambassador to Israel David Friedman invested $730,000 in the Montefiore Israeli wine brand on false pretenses, according to a lawsuit filed yesterday at the Tel Aviv District Court by Karraben Wine LLC, a US company owned until recently by Friedman.
With Friedman’s appointment as ambassador last March, the company was sold to the Mar Wine Company, owned by the Jewish American Hershman family, in order to prevent a conflict of interests. The lawsuit, which amounts to NIS 3.1 million, was accompanied by a series of documents — among them financial reports, bank transfers and correspondence — which, according to Karraben, were forged or falsely presented to it by the owners of Montefiore Arnon Geva Wineries in an effort to convince Friedman, and later the Hershman family representative Arik Hershman, to buy shares or lend money to the Israeli wine brand.
The lawsuit, filed by attorneys Dror Arad-Ayalon and Yuval Nahmani, alleged that Geva "managed the company and contacts with investors, while presenting false reports, forgery of bank documents and financial reports, tax offenses, fraudulent receipts and money laundering."
Another defendant is the prominent Jerusalem lawyer Eitan Geva, Arnon's father, who was formerly a director at Montefiore. According to Karraben, Geva knew about his son's actions, or looked the other way. The suit is based on the testimony of Friedman and other associates of Eitan and Arnon Geva.
The affair began in 2014, when Friedman, then an attorney for Donald Trump, served as a partner in the New York Kastovich law firm. Friedman was approached by Arnon Geva and his nephew Yaron Karni, an investment consultant who was also a shareholder in Montefiore, and told him that Arnon was looking for an investor to buy a quarter of the company's shares.
"Arnon claimed that he developed a unique business model, which he claimed required only a small investment, if any, for ongoing operations, leaving the business almost free of debt. The company purchases grapes from known suppliers and transports them to a large capacity winery, Muni Winery. The wine is produced by the well-known winemaker Sam Soroka, under Kosher supervision, and thus the only production costs was the money paid to the Moni Winery for the use of its facilities and the payment of the winemaker. "
Friedman agreed to invest $ 600,000 in the company, but stipulated that the company would not carry a debt to suppliers exceeding $10,000. He later lent the company another $130,000.
In light of information he uncovered, he claims that Arnon cheated him by promising that the company's profits would be 100% and that it did not require loans. The lawsuit also alleges that Geva tricked Friedman into claiming that Montefiore was a candidate to receive a prestigious franchise for the commercial operation of the ancient Yemin Moshe windmill in Jerusalem (established by Sir Moses Montefiore, the wine brand’s namesake) and that it will establish a visitors' center and a wine shop. At the beginning of 2017, Arnon notified Friedman that the company had won the concession, while in fact another company did.
In March 2017 Friedman was forced to sell his shares in Montefiore in light of his appointment as ambassador. The Hershman family paid him the amount of the investment and of the loan he gave. At the end of that year Arnon approached the Hershman family and asked for a $75,000 loan. He claimed that the company's business was successful and that the financing was needed to make a large order for a supplier selling large quantities of wine abroad.
At that point Hershman's suspicions were aroused and he asked to see the company's financial statements. He claims Arnon gave him falsified documents stating that the company was in a good financial position while in reality it was in the red and Geva was forced to take loans from the gray market at an interest rate of 96% per year.
"When the defendants' actions were on the verge of discovery, Arnon falsified documents of the French bank Societe General, claiming it was a company account. In fact, the company never had an overseas account and had not held any assets or funds outside of Israel. The defendants presented the false documents to the plaintiff's attorney, to another debtor, and to the plaintiff's bank in the US as proof of debt repayment, a federal crime in the US.
This action harmed the plaintiff not only because the debt was not paid on time, but also because it placed her at risk of a criminal investigation in the US, and thus its reputation in the bank with which it was working could have been severely impaired. This revelation led to the whole story unraveling.