Former Malam Systems (TASE: MLAM) controlling shareholder Gad Zeevi has been charged with aggravated fraud, maintaining false records, and providing a misleading detail in a report on the company management. Also facing charges are former Malam CEO Gilad Rabinovitch and other former company officers.
According to the indictment, Zeevi received NIS 1 million in management fees under an agreement between him and Malam management. In September 2001 an attempt was made, with Zeevi’s consent, to double the sum to NIS 2 million. The attempt ultimately failed.
Zeevi later sought an appointment as board chairman for a payment of $15,000. The indictment claims that, in an effort to secure approval for the fee, Rabinovitch approached the company’s public shareholders, including mutual funds and IT companies, to find out what their position was on Zeevi’s fee. Zeevi and Rabinovitch feared that they would not secure approval by a general shareholders meeting for the fee to Zeevi unless the proxy votes for the shares secured as collateral to Bank Leumi (TASE: LUMI) were counted as a disinterested vote. This was because the proposal would not win approval of one third of the voters present at the vote who were not parties at interest.
In light of this, Zeevi and Rabinovitch conspired to fraudulently obtain the approval of the shareholders meeting by classifying the proxy votes for the encumbered shares as votes of shareholders who are not parties at interest, in the event that the necessary one third majority could not be secured.
It was clear from the results of the vote that, without the false classification of the encumbered shares as owned by parties not at interest, the one third majority would not be secured. By making the false classification, the two men were able to secure approval of the shareholders meeting for the management fee agreement.
Published by Globes [online], Israel business news - www.globes.co.il - on November 13, 2006
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006