Israel Police announced today that the National Fraud Unit has been questioning Dan Dankner under caution about his roles as director and chairman of Bank Hapoalim (LSE: BKHD; TASE: POLI) in the period 2005-2009, on suspicions of impropriety. The investigation is being supervised by the economic department of the State Attorney's Office.
It will be recalled that Dankner was ousted from the post of chairman of Bank Hapoalim a few months ago after pressure was applied by Governor of the Bank of Israel Stanley Fischer and Supervisor of Banks Rony Hizkiyahu, for reasons that have still not been made public. The police spokesperson's announcement gave few details, but it is believed that the police are examining Dankner's ties with the investment fund RP Capital.
RP Capital is an investment group set up in 2005 in London. It focuses on emerging markets. Its founders were three former employees of investment house Merrill Lynch, headed by Rafael Berber, an Israeli, who had been global head of the equity-linked products group at Merrill Lynch. His partner in the fund until recently was Czech businessman Petr Kellner.
Dankner's connection with the fund came about through Elran Investments, the company controlled by cousins Gad Dankner and Dori Dankner, in which Dan Dankner himself held shares. Elran Investments, through its subsidiary Elran (DD) Israel Real Estate, was RP Capital's partner in real estate company Atlas Estates. It sold its holding in Atlas Management Company, the property manager of Atlas Estates, to RP Capital in March 2008. The partnership also extended to Romania, where the two firms jointly hold local satellite television company Boom.
The link that the police are apparently investigating relates to the deal whereby Bank Hapoalim bought control of Turkish bank Bank Pozitif in 2005. Hapoalim bought 57.55% of Bank Pozitif, while at the same time RP Capital was to have bought 7.45%. The agreement between the parties contained a compensation mechanism in the event that the fund was unable to complete the investment in the Turkish bank, if it failed to obtain the necessary permit to be part of the controlling interest in it. RP Capital was also granted an option to buy 7.45% of the shares in Bank Pozitif from Bank Hapoalim.
In the end, the fund did not invest in the Turkish bank, and in 2008, a proposal was raised before the Bank Hapoalim board to sign an agreement whereby RP Capital would forego its option to buy shares in Bank Pozitif from Bank Hapoalim, and would be compensated to the tune of $25 million. The investigation is apparently examining whether the board decision to compensate RP Capital was properly made, and to what extent Dankner was involved in approving it, in the light of the fund's relationship with the company controlled by his relatives.
Dan Dankner, who is currently CEO of Arison Investments, controlled by Shari Arison, said in response, "For understandable reasons, I have no intention of commenting at this stage on the various reports about the matter. I call for the investigation to be respected and to be allowed to proceed without any interference. I have complete confidence in the authorities, and I am cooperating with them fully. I hope that the matter will be clarified thoroughly, and that it will be brought to a conclusion as soon as possible."
A spokesperson for Arison Investments said, "Danny Dankner is at work as usual." Bank Hapoalim said, "The investigation in question is not an investigation of the bank. The bank continues to conduct its business in a regular manner and the investigation will not disturb its activity. It hopes that the investigation will end soon."
Published by Globes [online], Israel business news - www.globes-online.com - on March 3, 2010
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