Four years after the Psagot Investment House Ltd. scandal erupted come the indictments: the Tel Aviv District Attorney (taxation and economy) has filed an indictment against David Edry, who was vice president of Psagot’s brokerage manager of the company’s nostro account at the time, Shai Ben-David, former manager of Psagot’s brokerage, Aharon Navon, former manager of Deutsche Bank Israel’s trading room, and Saar Weintraub, who was a broker at Deutsche Bank Israel.
The indictment accuses the defendants of aggravated fraud and illegally influencing security prices. In addition, the indictment accuses Edry of fraud and breach of trust in a corporation. “Globes” previously reported that the district attorney intended to issue the indictments.
According to the first indictment, the defendants acted together to influence government bond prices in advance of the swap auction carried out by the Ministry of Finance in 2007. According to the joint plan, in the days preceding the auction, the defendants executed many deals, in large volumes, in order to influence the price of one of the bonds in the auction. In addition to the joint plan, Edry and Ben-David acted to influence the prices of other bonds in the auction. These activities improved the conversion ratio that the defendants were entitled to in the auction, and brought in significant profits for Psagot and for Deutsche Bank Israel.
The second indictment accuses Edry and Ben-David of conducting transactions in order to raise Delek Real Estate series E bond prices, based on previous agreements with Delek Real Estate CEO Hillel Rosanski, who promised to buy the bonds back at above market price.
The third indictment accuses Edry of illegal trading activity, by committing fraud and breach of trust against Psagot. Edry is accused of buying a bond for his personal account in December, 2008, and subsequently making massive purchases of the same bond over the course of three months through Psagot’s nostro account, which he managed, in order to raise the bond’s price. He then sold the bond from his personal account for a significant profit, and, only later, after his sale caused the bond price to drop, did he sell the bond from the nostro account.
Suspicion: Bond-price manipulation
The alleged nostro account bond-price manipulation affair erupted in February, 2010, when the local capital market was shocked by the announcement that the Israel Securities Authority had arrested David Edry and Shai Ben-David. The market was further shocked when it was subsequently revealed that former Psagot CEO Roy Vermus and subsidiary Psagot Securities CEO Shay Yaron were also suspected of involvement.
Initially, the investigation also covered Psagot, but in October, 2010, former State Attorney Moshe Lador accepted Apax Partners’ request to buy control of Psagot, and instituted an agreement according to which the case against Psagot would be dropped due to lack of public interest, but the company would be required to meet a few conditions. Among the conditions were: the replacement of senior staff, establishment of a strict corporate governance code, and a NIS 150 million penalty. Following the agreement, Vermus was removed from his post as CEO, the penalty was paid, and the case against Psagot was closed.
In July, 2013, the dark cloud over Vermus was lifted, when an agreement between his attorneys and the state attorney to close the case against him was signed.
Published by Globes [online], Israel business news - www.globes-online.com - on April 7, 2014
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