Internal report details Bank of Israel disarray

Conflicts of interest and other managerial deficiencies are listed in the report.

"A ticking bomb" is how Bank of Israel sources describer an internal report by the bank's Internal Auditor Shula Mishli that discloses suspicions of financial and administrative irregularities in contracts, the hiring of friends and relations in exchange for cash and by improper means, and conflicts of interest in contracts.

One of the conflicts of interest listed regards a contract with Ness Technologies Ltd. (Nasdaq: NSTC), the vendor of SAP systems for the Bank of Israel. Aharon Fogel simultaneously serves as both chairman of Bank of Israel advisory council and as chairman of Ness. At the time, and until recently, Ness has an exclusive license to distribute SAP AG (NYSE; XETRA: SAP).

The Bank of Israel signed a contract with Ness over the objections of some members of the bank's board of management, who said that the SAP ERP software was too heavy and too expensive (costing millions of dollars) for the bank's needs. Claims have also been made that no proper comparative study was made between SAP software and the solution offered by Oracle Corporation (Nasdaq: ORCL).

Another claim in the report is that Yossi Kucik served as an outside advisor for the Bank of Israel on labor issues and contracts. Kucik was appointed without a tender and with no approaches made to other experts or consultants in the field. Kucik is a former Ministry of Finance director of wages and director general of the Prime Minister's Office.

A third claim is that Eretz Israel Museum director general Ilan Cohen, a close associate of former Bank of Israel director general Jacob Danon, organized events for the Bank of Israel at the Israel Museum.

The Bank of Israel management has kept the report highly confidential, and refused to disclose it. A request by "Globes" under the Freedom of Information Law (5758-1998) as well as a court ruling on the disclosure of internal reports by public agencies, have been dismissed.

A Bank of Israel spokesman said in response, "At this stage, we're only talking about a draft report, and the work on the final report has not yet been completed. The audit committee has not yet finished discussing the matter. In addition, all the relevant parties at the Bank of Israel know about the issues raised in the report."

Mishli was compelled to write the report at the orders of the external representatives on the Bank of Israel Audit Committee. At a committee meeting, one of the external representatives raised questions about claims by former senior officials and media reports regarding alleged irregularities in contracts signed in recent years.

Published by Globes [online], Israel business news - www.globes-online.com - on July 24, 2008

© Copyright of Globes Publisher Itonut (1983) Ltd. 2008

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