Lawyers told "Globes" today that they doubt that the suspicions against IDB Holding Corp. Ltd. (TASE:IDBH) chairman Nochi Dankner will result in an indictment, at least as far as the main charge - of securities fraud - is concerned. They said that it would be hard for the Israel Securities Authority to prove that Dankner had criminal intent in his actions as they involved actions in stages, and that the buying and selling of shares is usually a completely legitimate act.
How does the Securities Authority intend to prove that Dankner had criminal intent in his actions. The case will apparently succeed or fail on wiretapping of his conversations after he fell under suspicion. At issue are conversations he had with the other parties in the case, which the Securities Authority believes will show that Dankner acted with planning intent, not innocently.
The problem is that the wiretapping was carried out after IDB's offering, and it would have presumably been much better to prove intent from meetings and conversations held before and during the offering.
For the sake of comparison, in the securities fraud case at Psagot Investment House Ltd., the Securities Authority was wiretapping conversations in the dealing room in real time.
The Dankner case can also be compared with another securities fraud case in which an indictment has already been filed, and which is now being heard by the Tel Aviv District Court: the bonds-pegging case at Melisron Ltd. (TASE: MLSR), controlled by Leora Ofer. In this case, Melisron CEO Avi Levy and Ofer Investments Ltd. CFO Golan Madar are accused of buying Melisron bonds in November 2009 in order to boost their price ahead of an issue to expand the company's Series D bond.
The indictment states that the two men sought to make the bond price attractive, compared with its market price, and improve the chances of the issue's success. Melisron, Levy, and Madar are accused of securities fraud and reporting violations.
The Securities Authority believes that, as in the Melisron case, the suspicions against Dankner will solidify into an indictment. It is important to note that the actions attributed to Dankner were not always considered as criminal acts. Only in the mid-1990s, did the courts rule for the first time that initiating intervention in the trading of securities with the sole intent of influencing the price, rather than to take a position, was manipulation. In other words, even a genuine securities transaction can be considered as a fraudulent effect (Tempo Beer Industries (TASE: TMPO) vs. the State of Israel, 1997). Before then, convictions for securities fraud were only for fictitious transactions and collusion.
Published by Globes [online], Israel business news - www.globes-online.com - on November 28, 2012
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