Israel Electric Corporation (IEC) (TASE: ELEC.B22) is liable to pay dearly for allegedly collecting billions of shekels illegally from the public to cover the costs of benefits for the utility's employees. Tel Aviv District Court Judge Drora Pilpel today approved a class-action lawsuit against IEC for allegedly illegally collecting NIS 11 billion from the public since 2002. The petitioner alleges that IEC used the money to finance pay hikes, bonuses, and illegal excess salaries to employees.
Judge Pilpel rejected IEC's defense that the lawsuit was liable to cause severe harm to the public, which would exceed any benefit from the legal proceedings, because IEC is a government company providing a critical public service, and legal proceedings could undermine its financial stability.
"Yes, the size of the claim, if managed as a class action suit, is unprecedented in scale. Nonetheless, it is necessary to take into account the amount of money IEC has frozen for various employee benefits, the massive NIS 8.9 billion mistakenly collected for pensions, and the millions of shekels in excess bonuses at IEC in recent years," said Judge Pilpel.
The petition to recognize the lawsuit as a class-action suit was filed in 2009. The petitioner alleged that, for years, IEC had overcharged customers through the electricity tariff, which was entirely determined on the basis of the utility's costs, including salaries and related expenses illegally paid to its employees. These expenses included bonuses amount to two months' salaries on 140% of the basic salary, illegal promotions and pay hikes, promoting retirees every two years, paying car expenses regardless of actual use, and so on.
The statement of claim says that these payments were included in reports IEC provided for the purpose of setting the electricity tariff. In this way, the public financed excess salaries at IEC.
IEC said that it would appeal the ruling to the Supreme Court.
Published by Globes [online], Israel business news - www.globes-online.com - on April 21, 2013
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