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The Trade Bank Story - Special Circumstances?

By Adv. Dor Heskia

Published on: Haaretz - TheMarker

The collapse of the Israeli Trade Bank and the embezzlement of the public funds conducted by its clerk Mrs. Eti Alon, makes it difficult for the Trade Bank to litigate against its debtors and the Israeli court is reluctant to help.

In a recent precedent ruling, Judge Nissim Yeshaya of the District Court in Tel Aviv, ordered to postpone the enforcement proceedings of the Trade Bank against its debtors. This may be what is called “lack of credibility” in the Army.

Judge Yeshaya’s ruling was given in the matter of the Sason family, which are substantial shareholders with personal interest in the shares of the publicly traded company “Kablanim”. The Sason Family worked with the Trade Bank in its good old days prior to discovery of the embezzlement. As a security for their business activities, the Sason family mortgaged its share in “Kablanim”.

Recently, due to debts of the Sason family, a receiver on behalf of the Trade Bank started to realize the mortgaged shares. The Sason family petitioned the court to order the postponement of the realization proceedings. These kind of petitions are common and usually the court favours the guarantee holders rather than the debtors. In this case however, the debtors superseded.

The Sason family, represented by advocates Shaul Bergerson and Amir Dolev, claimed that during the year 2001 they have submitted a lawsuit against the Trade Bank claiming that its managers acted in a wrongful manner and caused them great damages. According to the Sason family, the lawsuit was filed before Eti Alon’s embezzlement was published. In this matter they added that the Trade Bank’s books are not reliable and may not be used as reference.

Adv. Bergerson claimed that the Trade Bank’s request is based on an affidavit given by its former CEO, which can not be relied upon since the former CEO is one of the defendants in a large scale lawsuit filed by the Trade Bank’s liquidator against Eti Alon and other directors and officers of the Trade Bank. At this lawsuit, based on an investigation made following the collapse of the Trade Bank, the liquidator raised several claims regarding the credibility its former CEO, and to be more precise, that his reports to the board of directors were faulty, unreliable and undependable. The Sason family saw the liquidator lawsuit as the bank’s own-goal and claimed that it can not raise claims in proceedings against them, that contradict claims that the bank itself raised against its former officers. The liquidator of the Trade Bank can not rely on officers in claims in favour of the bank, while the bank itself has claims against those officers.

In other words, the Sason family argued that if the bank officers have credibility problems, then these should work both ways. In light of the Israeli Trade Bank collapse and the lack of order in its books, as described in the liquidator’s lawsuit against the bank’s officers, those books are not reliable and can not be trusted with the respect usually granted to official bank documents.

It was previously ruled, at the Eliyahu Kachtan case, that the high credibility given by the judicial system to banking records and other bank computer printouts, did not foresee a case of embezzlement of public funds of such a big scope.

To conclude, the Sason family claimed that the Israeli Trade Bank is under liquidation proceedings and is in fact insolvent; the bank records do not represent the true state of the bank accounts; the bank officer who made the statements lack credibility- according to the banks own claims that were raised in other procedures; in case that the court will rule in favour of the bank, it is a doubtful that restitution will be possible.

The main question raised was if these circumstances justify the staying of the shares realization proceedings.

Judge Nissim Yeshaya ruled that the answer to this question is positive. The judge accepted the petition and ordered to stay the realization proceedings against the Sason family until final ruling in their lawsuit against the bank. The decision was reasoned with the fact that it is impossible to revoke the chance of the Sason family to win their case.

The result is that the realization proceedings made by the bank were stayed and at this point the bank is reluctant from realizing the guarantees. This although usually bank claims for realizing guarantees end with victory of the bank and the receiver on its behalf. In the case of the Israeli Trade Bank, things looked different. Maybe it is possible to see “special circumstances” in all matters regarding the Israeli Trade Bank. 



This article and the information above may not be taken as a legal advice whatorever. The writer disclaims responsibility towards the reader and users of this website.


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