Regulator finds strong evidence of graft in Bezeq probe

Regulator finds strong evidence of graft in Bezeq probe

Communications Ministry chief suspected of influencing decisions in favor of the telephony and TV giant

The offices of Bezeq, the country's largest telecom group. (Kobi Gideon/Flash90)
The offices of Bezeq, the country's largest telecom group. (Kobi Gideon/Flash90)

The Israeli Securities Authority on Monday handed over to the public prosecution what it said was compelling evidence against the heads of Bezeq, Israel’s largest telecom company, after an investigation that has implicated two figures considered close to Prime Minister Benjamin Netanyahu.

ISA head Shmuel Hauser found strong evidence supporting the initial suspicions of criminal offenses, including violations of the securities law, fraud, breach of trust, and obstructing legal proceedings, the ISA said in a statement.

Although no names were mentioned in the statement, the initial ISA investigation looked into communications mogul Shaul Elovitch, the controlling shareholder of Bezeq; Shlomo Filber, the director general of the Communications Ministry; Stella Handler, Bezeq’s CEO; and the CEO of the Yes satellite TV company, Ron Ayalon.

Shaul Elovitz, Bezeq owner (Calcalist screenshot)

Elovitch is considered a personal friend of Netanyahu’s, and critics had long railed at the conflict of interest that relationship could cause the premier in his capacity as communications minister, a post he filled from the end of 2014 until February of this year.

The investigation found strong evidence that Elovitch made NIS 170 million ($48 million) illegally in a business deal Bezeq made with Yes, Monday’s statement said.

Communications Ministry director-general Shlomo Filber at a Knesset committee meeting in Jerusalem, July 24, 2016. (Yonatan Sindel/Flash90)

The ISA said it uncovered evidence Bezeq received insider information from the Communications Ministry, and also worked with the director of the ministry to influence decisions so that Bezeq would benefit.

“This is one of of the most complex and broad investigations carried out by the ISA, and included many investigative activities and the use of the most advanced technologies in the world,” Hauser, ISA chief, said.

In response to the allegations, a lawyer for Elovitch said, “The correct thing to do is to be patient and wait for the truth to come to light,” insisting that no crimes had been committed. A Bezeq spokesman declined to comment.

“The announcement of the ISA is another negative step for the Bezeq group and its directors, managers and controlling shareholder. It further solidifies prior allegations, but, as always, the proof of the pudding will be in the eating — the Israeli courts,” said Shirin Herzog, a senior partner and head of mergers and acquisitions at the Israeli law firm Ron Gazit, Rotenberg & Co.

“More generally, the announcement has ramifications for directors and managers in publicly traded companies, who should take criminal aspects into consideration when they adopt resolutions regarding sensitive transactions,” she said.

The ISA statement on Monday indicated for instance that the regulator now expressly prohibits the transfer of sensitive information regarding transactions to the controlling shareholder, when the shareholder is an interested party in the deal. “Until now, it was not directly prohibited, but only a lawyers’ inference and recommendation. Now it is also set by the ISA,” Herzog said.

Shoshanna Solomon contributed to this report.

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