Court accepts Discount Bank position and denies Zeevi's request – Zeevi's bankruptcy proceeding will not be closed to the public

After opposing the request of Discount Bank to foreclose some of his assets, businessman Gad Zeevi raises a new argument. In the objection which he filed against Discount’s application to open bankruptcy proceedings against him, he claims that the moves made by the banks have caused his companies huge losses – and threatens a tort claim

12.12.17| Anat Rouah

Businessman Gad Zeevi is opening a new front against Discount Bank, which is trying to collect a debt of $22 million dollars from him – and he is now threatening Discount with a huge suit. In the objection which he filed in response to the Bank’s request to start bankruptcy proceedings against him, Zeevi claims that the consortium of banks has over the years caused him damages of a scope of approximately one billion shekels. According to Zeevi, if Discount will not discontinue the proceedings against him, he will demand to offset from the debt Discount Bank’s share in it, which he estimates at NIS 106 million.

In the objection which he submitted to the Haifa District Court through attorney Shuli Goldblatt, Zeevi asked to have confidentiality imposed on the documents in the petition and to conduct the hearing behind closed doors. He based this on the grounds that publication of the objection might harm the many companies in which he holds office and in companies “perceived by the public as connected to him”. Zeevi claimed that “curiosity for its own sake cannot serve as justification for harming a person’s good name”. Judge Bettina Tauber rejected his claims and ruled that Zeevi had not succeeded in indicating a mandate that allows restriction of the right of the public to know about the proceeding.

The companies that Zeevi complains are being damaged are the same companies that Zeevi claimed two weeks ago, in response to Discount’s request to foreclose their assets, that he is not the controlling shareholder in them. Then Zeevi emphasized the fact that these companies are under a family trust whose beneficiaries are his four adult children. In the new request, this claim is weaker, and Zeevi now refers to the damage to the companies within the Zeevi Group as damages being caused to him personally.

In the response filed by Discount to the objection, through attorneys Assaf Englard and Zohar Ilan of law firm Hamburger Evron & Co., the Bank claims that the documents that Zeevi attached to the request actually confirm the Bank’s claims regarding Zeevi’s control of the companies and the mixing of his private assets and the assets of the companies.

The debt that has been conjured up

The start of the conflict between Discount and Zeevi is to be found in financing that Discount provided to Inpecos, a company engaged in oil deals. Discount claims that Zeevi is the controlling shareholder in Inpecos, and that a decade ago the company stopped repaying the loans it took from the Bank. After Discount’s attempts to collect the debt failed, the Bank started bankruptcy proceedings against Zeevi and tried to apply foreclosure of his assets.

Zeevi denies his responsibility for the debt in a series of arguments. The first argument is a technical one: According to him, Discount has no letter of guarantee signed by him personally, and the guarantee presented by the Bank does not refer to the specific bank account connected to the debt.

Secondly, Zeevi argues that the damage caused to the Bank as a result of the attachment order against him and from declaring him bankrupt is considerably greater than the benefit the Bank would derive from the order. According to him, a receivership order would cause “other creditors to decide to call for immediate repayment of various credit lines of which he is the guarantor”, and that it would be more effective to allow him to arrange his guarantees in the proper order.

In addition to these two arguments, Zeevi conjures up the huge damages caused to him by the banks in a previous case. In 1999, Zeevi purchased Bezeq shares through a loan of 750 million dollars from a consortium of the banks (Poalim, Leumi, International, Discount, Mizrahi Tefahot, Mercatile, and Union). After Zeevi and the companies failed to meet the terms for repayment, the banks appointed a receiver who sold the Zeevi shares for 3 billion shekels – but only after about two years. Zeevi argued that the banks charged him interest of 829 million shekels for arrears during this period, when they could have sold the shares immediately. In 2015, the Supreme Court ordered the banks to repay approximately 238 million shekels to Zeevi.

Zeevi now claims that the total damages caused by the banks amount to about one billion shekels. According to him, the arrears interest he was charged by the banks was returned to him with a delay of six years, and the fact that the amount had not been returned to him as early as 2009, when the sale of the Bezeq shares was completed, caused him damages of NIS 996 million. In the request, he lists a series of examples of transactions in which he suffered losses because of cash flow difficulties that also affected the trustee companies, and because of the coordinated behavior of the consortium of banks which withheld credit from the companies connected to him.

Zeevi had a vineyard

According to Zeevi, Discount Bank had already paid him 31 million shekels in September 2015 but, following the ruling of the Supreme Court, Discount Bank was ‘foaming at the mouth’ against Zeevi, and the Bank has behaved vindictively toward him since that time.

Zeevi estimates the share of Discount Bank in the damages caused to him by the banks at 11%, amounting to 106 million shekels. According to him, he has grounds for a claim against Discount, and if he is obliged to pay any amount to the bank, he will indeed file such a claim against Discount Bank and perhaps against the other banks too.

In practice, Zeevi attributes his current difficulties to harassment on the part of the banks. He summarizes his claims by saying that the request to start bankruptcy proceedings against him is tantamount to “both murdering and inheriting”.