Former finance minister Moshe Kahlon faces possible charges of fraud and securities reporting offenses related to his time as chairman of the Unet Credit company, the State Attorney’s Office announced on Tuesday.
The ex-Likud and Kulanu lawmaker is alleged to have ordered senior company officials not to report serious fraud within the organization, where he served as chairman of the board from June 2021 to June 2022.
The decision to charge Kahlon is still pending a hearing, as are planned charges against three of Unet Credit’s controlling shareholders in relation to a separate affair in which they are suspected of illegally allocating Unet Credit shares to a private company they owned.
Kahlon’s attorney Nati Simchony said in response to the pending indictment: “We are certain that the truth will come to light. The fact that there was no flaw in Kahlon’s conduct will become clear during the hearing and will lead to the closure of the case.”
Investigations into wrongdoing at Unet Credit began in 2022, and the Israel Securities Authority completed its investigation and passed its findings to the State Attorney’s Office in December last year. The non-banking credit services company, which provides loans and other financial services for its clients, was traded on the Tel Aviv Stock Exchange until its shares were frozen in the wake of the investigations.
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According to the State Attorney’s Office, some NIS 5 million were found to have been embezzled from Unet Credit’s Nazareth branch, while serious irregularities were found regarding other funds in the branch.
The company’s compliance officer, Yoav Tsabar, in late 2020 allegedly uncovered these problems, which were also known to the company’s owners but were hidden from the board and the public.
A stock market ticker in the lobby of the Tel Aviv Stock Exchange, March 15, 2020. (Flash90)
The State Attorney’s Office alleges that Tsabar delayed reporting his findings to Kahlon until the beginning of 2022, and Kahlon subsequently instructed him not to disclose the findings to the board “due to concern of harming the company’s credit rating.”
Only in the middle of 2022 did Tsabar report the irregularities to Unet Credit’s board of directors, “which immediately acted to appoint an external auditor and published the results to the public,” said the State Attorney’s Office.
Following the revelations, trading on Unet Credit shares was frozen and it was delisted from stock market indices. Auditors who had signed off on its financial statements from 2020 to 2022 withdrew those approvals, prosecutors noted.
Tsabar is facing an indictment on the same charges as Kahlon, pending a hearing.
Kahlon served as a Likud MK and minister for 10 years, and was credited with spearheading a popular program that deregulated the cellphone industry. He later formed the Kulanu party under his leadership and served as finance minister from 2015 to 2020.
In a separate case, the controlling owners of Unet Credit, Tzahi Ezer, Shlomo Isaac, and Shai Penso, are suspected of illegally allocating two million shares to a private company owned by the trio and two consultants. The shares were worth some NIS 50 million ($13 million).
The State Attorney’s Office alleged that the transfer of the shares as presented to the public company’s shareholders was “substantially different” from the transaction that was actually carried out, constituting fraud.
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