- This is an enormous case of director’s fraud – in excess of US$ 100 million – which was heard, and is still continuing, within the framework of one of the largest liquidation cases ever in Israel.
- Brief factual background: The Dunhill Concern is a complex of four industrial factories built on 120,000 square meters in Beer Sheva. The principal interested party in the Concern was Mr. David Fisher, although, following his attempts to camouflage this fact, the company was formally owned by various straw companies and individuals overseas.
In order to raise capital to build the factories, the Concern entered into a loan agreement in 1992 with the Italian bank, Banco di Napoli, which is domiciled in Luxemburg. The loan, for 85% of the project’s construction cost (US$ 95,710,000), was guaranteed by the Italian government corporation, Sacche. The Concern undertook that a further US$ 34 million would be invested by the owners, as equity. Approval was also given to the Concern for a US$ 65 million grant from the Investment Center in Israel, although the sum actually granted only amounted to US$ 14.5 million. Despite the considerable amounts of money provided, the building of the factories was never completed and most of the funds found their way, due to the perpetration of massive fraud, into the hands of none other than Fisher.
In 1998, the company began liquidation proceedings, and the liquidator, Zvi Yochman, CPA, using our services, petitioned the Court with the request that Fisher be held personally responsible for all the Concern’s debts, which totaled in excess of US$ 130 million.
Click here to read the request.
In May 2002, the District Court ruled that Fisher was personally responsible for all Dunhill’s debts to the bank and to the Investment Center in the amount of US$ 112,560,000.
Click here for the final decision.
- Within the framework of the lawsuit against Fisher, the District Court granted Mareva and Anton-Piller injunctions, which were addressed to financial bodies and trust companies in a large number of foreign jurisdictions, including Luxemburg, Vaduz, Lichtenstein, the British Virgin Islands, the Isle of Mann, Switzerland, the Bahamas, the United Kingdom and others. The above injunctions were enforced by the above countries and numerous original documents were forwarded to us by those financial institutions and trust companies, by virtue of the aforementioned injunctions. These documents greatly contributed to our ability to reveal the concealed ownership structure, which had aided Fisher in cheating the bank and the Investment Center, and helped in exposing the rolling funds mechanism used in the pretense of presenting the equity investment.
Click here to read the request.
- It should be noted that, within the context of the claim, Mr. Alan Katz, who had served as a straw owner for Fisher, agreed to turn “State’s witness”. Katz cooperated with the liquidator and, in return, an agreement (which was approved by the Court) was signed with Katz, pursuant to which it was agreed that the liquidator would not instigate any proceedings against Katz. From Katz’s testimony it was revealed, as was also ruled by the District Court, that, contrary to their undertakings and representations to the bank and to the Investment Center, Katz and Fisher had in fact not made any investment in the project’s equity. In actual fact, Fisher had rolled over the funds that he received from the bank itself and presented them as “equity”. An additional condition for the granting of the loan was the presentation of construction progress certificates. However, according to Katz’s testimony, he signed the reports sent to him by the contracting company, which was also owned by Fisher, without checking the reports or making any examination as to whether the work had been executed. In 1995, in New York, Katz signed a completion certificate for the project, which stated that the factories had been examined by the company and, having been found to be in compliance with the agreement’s requirements, had been handed over to the company. Based on this certificate, the bank released a deposit of US$ 11 million. However, in actual fact, there had been no supervision over the work done and the overall project had not been completed in 1995. It was also revealed in testimonies given to the Court that, according to the authenticated documents seized by us as a result of an action filed in Vaduz, Lichtenstein by our office, a corporation by the name of Lunidar Stiftung had been established in Vaduz in 1992. This corporation owned, through trust companies on the Isle of Mann, the shares in the company Dunhill Properties, which was the owner of the conglomerate. The documents showed (as was confirmed from Katz’s testimony and from an affidavit by Fisher following publication of the Lunidar documents) that Fisher owned 95% of the rights in Lunidar, while Katz owned 5% of the rights in this corporation. It was also revealed that, contrary to representations made to the bank and to the Investment Center, Fisher was in control of the conglomerate and that, in fact, it was Fisher who was both the developer and the main contractor for this project. For his part, Fisher used this work in order to inflate the prices of the Concern’s construction costs from a cost of approximately US$ 30 million to an astronomic price of US$ 116 million.
- Fisher lodged an appeal with the Supreme Court against the judgment holding him responsible for all the debts of the conglomerate in the amount of approximately US$ 112 million. The Supreme Court upheld the ruling that Fisher is personally responsible for the debts of the conglomerate and returned the hearings to the District Court to determine the extent of Fisher’s responsibility. The District Court recently decided to fix the extent of Fisher’s responsibility in the approximate amount of US$ 60 million. The liquidator, through our office and Fisher lodged an appeal with the Supreme Court against the above judgment.
- It should be noted that the liquidator, using our services, has taken extensive measures to locate and attach the assets of Fisher and the companies under his control, wherever they may be throughout the world. The amount of assets seized is not inconsiderable, but these cannot be realized so long as no peremptory ruling has been delivered. Once the Supreme Court has delivered its judgment, we shall take action to realize the assets that have been seized throughout the world, and the proceeds therefrom will be added to the liquidation funds for the benefit of the Concern’s creditors.