Following his conviction on July 4 this year for share pegging, Nochi Dankner was sentenced this morning to two years imprisonment and a suspended sentence of a further year, plus a fine of NIS 800,000. Nochi's partner in crime, financier Itay Strum, was sentenced to one year of imprisonment.
Dankner was convicted of having used Strum to influence the share price of IDB Holding fraudulently, in order to improve the chances of success of an offering the company made in February 2012, paying Strum NIS 8 million. Dankner was the chairman and controlling shareholder of IDB at the time.
In handing down the sentences, Judge Khaled Kabub said that the damage caused by Dankner's actions was great. "The offences were perpetrated by someone who was the best-known figure in the Israeli economy and capital market. These were sophisticated actions carried out over three days, involving sums in the tens of millions of shekels, and intended to serve a forbidden purpose."
Kabub added, "Dankner's breach of trust towards the investment community is substantial and weighty. Dankner sought to save his control of IDB, and acted unlawfully. Danker fell from a great height to the depths, but it has not been argued before me that he lost all his assets. Dankner has made an exceptional contribution to society, among other things in activity to strengthen outlying areas of the country."
The Tel Aviv District Attorney's Office had asked for a sentence of 3-5 years imprisonment.
Commentary: Hard on Dankner, but no deterrent
1. The sentence handed down today by Judge Khaled Kabub on Nochi Dankner for his conviction on charges on share pegging, two years in prison, cannot but be regarded as substantial and severe. Nevertheless, it could be said that Dankner got off lightly. The District Attorney's Office asked for a much harsher sentence, of up to five years imprisonment, and the judge himself pointed out in his sentencing that on the basis of the range of punishment available, Dankner's sentence could have been up to 42 months.
Two main reasons led Judge Kabub to impose a more lenient penalty than was sought by the prosecution. One is that he was persuaded that Dankner's contribution over the years to Israeli society was exceptionally large. The judge also forthrightly rejected the criticism that would negate Dankner's actions in this respect on the grounds that his financial contribution to public causes was made through his companies, that is, from public money and not from his own pocket. The judge wrote: "It must be recalled that these donations came out of the company's profit, and Dankner, as a shareholder in the company, bore his proportional share of them." He also found that Dankner directly donated some NIS 40 million of his own money to public causes. "The value of the convicted person's willingness to set aside a not inconsiderable portion of his money for activity to help others should not be underestimated."
The second, and perhaps even more significant reason for the fact that Kabub made do with a two-year sentence for Dankner is the ruling by the Supreme Court a few months ago (in July 2016) in the share pegging case involving Financial Levers Ltd. In that case, the Supreme Court justices cooled the punitive ardor of Kabub's colleague, Tel Aviv District Court judge David Rosen, who wanted to send Jacky Ben-Zaken to jail for three years. The Supreme Court cut the sentence to just 26 months. The justices wrote in the decision that they accepted in principle the stance of the prosecution that penalties imposed for securities offences should be stiffened because of the harm to the community and to the capital market. Nevertheless, they ruled that this should be done gradually. It appears that Kabub, who very much wants to be appointed to the Supreme Court in the current round of appointments, took careful heed of the message from the justices of the highest instance, and avoided imposing on Dankner a penalty harsher than the one ultimately meted out to Ben-Zaken.
2. The sentence is the final chord in the proceedings in Dankner's case in the District Court, but his trial is not yet over. He is expected to make a last stand, through an appeal against his conviction and his sentence to the Supreme Court. Dankner goes into this battle in anger at the law enforcement system, and lacking faith in it. He is sure that he was put on trial out of motives of personal vindictiveness. But to persuade the justices of the Supreme Court to overrule Kabub's thorough, detailed and complete verdict, Dankner will need a lot more than anger. The chances of an appeal succeeding are not seen as high, and Dankner will find it very difficult to avoid going to jail.
3. One of the reasons the prosecution gave for the need to be severe in sentencing Dankner was "If a flame has caught the cedars, what will the moss on the wall say?" The prosecutor said that, because of the Dankner case, the public's confidence in the capital market had been badly impaired, and that talk of the stock market being manipulated was widespread. An interesting question is whether Danker's conviction and jail sentence will lead to stock market fraud being stamped out, or will at least deter others from pegging shares? Unfortunately, research shows that there is almost no connection between the two things. Past experience indicates that the amount of fraud will not diminish much, and that the frauds perpetrated in the future will be more sophisticated.
Published by Globes [online], Israel business news - www.globes-online.com - on December 5, 2016
© Copyright of Globes Publisher Itonut (1983) Ltd. 2016
Published by Globes [online], Israel business news - www.globes-online.com - on December 5, 2016
© Copyright of Globes Publisher Itonut (1983) Ltd. 2016