A storm has hit the capital market and Harel Insurance Investments Ltd. (TASE: HARL), Israel’s third largest insurance company, controlled by the Hamburger family. Harel Investment House deputy CEO and CFO Guy Vaisman is suspected of embezzling NIS 40-60 million, according to preliminary estimates.
It is not yet clear if Vaisman stole money from Harel’s clients. The company said that, as far was known, only company funds were stolen. Vaisman apparently used some of the stolen money to bet on Tel Aviv 25 index derivatives and options.
Market sources believe that the embezzlement was carried out through loans provided by Harel Investment House Ltd. This is the normal business of investment houses, which extend credit to clients to invest in derivatives and other financial instruments. Harel Investment House extends tens of millions of shekels in loans daily.
Harel Insurance was under heavy pressure this morning, and executives held constant meetings. Harel Insurance chairman Yair Hamburger met company executives, and told them, “This is a very serious crisis.”
Harel today called Vaisman “a very clever man who outsmarted the system. We still don’t know what happened at Harel Investment House.”
Since this morning, a growing number of Harel customers have been calling the company’s service center worried that they might have been hurt by the embezzlement.
To calm customers, Harel Insurance notified the Tel Aviv Stock Exchange (TASE) last night, saying, “On the basis of information in the company’s possession so far, Harel Investment House’s clients were not affected by the suspected activity.”
The exact scale of the embezzlement is uncertain at the moment, nor is it known whether Vaisman had any accomplices.
After discovering the embezzlement, Harel filed a complaint against Vaisman with the Israel Police National Fraud Unit, and the unit questioned him at its Bat Yam headquarters this afternoon.
The embezzlement became known when Harel Insurance sent a notice to the TASE. Harel said that as the result of embezzlement at its subsidiary, Harel Investment House deputy CEO and CFO Guy Vaisman was fired.
Harel apparently discovered the embezzlement in an audit at the request of the Israel Securities Authority, which suspected fraud at Harel Investment House. Harel Insurance and the Securities Authority are working together on the case.
The audit found irregularities at Harel Investment House, which led to Vaisman. He was summoned to Harel Insurance’s office yesterday, reportedly confessed to the embezzlement after a long meeting. Vaisman, 41, worked for Harel for 19 years, including 10 at his current post. As number two at the company, he was considered an obvious appointment of the owners, and had their full confidence.
Published by Globes [online], Israel business news - www.globes.co.il - on April 16, 2007
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