Prominent class actions and derivatives that were submitted to protect the public
In Representations of the general public that is harmed by violations of state law, Adv. Ilan Verdnikov combines economic understanding of investments and the capital market, with extensive and unique legal knowledge. The vast experience and knowledge accumulated over the years, thanks to the focus of his activity in this unique field of expertise, lead to significant achievements for clients and the public represented by Adv. Ilan Verednikov. As an attorney who is active mainly in the legal field of class actions and derivatives, he has a great deal of knowledge in locating the appropriate evidence, the right claims and the pre-examination of the chances of success in the class action or derivative. The motto of the firm is "Quality is superior to quantity"! Therefore, class actions or derivatives are filed only after a thorough examination of their factual, legal and economic basis.
In the review process, emphasis is placed on strict screening, so that only claims with good chances of success will be submitted in the end. Prominent examples of class actions and significant derivatives for compensating investors (or consumers) are detailed here and also published in the various media channels:
A class action suit for compensation to the owners of securities of Shikun & Binui
The amount of damages according to an expert opinion, CPA Yehuda Barlev: 565 million
In summary, Shikun & Binui, a leading public company, violated the obligation to disclose and report corrupt practices and caused severe damage to the public, the owners of securities of the Company, which was concealed from them. See the article published on the Ynet website.
The Economic Court decided to prefer the class action that we submitted, being qualitative, professional and supported by established evidence, over a competing class action suit that was hastily filed and demanded a wide-ranging amendment. For further reading on the court's decision, see the article published on The Marker website.
Class actions against airlines The collection of cancellation fees is higher than permitted
Total amount of claims: over 100 million
In essence, the airlines (Turkish, Aegean, Ukrainian, and Austrian Airlines) required consumers to pay cancellation fees above the limit set by the Consumer Protection Act. According to our claim, the airlines that operate and market to consumers in Israel, operate flights from and / or to Israel can not ignore the Israeli law! The claims were filed in August and September 2016, in the Central District Court in cooperation with the law office of Holdstein-Shalev.
Class Action for Compensation of Jerusalem Economic Shareholders
The amount of damage according to an expert opinion, Prof. H. Levy: 109.6 million
The motion for approval of a class action was filed on the grounds of discrimination against shareholders and acts of lack of authority of the board of directors, in the execution of a private and unequal issue that diluted the shareholders at a low price without obtaining their approval. The evidence we found and a representative in the District Court also indicate serious flaws in the conduct of the members of the Board of Directors, who decided on the unequal issue. Contrary to the company's reports to the public, and most strangely they did not allow the representative plaintiff and the general public to participate in the issue, but only a handful of "privileged and lucky" investors, who received the opportunity to participate and earn. The economic expert whose opinion supports the lawsuit is Prof. Haim Kedar-Levy. The representative plaintiff decided to withdraw from the motion for class action, in an arrangement approved by the court, the representative plaintiff received reimbursement of expenses from the defendants.
A class action suit to compensate shareholders of ORL
The amount of the damages according to the expert opinion is 135 million
ORL presented investors with a declining financial debt and reported misleading and deficient financial transactions in the amount of $ 750 million. The lawsuit was filed in cooperation with the law firm of Holstein-Shalev. In the judgment of the District Court, agreed with our claims of the violations of the Securities Law in the provision of misleading and incomplete reports, and therefore, compensation and reimbursement of legal expenses of NIS 150,000 in favor of the class action attorney were ruled.
Class action for compensation of Dori Construction and Group shareholders
The amount of the damage according to expert opinion Dr. Meir Amir : more than 70 million
The class action is being conducted in the Tel Aviv District Court In 2017, the Securities Authority commenced an administrative enforcement proceeding against Dori Construction and its officers.
Class action to compensate Bezeq shareholders
The amount of the damages according to economic expert opinion: 1.6 billion
Was submitted to the Economic Department in the Tel Aviv District Court against Bezeq, the controlling shareholder Shaul Elovitch and other officers in Bezeq. (Cooperation with the office of Ronen Adini). The Securities Authority announced its support for the class action after examining in depth the claims and evidence presented, including the opinion of an economic expert - David Solomon.
ורדניקוב נגד אלוביץ' ואח' תביעה נגזרת
לפיצוי חברת בזק על הנזקים הכבדים שנגרמו לה, כתוצאה מנטילת הלוואות חריגות שסייעו לבעל השליטה (אלוביץ') - לפרוע חובותיו האישיים לבנקים ולא לאבד את השליטה בבזק.
תביעה חשובה ועקרונית זו ממתינה כעת להכרעתו של בית המשפט העליון בירושלים. (לאחר ערעור על החלטת השופט חאלד כבוב ממחוזי ת"א לדחותה). על פסק דינו של השופט כבוב, פורסמה ביקורת מרובה של מומחים בולטים מהאקדמיה לתחומי המשפט של דיני חברות וניירות ערך: פרופ' עמיר ליכט, ד"ר יחיאל בהט (בפרק מספרו "חברות החוק החדש והדין"), וד"ר עידו באום.
Verdnickov vs. Alovich A derivative claim
To compensate Bezeq for the heavy damages caused to Bezeq as a result of taking exceptional loans that helped the controlling shareholder (Alovich) to repay his personal debts to the banks and not to lose control of Bezeq. Alovich bought the controlling interest in Bezeq by means of a business pyramid and with tremendous leverage - the highest in the history of the State of Israel - of loans with principal amounts of not less than NIS 5.5 billion! The tremendous leverage placed the controlling shareholder (Alovich) in a clear and extreme conflict of interest and obliged him to adopt in advance a harmful strategy for Bezeq: the taking of exceptional loans in Bezeq that are not needed [about NIS 8 billion], and a capital reduction of NIS 4.5 billion A dividend in excess of NIS 10 billion.
The damages to Bezeq from the decisions of Alovich and Bezeq's board of directors under his control was described at length in three expert opinions: Prof. Yaron Zelekha, economist Avi Azulai and Dr. Meir Amir
In the judgment of the Justice Kabov, a series of serious findings were determined that accepted our arguments, and in accordance with the evidence presented in the trial, it was determined, inter alia, that:
1) In contrast to the version of Bezeq witnesses, a factual connection was established between the taking of the exceptional loans and the distribution of the dividends;
2) The members of the Board of Directors knew (as opposed to their denials), at the time of the decision on the reduction of the capital and dividend distribution, that this would require the taking of exceptional loans by Bezeq;
3) there is a suspicion of a conflict of interests of the Board of Directors of Bezeq when it decided to recommend to the General Meeting to distribute 100% of the Company's net profit as as dividends;
4) There is a real concern that Alovich had a significant influence on the Company's decision-making process in connection with taking exceptional loans, reducing capital and distributing dividends;
Despite all these statements against the defendants, and other important determinations that are too short to detail here, the derivative claim was rejected. Judge Kabbov's verdict was heavily & publicly criticized by a number of prominent experts in the fields of corporate and securities law: Prof. Amir Licht, Dr. Yechiel Bahat and Dr. Ido Baum.
On December 28, 2016, the appeal we filed with the Supreme Court was rejected in a precedent-setting ruling that was defined by experts as one of the most important rulings in recent years. The Honorable Judge Yitzhak Amit first adopted in the Supreme Court the defense of "increased business judgement rule" in favor of the directors. According to the Honorable Justice Amit, the plaintiff is required to prove that the protection of the business judgment does not apply, and indeed, according to the evidence presented to him, it has been proven that there is a "potential conflict of interests" between the controlling shareholder and some members of Bezeq's board of directors. However, according to the innovative test set for the first time! it is sufficient for the directors to show that the decision they received falls within the "reasonable range" in order to reject the claim against them. This precedent-setting test is called "increased business judgement rule" and its origin in American case law.
The Honorable Judge Noam Solberg criticized this precedent-setting test, which places a double burden of proof on the plaintiff, "neutralizing the legal threshold," thereby allowing the controlling party to easily bypass the provisions of the law.
Further more, this test was created to protect directors in a hostile takeover of the company, and its implementation by Judge Amit differs from its original application in the United States.
With all due respect, in my opinion, this is a vague test that is contrary to the Israeli Companies
Law, a test that allows for "reasonable" violations of the duty of trust and obligation to operate an independent judgement by directors as set out in the Companies Law. This innovative test also creates great uncertainty regarding the applicable law, it contradicts the clear provisions of the Companies Law, the case law in Israel, and it encourages officers to act in a conflict of interest, while trampling the rights of shareholders from the public.
It is important to understand that most Bezeq shares belong to us, we are the public whose money is invested in the company, whether through our pension funds or directly. The actions and decisions taken by the Board of Directors of Bezeq have a negative material effect on the savings of the public investing in them.
According to accountant Shlomi Shub, at the beginning of 2017, Bezeq has a financial debt of NIS 12 billion, its tangible equity is shrinking and it is exposed to a possible loss of more than NIS 1 billion, due to a conflict of interest transaction in which Bezeq acquired from Shaul alovitch The failed company "YES".
In June 2017, the Securities and Exchange Commission opened a criminal investigation against Shaul Alovich and senior executives at Bezeq due to suspicions of fraud, malpractice and violations of securities laws, all in order to benefit Shaul Alovich at Bezeq's expense. In 2018, Shaul Alovich lost control of Bezeq due to the inability to repay debts of over NIS 1 billion to the banks, which took control of his shares in the company. Alovich, his family and close associates were all dismissed from their positions on Bezeq's board of directors, and are expected to face a criminal trial. The television program "Ulpan Shishi" broadcast in the prime-time national news channel of Israel a short segment of a special lecture I gave. as part of course for future directors at Tel Aviv University on Shaul Alovich harmful takeover of Bezeq: