This one is Israeli investment house Psagot, which is under investigation for alleged trading impoprieties by former executives David Edry and Shai Ben-David. In a statement, the Israel Securities Authority said: “Edry and Ben David are suspected of having committed fraud in their dealings with securities in a systematic manner that stretched over a long period of time.”
That time period was 2007 to 2009, when Psagot was controlled by York Capital Management. Late last year, York agreed to sell its 76% stake to Apax Partners for approximately $822 million, with minority shareholder Markstone Capital Partners retaining its 24% position. The deal would have represented a major score for York, given that it paid just $280 million for the stake in late 2006 (beating out, among others, Apax).
I say would have, because the sale to Apax hasn’t actually closed yet. It’s slated to transact in April, but the ISA investigation could put a crimp in those plans. I hear that Apax did not know about the investigation prior to signing papers in December, and now plans to take another look under the hood. Prevailing wisdom right now is that these were isolated acts rather than symptoms of institutional fraud, but no one can yet discount the possibility of a snowballing scandal.
Also worth noting that this looks very bad for York. One of those damned if they knew (fraud) and damned if they didn’t know (poor oversight) situations, although the latter is certainly less offensive than the former.
An Apax spokesman said it was too early for the firm to comment on the situation, and we’ve also put a call into York that has not yet been returned.