Former finance minister Moshe Kahlon was convicted on Sunday of failing to ensure that serious financial irregularities at UnetCredit were properly reported to the public while he served as the company's chairman.
The conviction came as part of a plea agreement between the parties.
The plea agreement was filed alongside a broader indictment in the UnetCredit case, one of the major corporate collapse cases to emerge from Israel’s non-bank credit sector in recent years.
UnetCredit was a public company that provided non-bank credit and whose shares were traded on the Tel Aviv Stock Exchange. The case centers on what prosecutors describe as a pattern of concealment, circular financing, and misuse of the public company’s funds by controlling shareholders and other senior figures.
Under Kahlon’s plea agreement, he admitted to violating reporting duties under the Securities Law. The sides will ask the court to sentence him to a suspended prison term, a NIS 180,000 fine, and an 18-month restriction on serving as an officer in a public company. The plea agreement remains subject to court approval.
Kahlon, who previously served as finance minister, was chairman of UnetCredit Financial Services from June 2021 until his resignation in June 2022.
The 2020 share allocation deal
At the center of the case is a 2020 share allocation deal. According to the indictment, UnetCredit’s publicly traded company allocated two million shares, worth NIS 50 million, to the private company controlled by its controlling shareholders and to several advisers.
The deal was presented to the company’s institutions as if the money used to buy the shares would come from outside sources connected to the controlling shareholders. Prosecutors allege that this was not what happened.
Instead, according to the indictment, the public company’s own money was routed through a circular transaction, creating the appearance that the private company had paid for the shares. In effect, prosecutors allege, the public company funded the purchase of its own shares, and the controlling shareholders and others fraudulently obtained shares worth tens of millions of shekels.
