The axiom that you don't do business with family was further reinforced last weekend with the announcement that a serious conflict had erupted between the owners of the group. Civilian IntelligenceWhich provides guarding and cleaning services, security and couriers, VIP escort services, and more. This internal conflict provides a glimpse, albeit a limited one, into the management methods of one of the largest groups in Israel in terms of the number of employees - about 8,000 employees, which has operated for decades in considerable secrecy.
The company's owners are cousins Yechiel and Moti Dahan, originally from Nahariya, who purchased it about 16 years ago for about $3 million. Yechiel owns 51% of the company and Moti 49%. Last July, Yechiel Dahan purchased, through a private company, the 300 ATMs of the Sheba (Automatic Banking Services) company, which were jointly owned by the five major banks.
According to Moti Dahan, as reflected in a lawsuit he filed with the District Court, this deal is the basis for the conflict between the two cousins. Yehiel's version is completely different: According to him, for about five years they have been in the process of separating, including examining the option of selling Modiin Ezrahi. For this purpose, the group even contracted with several external consultants. It seems, Yehiel claims, that the procedure that Moti took was intended to improve positions in the bidding process.
Want more news, videos and stories? Join the Haredim 10 WhatsApp channel >>
""Motti is in trouble," a source close to the deal explains the claim. "He has 49% of the group, but not even a single director on his behalf. No one would want to buy such a volume of shares without having any 'say' in management and there isn't even a Bambi (Buy me buy you) agreement. The gap in ownership percentages is tiny, but substantial when it comes to management.".
Loss prices for the family
Yechiel Dahan, in his fifties, entered the business world not long after his discharge from the army when he founded, together with his cousin Moti, a company called Tevel, which provided cleaning services mainly in the north of the country. When the option arose to purchase Modiin Ezrahi from its original founders - businessmen and retired police officers - the two were required to mortgage their homes in Nahariya to raise the money. Today, by the way, Yechiel Dahan lives in Ramat Hasharon. He is a father of four children and maintains a traditional lifestyle.
The two held the shares of Modiin Ezrachi through Tevel until 2010, when a reorganization took place, in which Tevel was merged into Modiin Ezrachi. As part of the move, Yechiel's Margolin company became the owner of 51% of Modiin Ezrachi's share capital, while Moti's Ravid company became the owner of 49%.
Over the years, the two cousins received the same payment from Modi'in Ezrachi: a management fee of 250,000 shekels per month, paid through the companies they own. In 2006, they appointed a CEO who has served since: Yigal Malka.
At the same time, the cousins continued to do business separately. For example, Yechiel was involved in real estate, and in 2006 he even purchased the Lev Ha'ir Mall in Kiryat Gat from the receiver. Moti owned a hotel and invested in high-tech.
In his application to the court, Motti claims that things were going smoothly until he discovered that his partner, together with the CEO, had carried out various actions intended to increase their profits at his expense and at the expense of the group. For example, according to him, it became clear to him that over time, Modi'in Ezrahi had subsidized security services for a mall owned by Yehiel in Kiryat Gat. Another claim is that Modi'in Ezrahi had entered into various deals at a loss with a company called Vela Services, which is owned by Yehiel's son and provides various services to VIPs - hospitality, transportation, security, and more. He notes that the Modi'in Ezrahi group website states that "Vela" is part of the group, even though he never gave his consent to this.
Throughout these years, he preferred to "swallow frogs," as he put it, until his cousin crossed the border to the point of harming civilian intelligence. That border crossing is, for him, a Sheba deal.
A little background: In September 2012, the Antitrust Authority ordered the major banks to sell some of the ATMs they owned through the Israeli Bank of Israel. These are ATMs located in shopping malls, kiosks, etc., and the cost of using them is significantly higher. The sale was carried out in a tender that ended in July 2013.
According to the lawsuit he filed, Moti thought the deal was synergistic for Modiin Ezrachi, whose business also includes courier services, and therefore brought the matter to the attention of Yechiel and the CEO. They, he said, were interested in the offer and considered it an excellent opportunity. Some time later, he was astonished to discover that the two competed through another company they owned, and purchased the ATMs for 63 million shekels. What's more: he claims they used Modiin Ezrachi's name to promote the deal and also began contacting the group to move money to and from the ATMs.
His claims do not end there. Since purchasing the ATMs, according to him, Malka abandoned his position as CEO of Civil Intelligence and began devoting all his time to the new business, to the point that Civil Intelligence's annual business turnover dropped by approximately NIS 120 million compared to previous years. "You don't have to be a great expert to understand that at least part of this drastic decline stems from Yigal Malka's neglect of his role as CEO of the group and his focus on handling his and Yechiel's private affairs," the lawsuit states.
Against this backdrop, Motti began examining the company's operations, ordered the corporate documents from the Companies Registry, and found, according to him, among other things, that Yehiel had changed the company's bylaws to deepen his control over it. According to him, this happened at a meeting where Yehiel was the only participant representing all the shareholders. When he began demanding details and documents, Motti claims, Yehiel and Malka realized that he had no intention of agreeing to the new situation, and so they took extreme action against him and stopped paying the management fees he had received for years.
In a hearing held in the Tel Aviv District Court, Motti's attorney, Attorney Shmulik Cassuto, spoke on his own behalf and in the first person: "Both of us (Motti and Yehiel) founded a company and were active in it; when we let Malka run the company, I backed out, but that doesn't mean I'm not involved. It's true that I'm not involved on a daily basis, I'm not concerned with how much the secretary will receive (...), but I'm an essential part of the company, 49%, and one day it turns out that I was kicked out.".
He said the following about the Sheba deal: "I drew the company's attention to the deal. I said it had to be done and I realized that it was being done. Then one day it turns out that my partner and the company's CEO are doing the deal themselves outside the company. I start checking what's going on and they're cutting me off from the management fees that I've been receiving for 20 years...".
The management agreements, Cassuto noted in court, expired on December 31, 2013. Why was the payment only stopped in June? According to Moti Dahan, the answer is clear: "Because I dared to ask a question. For 20 years, we've been sharing shekels for shekels, lira for lira. We made fundamental decisions together and suddenly you cut me off because I asked a question? With all due respect, this is a violation of the legitimate expectation of the parties.".
At this point, Cassuto added that Motti asked to receive the financial statements, but did not receive them. According to him, the court had previously established a clear rule on the matter, according to which the owner of a company is entitled to receive all the data. "My client receives nothing, half of his company, but he receives no money or data... I do not know of such an extreme case.".
Without the hassle of management
Not surprisingly, Yehiel Dahan, through attorney Yossi Benkel, has a completely different view of the situation. According to him, since he and Moti acquired Modiin Ezrachi, he has served as the sole director in the world. About ten years ago, several directors were appointed, including Moti, but his appointment was canceled in 2009.
During their 22 years of partnership, according to Yechiel, there was a clear division of roles, which suited Moti, as it allowed him to enjoy the group's profits that grew over the years and relieved him of any involvement in management. Now, Benkel notes, Moti suddenly wants to change the situation due to the cessation of management fees.
As for the ATM tender, Benkel claims that Moti showed interest in the details only after winning and never claimed that it was a business opportunity for Civil Intelligence and did not raise the matter for internal discussion within the company - "neither before winning nor after." Furthermore, Yechiel claims, the ATM activity is not at the core of Civil Intelligence's activity, and does not constitute competition to it.
In the first round, meanwhile, Motti scored a victory, albeit a partial one: Judge Oded Modrik, who heard the request, ordered the management fee payments to be reinstated. The decision to stop them, he noted, has no reason other than the desire to deprive Motti of his rights. The payments, the judge noted, were made over the years regardless of and without regard to the extent of either party's involvement in the company. In the ATM deal, however, the judge decided not to intervene. A continuation of this dispute, it seems, will come soon.
