The Finance Ministry alleges that El Al concealed tens of millions of the state’s money.
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The Ministry of Finance yesterday filed a $16.5 million lawsuit against El Al Israel Airlines Ltd. (TASE: ELAL) in the Lod District Court. The lawsuit asserts that El Al failed to transfer surpluses to the state in contravention of agreements with it.
According to the statement of claim, when the state’s holdings in the airline were privatized in 2003, El Al and the state undertook to use the privatization proceeds to cover a deficit totaling hundreds of millions of shekels in the El Al employee compensation fund. “The source of this deficit is the gap between the amounts designated for payment of severance pay to eligible employees and the amounts actually deposited by the company, ” the claim states.
Under the agreements, the state undertook to use the money it received from El Al’s offering to cover part of the deficit. The state alleges that after the proceeds were received, the severance pay fund deficit was fully covered, but El Al was left with surpluses. The state writes in its claim, “As of December 31, 2013, these surpluses totaled NIS 32.4 million. There is no doubt that El Al is obligated by law and by agreement to return this sum to the public treasury, because El Al has no right to this money.”
In its claim, filed through the Tel Aviv District State Attorney’s Office, the state adds that it discovered that El Al had received additional proceeds from the issuing of options that should have been, but were not, transferred directly to the severance pay fund. “NIS 14.6 million, which the company listed in its books as savings on salary costs, was given as options to El Al employees, ” the claim alleges. The State Attorney’s Office says that there is no dispute that this amount constitutes proceeds from the offering, and should have been used to reduce the deficit.
“Unfortunately, El Al is trying to evade reimbursement of this money to the state, despite its legal obligations to repay it, ” the claim states, “El Al is thereby seeking to make illegitimate gains at the claimant’s expense, and in effect at the expense of the public as a whole.”
El Al responded by saying, “No statement of claim whatsoever has yet been delivered to the company. If and when it receives one, the company will study it and respond as necessary.”
Published by Globes [online], Israel business news – www.globes-online.com