Globes Reports on Another Opaque Leviev Business Deal, Now in Zufim (Translation)

Zufim: Tens of Families Have Built Homes they Cannot Sell
May 29, 2014
Shlomit Tzur
Translated from Hebrew for Adalah-NY by Ofer Neiman and Udi Pladott   (…  represent parts of the article that were not translated)

Families residing in [the settlement of] Zufim in Samaria, near Kohav Yair, have recently discovered a surprising fact: the plots they had purchased and on which they had built their homes have had a lien against them since the 1990s, with the state being the claimant.

In a lawsuit for damages in the sum of 2.5 million NIS, filed by 10 of these families against the Leader Company, which had sold them the plots, they state that they were astonished to learn of this fact, since the lien had not appeared in the certificate of rights issued to them by the company - and that this was done deliberately and in bad faith. According to these families, they are unable to sell their homes and the threat of the State exercising its rights to the plots, thereby claiming its rightfully due debt, hovers over their heads every single day.

Until a few years ago and at the time in which the liens were registered, businessman Lev Leviev and his brother in law David Elishayov were the majority shareholders in the company. The two had even given personal guarantees to ensure the lien in favour of the State, which has not been lifted to this day.

“False pretense and bad faith”

The complaint states that Leader presented itself as the owner of 40 hectares on the lands of the [Palestinian] village of Jayyous in Samaria, and and an additional area of 120 hectares of state-owned land allotted to Leader Co. by the Custodian of Government Property in Judea and Samaria, in a development contract. Leader also acted as the housing company and handled the registration of said properties. The settlement of Zufim was established on these lands.

It further states that the Leader Company presented the families with an obligation that their rights to the lots were free of any debt, foreclosure, mortgage or lien, and took action to market plots or houses on the land. “In all certificates of rights issued by the defendants, any liens on the property to third parties were not disclosed, and there had even been a false presentation that the plots were under no lien whatsoever.”

The complaint also specifies that a fixed lien of the first degree to the benefit of the Israeli Housing Ministry, based on bonds, was registered with the Israeli Company Registrar in 1996. The bonds were signed by Lev Leviev and David Elishayov, who issued personal guarantees signed in their handwriting to secure the lien. The terms of the bond included the obligation imposed on Leader “not to sell, transfer, lease out, rent out or deliver the property under lien without prior written consent by the Ministry of Housing”.

According to the complaint, the Ministry of Housing has liens against the lots of the 10 plaintiff families, and liens are registered against 100 other lots in the settlement. The lien was registered by Adv. Moshe Glick, who is representing Leader Co. and is handling the deals. His office also operated as the housing company that issued that certificates of rights along the years. The plaintiffs claim that the lien was concealed consistently, deliberately and systematically for years.

At the end of 2013, the Leader Company filed a lawsuit for 100 million NIS against the State, in which it argued that the path of Israel’s separation barrier had been drawn on the land slated for the settlement’s expansion, and thus, Leader had lost any practical possibility of developing the remaining land it still owned in Zufim, and lost its rights to build 1600 housing units.

In April 2014, the state, on behalf of the Ministry of Finance and the Ministry of Housing, filed a counter lawsuit at the District Court in Jerusalem, claiming the debts owed to it by Leader. The debt now amounts to 14.6 million NIS. This lawsuit sheds light on the aforementioned lien registered for these plots in Zufim, to the benefit of the Ministry of Housing. In the suit, the state cites the agreement signed between the Ministry of Housing and Leader in 1996, explaining that the Ministry had transferred 3.6 million NIS to Leader as part of the agreement, as conditional compensation for any instruction to halt construction in Zufim. Such instructions are given from time to time based on political considerations related to construction in the [occupied] territories.

The agreement further stipulated that upon resumption of [halted] construction, the compensation will be converted into a loan and Leader would be obligated to repay it to the state within 45 days of selling the lots. Leader did indeed sell the lots and therefore had to repay the loan, adjusted for the construction costs index, and - in case of late repayment - an additional 4% adjusted APR.

In its lawsuit, the state claims that, even though Leader Co. built and sold and housing units over the years, it had not repaid the loan, even though it admits to the existence of the debt.

No shareholders or board

And what about Leviev and Elishayov’s personal guarantee? Globes’ research has revealed that a few years ago, Leviev transferred his rights in the company, and now it is registered as a foreign company without any shareholders or board. Adv. Moshe Glick who represents the company, was asked by Globes who controls the company, and responded that he was “looking into” the matter, failing to respond before the current edition was closed. Sources related to Lev Leviev refused to specify to whom Leviev transferred the shareholder rights in the company.

In other words, a foreign company now holds the rights to the construction of thousands of housing units, apparently without having received authorization from the State.

The plaintiffs also argue that they had incurred damages amounting to 15% of the value of the properties under lien and they additionally demand compensation for the emotional distress they suffered: ”The plaintiffs have been facing mental stress and severe anxiety. Their house and main property is under lien to the benefit of a third party, which has brought about stress and anxiety. The damage is assessed at 50,000 NIS for every family and amounts to 300,000 NIS, such that the total damages amount to 2.58 million NIS”, according to the lawsuit.

The plaintiffs also demand that Leader be ordered to pay penal damages due to its conduct which borders on the criminal, due to fraud, deception and bad faith, and the issuance of false and mendacious certificates of rights.

Leader: The plaintiffs’ claims will be rejected in their entirety

Adv. Moshe Glick has issued [the following statement] on behalf of the Leader Company: “The company regrets the course of action taken by the plaintiffs, and primarily the fact that the party that is motivating these plaintiffs [the state] is doing so for wrongful reasons. This party has blatantly violated an obligation to carry out development work in the settlement, and now that it has been sued for this violation of a contract, it is trying to exert pressure on the company in wrongful ways.

Leader co. has recently received the complaint, and a preliminary examination of its contents reveals that it is rife with incorrect claims and facts, which were not adequately verified and examined by the plaintiffs, and therefore the [Leader] Company fully rejects all the allegations in the lawsuit, and it is certain that the plaintiffs’ claims will be rejected in their entirety by the court. Any attempt to find fault with those who were parties to the contract 20 years ago and are no longer involved in the matter is an act which must be rejected out of hand.”

The Housing Ministry and the Finance Ministry stated that “Leader’s debt has indeed been known to the Ministry of Construction and Housing for years now. The Accountant General of the Finance Ministry conducted complex negotiations with the company in order to collect on the loan, including in the recent past, but apparently to no avail so far. The Leader Company requested to delay payment on the loan on the grounds that it is entitled, by its account, to substantial compensation from the Defense Ministry due to the construction of the security fence. Recently, after the Defense Ministry rejected the claims of the company, and the company then filed a countersuit against the Defense Ministry, the Finance Ministry, together with the State Attorney’s office, filed a countersuit for the full payment of the company’s debts to the State for the Zufim project. The proceedings are currently pending, and we are waiting for the statement of defence from the company, in accordance with accepted procedure.”

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