Saturday, November 13, 2010

When fraud is certified kosher 

After a Haredi developer appealed a rabbinical court ruling to a state court, the judge focused not on the rabbis' findings, but on the fact that they had turned a blind eye to a blatantly illegal agreement

Had they not been so greedy, the ultra-Orthodox real estate developers Aharon Eisenberg and Avraham Tzeinwirt could quite possibly have been benefiting today - one from a large sum of money promised in return for withdrawing his bid on a parcel of land at the last minute, the other from the building he could have constructed on that land for a sizable profit. The parcel in question, located in downtown Jerusalem, was sold by the Jewish Agency.

But Tzeinwirt, the winner of the tender, reneged on the shady deal he'd signed with Eisenberg and refused to pay him the sum he'd promised in return for the latter's withdrawal from the tender.

Throughout the three years that have elapsed since then, the two men have continued to fight over the money. They first applied for arbitration to an ultra-Orthodox rabbinical court (known in Hebrew as a "Badatz" ), which ruled that Tzeinwirt had to pay. But Tzeinwirt refused and in an unusual step applied to the Tel Aviv District Court, which then reversed the arbitration ruling. Now the entire deal is liable to be canceled.

Tel Aviv District Court Judge Michal Agmon-Gonen harshly criticized the ultra-Orthodox rabbinical court in Bnai Brak - which is headed by Rabbi Nissim Karelitz and operates outside of the state's judicial system - ruling that this court had validated an illegal agreement, the aim of which was to defraud the Jewish Agency and the Tax Authority. As the deliberations at the rabbinical court are not open to the public, the judge relied to a large extent on the testimony provided by the litigators themselves.

The revocation of an arbitration ruling handed down by an ultra-Orthodox rabbinical court is highly unusual. According to Haredi jurists and wheeler-dealers, the public courts are not usually eager to intervene in the private rabbinical courts' arbitration rulings, regarding them as internal matters best settled within the community.

In this case, however, Agmon-Gonen revoked the arbitration ruling because it violates public policy - and in so doing also spoke her mind about the Haredi court's tendency to turn a blind eye. In her ruling, the judge wrote that "the the two sides explained clearly to the arbitrators [at the rabbinical court] the motivation for the agreement in this way: "Why should the money go to the [Jewish] Agency, those eaters of animal carcasses and unclean food, rather than remain with us?" (The quotation is from the arbitration proceedings )."

The legal department of the Jewish Agency, which issued the tender, says they are studying the details of the case and will then decide how to act.

"The partners' intension to defraud the tax authorities was also explained to the arbitrators in no uncertain terms," the judge continued, quoting from respondent Tzeinwirt's brief. "It was explicitly agreed that [Tzeinwirt] would transfer to Mr. Eisenberg the sum of $1.15 million, but it occurred to neither of them that it would be necessary to deduct from this amount tens of percentage points for the authorities and the regime of the Zionist state."

Agmon-Gonen's summation further states: "After what the two sides said in the arbitration, including their explicit acknowledgment that it was an illegal agreement, they would have done well had they not brought this agreement into the court. The submission to the court of the briefs by the parties in the arbitration - in which both sides make it clear this concerns an illegal agreement, the aim of which is to defraud the Jewish Agency - constitutes insolence. In any event, once it became clear that the arbitrators, despite being aware that a blatantly illegal agreement was in question, gave it validity, there was no alternative but to revoke the arbitration ruling."

The judge also ordered that the ruling be sent to the attorney general, the Justice Ministry, the Jewish Agency and the Antitrust Authority to examine the possibility of indicting the sides involved in the deal.


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