Canadian Investor Buys Secret Stake in Major Bank Owned by Israeli Oligarch

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Shari Arison is the richest woman in Israel (she lives mostly in Miami, but retains Israeli citizenship), worth $7-billion.  She leads a family business inherited from her father, Ted, who founded the Carnival Cruise Lines.  She heads one of the 18 Israeli oligarch families, which together own 60% of the nation’s equity capital.  Because of this, Israel has the fifth greatest disparity between rich and poor among all OECD nations.  During periods of social protest, Arison and her fellow oligarchs are often pointed to as emblems of tremendous wealth and a corrupt financial system.

Arison’s Bank Hapoalim, the nation’s largest privately-owned financial institution ($100-billion in assets and 12,000 employees), has endured a period of financial crisis and conflict with regulators, as it was forced to satisfy more stringent capital requirements under Israeli financial reforms.  Arison has searched long and hard for buyers to rescue her position in the bank.  Over the past year, she identified several parties interested in buying a stake in the bank and her other investment funds.  Within the past month, three funds signed memoranda of understanding, taking a $930-million (a different report values the stake at $800-million–the price depends in part on the value shekel in relation to the dollar) stake in one of Israel’s largest banks.

Bank Hapoalim is a complicated and controversial investment.  Besides the regulatory issues it faces, it is also deeply implicated in the Israeli Occupation.  It owns numerous branches in Israeli settlements and funds residential and commercial mortgages beyond the Green Line.  In doing so, it not only lends money, but accepts the Palestinian land and settlement housing it finances as collateral.  If an investor defaults, the bank becomes the owner of this property, essentially stolen land to begin with.

In addition, the Bank serves as a clearinghouse for Palestinian banks and provides services to them at a steep price.  The funds which the Palestinian institutions must deposit with Bank Hapoalim to guarantee these services are steep and earn no interest.  This is captive banking which constitutes a form of financial Occupation.

Thus, the Bank both benefits from, and sustains the Occupation.  As such, it has come under pressure from BDS activists both inside and outside Israel who target such Israeli companies.  Denmark’s largest bank and the United Methodist Church have divested themselves of the Bank for that reason.  The Danish company explained that Hapoalim was ““involved in activities in conflict with international humanitarian law.”

That probably explains why at least one of the buyers of the new stake has refused to identify itself.  There are two known participants: the University of California Retirement Plan, which investments the pension contributions of thousands of UC professors and staff.  Maariv only identified the second as a Canadian academic pension fund.  I’m guessing it’s the Ontario Teachers Pension Plan, which is the only pension plan I’m aware of in Canada dedicated to teachers.  I’m trying to confirm this with the reporter who wrote the Maariv story.  I’ve also approached each company for comment on their purchase of the Bank and the ethical issues it raises.

The reporter did not know who the third investment fund was.  Both Israeli and Canadian regulators permitted this part to remain secret.  Writing in Maariv, he noted how problematic this decision was:

It’s important to note that revealing the name of investors in such a significant business transaction is critically important.  The wider public may have significant information it can add regarding the business activities of parties to the deal, who will be taking control of the Bank.  This information can help in examining the suitability of the new partners in the deal.

None of the English-language media coverage of the story identified any of the participants in the deal, which I found strange.  But one factor was noted in these reports: none of the new investors have previously sunk any significant sums into Israeli deals.  Though the reporter doesn’t specify the significance of this, there is a nationalist dog-whistle in the comment.  Israelis know they are facing a worldwide boycott.  When they can persuade mutli-billion-dollar international investment funds to invest in Israel it is a way to break the boycott.  It isn’t just a financial investment; it is a national victory against Israel’s enemies (at least in the eyes of the average Israeli).

This may explain the purpose of shielding the identity of the third party: making this investment is controversial.  It will arouse the ire of the international BDS movement.  Hundreds of companies which have made such prior investments have faced shareholder unrest and a world-wide campaign to divest their Israeli holdings.  It’s likely this party anticipates such controversy and is seeking to quell it.  That’s all the more reason to pressure the Canadian financial regulators to reveal the information to the public.  Major international financial deals must be transparent.  Secrecy and opacity only benefits those who have something to hide and constitute bad financial management.

It’s ironic and tragic that two pension funds representing the professors and teachers of Ontario and California are supporting Israeli economic apartheid.  Educators serve our children and teach them.  They are role models and embody values in their teaching and their lives.  They study society and examine its problems.  Their research and analysis suggest methods of improving society and addressing its ills.  So how is it these two funds prop up a rotten Israeli system of Occupation and oppression of Palestinians?

I urge Canadian activists and business journalists to examine this business transaction and bring it into the light of day.  As an aside, Bank Hapoalim maintains branches in both Canada (Toronto) and California (Los Angeles), where their new owners are based.